BY ELENI HIMARAS
reporter@ltview.com
The debate over potential annexation of the Lakeway Municipal Utilities District is complex. There are many Municipal Utilities Districts in Texas serving millions of customers.
So what is a MUD? What is its function?

 According to the Texas Commission on Environmental Quality, a municipal utility district’s function is “to provide centralized water, wastewater, drainage [and for some recreational and roads] services to their residents and customers,” as codified in more detail by Chapter 54 of the Texas Water Code.
Throughout the recent debate surrounding a possible annexation of Lakeway MUD, many officials have said that MUDs, at their core, are intended to be temporary, interim agencies put in place while a developer as an area grows. They don’t have to be, though.
“There is nothing in the Water Code that says a MUD is temporary,” TCEQ spokesperson Terry Clawson said.
He went on to say, however, that there has been a history of MUDs being annexed by cities as a means to facilitate cohesive municipal planning, as well as other concerns, including tax collection.
“Often cities will annex districts that are nearly built-out when the district’s tax rate is lower than the city’s tax rate; that way a city will collect sufficient tax revenue to pay off debt assumed without burdening existing city residents. Also, cities typically provide more services than MUDs, including Police, Fire, EMS,” he said.
What impact a possible annexation LMUD would have on its current customers, both in and out of the district, is currently being debated by a host of entities, including Texas Sen. Kirk Watson. According to the TCEQ, understanding exactly what would happen to LMUD rates is a complicated process.
“If Lakeway MUD has a lower tax rate than the City of Lakeway, if the city annexes then landowners would pay the higher city tax rate. If a MUD has a higher tax rate than a city, then the MUD residents would end up with a lower tax rate if annexed,” Clawson said.
The city currently has a tax rate of $0.1827 per $100 assessed value while the LMUD has a tax rate of $0.1922 per $100 assessed.
Clawson said the formula is complicated by the fact that even if the city has a lower tax rate than the MUD, it may need to increase that tax rate to cover additional debt from a recently annexed MUD. So while some former MUD landowners may have a lower tax rate, some city landowners may see an increase, according to the TCEQ.
What may prove to be the most complex equation surrounding any the potential LMUD annexation is that the district includes a few small areas outside of the city. Neither Clawson nor Watson could think of a recent example of a city attempting to obtain legislation to annex a MUD because it provided service to areas outside of a municipality.
Currently, the LMUD provides sewer service to 3,000 customers and water service to 4,000 customers. Only sewer customers pay property taxes to the LMUD and may vote on their board of directors.
“The district was created after the original 17 sections [of the original Lakeway subdivision, before it was later incorporated] and there was a water system in those original 17 sections. And when the district was formed it did not include those 17 sections but the developer soon sold the water system in the 17 sections to the MUD to operate,” said LMUD General Manager Richard Eason of why the LMUD provides water service to customers outside the geographic boundaries of its district.
Eason said the district estimates that there are 2.7 people per household and that given that estimate, they provide water to 10,800 people and sewer to 8,100 people. According to Lakeway City Manager Steve Jones, the current estimated population of Lakeway is about 14,000 and could reach between 24-25,000 at “build out.”
The Travis County Water Control and Improvement District 17 also provides water service to some areas of Lakeway. Water Disttrict 17’s service area currently includes Apache Shores, Comanche Trail, Flintrock, River Ridge, Serene Hills and Steiner Ranch.