As many residents may already know, the Board of Directors (the "Board") of Westlake Municipal Utility District No. 1 (the "District") has called for a $17 million bond authorization election this coming November 5, 2019. To ensure that residents of the District have accurate information regarding the proposed bond authorization and the Board’s goals for the District, we have put together answers for residents’ common questions. This page will be updated to address additional questions and provide additional information.
What is the District?
The District is responsible for providing water and sanitary sewer service to approximately 3800 residents in more than 1200 homes in the Westlake, Westlake Forest, and Westlake Village subdivisions. The District also provides service to approximately 45 commercial customers within the roughly 395 acres of the District.
The District currently operates and maintains a water plant (and water well), a wastewater treatment plant, 2 lift stations, about 13 miles of water lines, and about 12 miles of sanitary sewer lines.
What is the election?
The District is requesting authorization from its voters to issue bonds in several increments over time, as needed, to fund the required maintenance and replacement of the District's water, sanitary sewer and drainage (WS&D) infrastructure over the next 15 years.
Language similar to that below will be on the ballot for residents of the District when they go to the polls or vote by mail for the November 5, 2019 general election:
Proposition A – The issuance of up to $17,000,000 of water, sanitary sewer, and drainage facilities bonds.
What is a bond authorization?
A bond authorization is an authorization to sell bonds to fund district projects. It is similar to a line of credit that a business might use to fund its operations. An authorization is not immediate funding, nor is it a “blank check” to fund the entire amount of the authorization without meeting strict regulatory requirements. While an authorization may be for a larger amount, bonds may only be sold once necessary projects are ready to begin or as needed for repairs and maintenance or replacement.
The District currently has $0 in remaining bond authorization. The most recent bond authorization was in 1999, when the District's voters authorized a total of $6,875,000 for the purpose of constructing water, sanitary sewer, and drainage facilities. All of the bonds authorized in the 1999 election were issued in 2002 and 2006 to fund necessary projects for the water and sanitary sewer infrastructure in the District.
What will bond authorization be used for?
If approved by District voters, bond funding will be used for several vital projects required to allow the District to achieve its goal of continuing to provide consistent water supply and sanitary sewer service to the residents and businesses in the District. With this goal in mind, our Capital Improvement Plan (often referred to as the "CIP") was adopted by the Board with input from the District’s engineer, financial advisor, and operator.
The CIP identifies the projects the Board anticipates will be necessary over the next 15 years to maintain, replace, or upgrade the aging water and sewer infrastructure owned and operated by the District. Costs for those projects (and required bond issuance costs) are estimated to be $17 million.
Key CIP projects include:
- Replacing some of the District's waterlines;
- Rehabilitation of the District's sanitary sewer lines; and
- Maintenance, rehabilitation, and replacement of crucial items at the District's water plant and wastewater treatment plant.
Why is it necessary to do these projects now?
The District was created in 1972 and much of the District’s water and sewer infrastructure has been in place for many years. As such infrastructure ages, it requires maintenance, rehabilitation, and, sometimes, replacement as part of its lifecycle. On average, infrastructure lasts about 30-40 years with optimal maintenance and operations.
The District intends to issue bonds only as necessary over the next 15 years pursuant to the CIP in order to proactively maintain its facilities. This will enable the District to ensure reliable and continuous service by maximizing the life of its water and sanitary sewer infrastructure.
Municipal utility districts were originally created to eventually be annexed by a neighboring city, after which the city would pay for the costs of operating, maintaining, and repairing all District facilities. Annexation of the District by the City of Houston is very unlikely, so the District must prepare to fund all necessary costs of maintenance of the water and sanitary sewer facilities required to serve its residents.
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, likely requiring substantial increases in maintenance tax rates and/or water and sanitary sewer rates. The District must have funds in hand before it can proceed with a required project. Funding projects with maintenance taxes or water and sewer rates would likely require a major increase in rates in the short-term in order to collect the required funds. This method places the entire financial burden on current residents and could create significant delays and increase costs for the completion of large projects.
Authorizing the District to issue bonds will allow the Board to spread the costs of the necessary projects over several years and avoid significant increases in maintenance tax rates and/or water and sanitary sewer rates required by a "pay as you go" approach. This method spreads the cost for these projects among current and future residents and businesses in the District and enables the District to complete necessary projects quickly.
How are my taxes determined?
The District levies a total tax rate each year that has two components:
- The debt service tax, the proceeds of which can only be used to make payments on the District’s outstanding bonds; and
- The maintenance and operations tax (often referred to as M&O), 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 17% between 2014 and 2018 (from $0.5925/$100 assessed value to $.49/$100). As of September 23, the Board has reduced this by another $0.01/$100 of assessed value to $0.48/100. For more details regarding tax rates, click here. As a result of prudent financial management, the District has earned an A2 rating from Moody's.
Through careful supervision of expenses and planning for maintenance, the District currently has 27 months of reserve funding. The standard for municipal utility districts is generally 12 months. Reserve funds earn interest and are available for emergencies, but are insufficient for the various large projects required over the next 15 years to keep the District's infrastructure functioning properly.
How will the authorization affect our taxes?
The Board does not anticipate any increase in the District's total tax rate in the next 10 years as a result of these bonds. This projection is based on the following factors: (i) the issuance of $3,500,000 in bonds in 2020, (ii) the issuance of $5,000,000 in bonds in 2025, (iii) a 5% estimated interest rate on such bonds, and (iv) the assessed value of property within the District staying the same or increasing over time.
With the authorization and issuance of the bonds, it is not expected that an increase in the District’s maintenance tax rate will be required.
Is the District responsible for storm water drainage facilities in the District?
No. Westlake MUD 1 does not own any storm water drainage infrastructure. Drainage facilities within the District are the responsibility of Harris County and the Harris County Flood Control District. U.S. Army Corps. of Engineers drainage facilities located outside of the District also impact drainage in the District. For more information on their storm water drainage projects, please visit their websites.
Some bond funds may be utilized to better prepare District facilities for severe weather events, but those items are not directly related to existing drainage infrastructure in the District. During Hurricane Harvey-related flooding, our facilities were operational for the duration of the storm and related flooding. The plan is to continue to monitor and evaluate risks and make necessary improvements to mitigate risks to our facilities.
Is the District going to connect to the City of Houston’s water system?
No. The District will not be connecting to the City of Houston's water system. The District will eventually be required by the Harris-Galveston Subsidence District and the West Harris County Regional Water Authority, which were both established by state law to set groundwater management policy for the region, to connect to surface water sources such as Lake Houston, from which much of Houston's water is provided. The District will continue using and maintaining our existing water well as a backup and supplemental water source, as needed.
Changing water sources from our wells to surface water requires changes and upgrades in our infrastructure to handle different water purification processes to keep our residents safe, and such upgrades will be funded by the bonds, if authorized.
For more information on the subsidence district and water authority, please click the respective links above and read our News Post here.
How will ongoing communication be handled regarding District projects?
The Board understands that communication with residents regarding its projects and goals is vital. That is why we have hired our communications firm Touchstone District Services to reach out to our residents and help us ensure residents are continuously updated regarding the bond election, resulting projects, and general issues with water and wastewater services in the District. We will be using water bill inserts and messages, door hangers, and news posts on the District’s website to ensure residents are aware of the progress on projects and how such projects will affect their day-to-day activities. The Board and its consultants will work with contractors to ensure those we hire communicate with residents regarding activities in the District.
I have more questions…
Further, the District will host an Open House on October 15, 2019, to provide additional information and give residents an opportunity to ask consultants and directors any questions they have in regards to the bond authorization process. The open house will be held from 6-8 p.m. at the Westlake Volunteer Fire Department which is located at 19636 Saums Road, Houston.