Why MUD tax rates change from year to year
Updated 2026-11-02
Short answer: a MUD's board adopts a new tax rate every year, usually in August or September, based on what it owes on its bonds and what it needs to run the district. As a neighborhood builds out and its total value grows, the same bond payment is spread over more value, so rates often drift down. But they can also go up, and a tax bill can rise even when the rate does not. Of 68 Montgomery County utility districts with both a 2025 and a 2026 rate in the county tax office table, 15 lowered their rate, 20 raised it, and 33 kept it the same.
The rate has two parts that move for different reasons
- Debt service repays bonds the voters already approved. The board sets it high enough to make that year's bond payments. It goes down when the district's taxable value grows faster than its debt, and up when the district sells new bonds or values fall.
- Maintenance and operations (M&O) pays for running the water and sewer system, the board, and contractors. State law limits how fast it can grow without an election (see below).
Among the 68 districts above that listed both parts for both years, 26 cut their debt rate and 18 raised it, while 27 raised their M&O rate. Each district page shows this split year by year.
What limits a MUD tax increase
Texas Water Code chapter 49 sorts water districts into three groups. For each, the test is how much the total MUD tax on a home of average value would rise compared with the year before:
- Developed districts (ones that have issued bonds for at least 95% of their planned build-out): more than 3.5% (plus any unused increment from earlier years) triggers an automatic election.
- Low tax rate districts (M&O rate of 2.5 cents per $100 or less): more than 8% triggers an automatic election.
- Developing districts (all others, which covers many newer MUDs): more than 8% lets voters petition for an election to lower the rate.
An election can only bring the rate back down to the district's "voter-approval" rate, which is the full debt rate plus an M&O rate that raises M&O tax by no more than 3.5% or 8%. So the part of the rate that repays bonds voters already approved stays. These rules are in Texas Water Code sections 49.23601 to 49.23603, and each district's calculation is on a state worksheet that the county tax office posts with its tax rate table.
Why the bill can go up when the rate doesn't
A tax bill is the rate times the taxable value. If the appraisal district raises a home's value, the bill rises at the same rate. For a homestead, Texas limits the yearly increase in taxable value to 10% (plus new improvements), under Tax Code section 23.23, so a home that just changed hands or lost its homestead exemption can see a bigger jump. Exemptions matter too: a MUD can add, raise, or drop its optional homestead exemption from year to year.
Do MUD rates fall over time?
Often, but not always. In the county tax office table, 103 utility districts list a rate for both 2021 and 2025. Of those, 68 had a lower rate in 2025 than in 2021 and 13 had a higher one. A district that is still selling bonds for new sections can hold a high rate for many years, so look at its history, not just this year's number.
2026 rates compared with 2025
As of 2026-11-02, 74 utility districts had a 2026 adopted rate in the county tax office table; the rest had not posted one yet, and many MUDs use their own tax collector. Rates are per $100 of taxable value. Districts with an open data question are left out of this table; see data notes.
How to check a home's MUD rate trend
- Find the home's district with how to find a home's MUD.
- Open the district's page from the MUD list and read its rate history and debt-to-M&O split.
- Read the seller's MUD notice for the district's bonds, including bonds voters approved but the district has not sold yet, which can keep the debt rate up.
- Plug the combined rate into the true monthly cost calculator.
This guide is general information, not legal or tax advice. Rates come from the Montgomery County Tax Office table as posted; confirm a specific district's rate with its rate order or tax collector.