As many residents may already know, the Board of Directors (the "Board") of Ricewood Municipal Utility District (the "District" or “Ricewood MUD”) has called for a bond authorization election to be held Tuesday, November 7, 2023. To ensure that residents and other constituents of the District have accurate information regarding the proposed authorization and the Board’s goals for the District, we have put together this Bond Election FAQ to provide answers for questions that residents often ask about this subject.
What is Ricewood MUD?
Ricewood MUD is a municipal utility district, which is a form of local government, and was created in 1982. Since that time, Ricewood MUD has been responsible for providing water, sanitary sewer, and drainage infrastructure and related services to all of the property within its boundaries. Currently, Ricewood MUD services almost 5,000 residents in over 1,600 homes located in portions of the Westfield, Westfield Terra Estates, and Sundown Glen subdivisions, and to over 50 commercial customers in the area as well. The District also constructed and maintains Ricewood Park. As shown in the map below, the District’s boundaries encompass 540 acres of land. For more general information on MUDs, please click this link.
Ricewood MUD currently owns, operates and maintains a water plant with on-site water well, and one (1) sanitary sewer lift station. Ricewood MUD owns capacity within the Mayde Creek Wastewater Treatment Plant. Over 17 miles of water lines and 18 miles of sanitary sewer lines connect these facilities to all of the homes and businesses within the District. The District also owns and operates three (3) detention basins in addition to Ricewood Park, which can act as a detention basin when needed.
What is the election?
The District is requesting that its voters give the District the authority to issue municipal bonds when needed to fund large projects required for the maintenance and rehabilitation of the District's water, sanitary sewer, and drainage infrastructure.
The language below will be on the ballot for residents of the District when they go to the polls or vote by mail for the November 7, 2023 election, asking voters to select one (1) option of either FOR or AGAINST on the following proposition:
PROPOSITION A – the issuance of up to $26,000,000 in total principal amount of bonds for water, sanitary sewer and drainage facilities and the imposition of taxes, without limit as to rate or amount, sufficient to pay the principal of and interest on the bonds.
This proposition is related to the bond authorization amount the District is seeking to complete projects in the District.
What is a bond authorization?
A bond authorization grants the District the authority to sell bonds in order to fund large district projects. Just as you would get a loan to finance a large purchase or home repair, the District will issue municipal bonds to finance a large maintenance project.
Many voters are primarily familiar with bond elections proposed by their local school districts. School district bond elections frequently request funding for an immediate project – For example, a $20 million bond election to build a $20 million stadium. This is not the case with MUD bonds. A MUD bond authorization election simply grants the district permission to issue bonds in the future, in smaller increments, and on an as-needed basis. Upon its creation in 1982, voters authorized the District to issue almost $25 Million in bonds to construct and maintain its facilities. It has been over 40 years, but the District still has not issued all of those bonds. The District currently has a little less than $2 Million in remaining bond authorization. This election will allow the District to continue to maintain its facilities over the next 40 years.
What will bond authorization be used for?
The Bond Election Report submitted by the District engineer identifies the projects the Board anticipates will be necessary over the next 40 years to maintain, replace, or rehabilitate the aging water, sanitary sewer, and drainage infrastructure owned and operated by the District. Considering all information available today, the District’s engineer estimates that the cost for those projects, will require approximately $26,000,000 in bond funds, to be issued as needed. This will enable the District to ensure reliable and continuous service by maximizing the life of its water and sanitary sewer infrastructure.
Examples of future major projects include:
- Rehabilitation of the District’s water plant and water distribution system;
- Rehabilitation of the District’s sanitary sewer collection and transportation system;
- The District’s pro-rata share of rehabilitation of the Mayde Creek Waste Water Treatment Plant, and related facilities; and
- Rehabilitation of the District’s detention and pollution control facilities.
Can’t the District just pay for projects without issuing bonds?
The primary alternative to authorizing the bonds is to fund all necessary projects on a "pay as you go" basis. Accordingly, utilizing this approach would likely require large increases in maintenance tax rates and/or water and sanitary sewer rates in order to collect the required funds. Further, the law requires the District to have the necessary funds in hand before it can proceed with a required project. If the District is forced to raise the necessary money on an as-you-go basis, it could create significant delays in the completion of large projects.
Much like a home equity loan for a major roof repair, when the District issues bonds, it spreads the costs of the necessary projects over several years and avoids the increases in tax rates and/or water and sanitary sewer rates typically required by a "pay as you go" approach. Moreover, the interest rates for the District on the re-payment of its municipal bonds are substantially lower than rates for traditional construction loans bonds aefficient of funding for District projects. Finally, issuing these bonds on an as-needed basis enables the District to complete necessary projects quickly when the need arises.
How are my taxes determined?
The District levies a total tax rate each year that has two components:
- The debt service tax rate, the proceeds of which can only be used to make payments on the District’s outstanding bonds; and
- The operations and maintenance tax rate (often referred to as O&M), the proceeds of which are deposited to the District’s General Fund and used, together with water and sewer revenue, to pay operating and maintenance expenses of the District.
These two components of the tax rate have changed over the years as the District’s debt service and operating expenses have changed.
How does the District manage taxpayer dollars?
The Board has reduced the District's total tax rate by more than 13% between 2018 and 2022 (from $0.39/$100 assessed value to $0.34/$100). For more details regarding tax rates, click here. As a result of prudent financial management, the District has earned an “A2” (rating outlook stable) underlying rating from Moody’s Investor Service.
Through careful supervision of expenses and planning for maintenance, the District currently has approximately 14.5 months of operating reserve funding and $1,940,000 in previous bond authorization. A common benchmark for Municipal Utility Districts is generally 12 months. Reserve funds earn interest and are available for emergencies, but can prove to be insufficient if large-scale rehabilitation, repair, or replacement is required, as in the case of plant facility failure or compromise.
At this time, with all the information on hand, given the plan outlined in the Bond Election Report, the Board of Directors for the District does not anticipate a debt service tax rate increase as a result of bond issuance for water, sewer, & drainage projects over the next 5-10 years.