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What districts may spend on, good practice, and accountability

What each kind of district is allowed to pay for, the limits that apply to all of them, what well-run boards do beyond the law, and who checks. Citations were checked against the official text of each statute. This is a plain-English summary, not legal advice.

What each kind of district may spend money on

A special district can spend public money only on what a law allows it to do. Which law applies depends on the kind of district. The table covers the main types you will see on this site. When a district's spending looks unusual, the first question to ask is: which section of its law allows this?

"Water Code" means the Texas Water Code; "LGC" means the Local Government Code; "Gov't Code" means the Government Code; "Const." means the Texas Constitution; "30 TAC" means TCEQ's rules in Title 30 of the Texas Administrative Code. Water Code chapter 49 sets general rules for water districts. It applies to every district created under Const. art. III §52(b)(1)–(2) or art. XVI §59, unless the district's own law says otherwise (Water Code §49.001(a)(1), §49.002).

Type of district What it may pay for What needs voter approval (and which bonds need TCEQ / Attorney General approval) Key limits
Municipal Utility District (MUD)
Water Code ch. 54 + ch. 49
  • Water supply, sewer (wastewater), and drainage and storm water, including detention (§54.201(b)(1)–(3); §49.211).
  • Parks and recreational facilities: parks, landscaping, trails, sidewalks, greenbelts, and the street and security lighting that goes with them (§54.201(b)(7); §49.462–§49.463).
  • Roads, but only after TCEQ approves road powers for the district and the city or county with platting authority (or TxDOT, for state roads) approves the plans (§54.234). A MUD that is at least 10 years old may also issue bonds to repair or maintain streets (§54.242, §54.522).
  • Street and security lighting (§54.236).
  • Fire protection: its own fire department, a joint one, or a contract, under a plan approved by TCEQ (§49.351).
  • Security and law enforcement: it may employ peace officers or contract for them, for example with a constable or sheriff (§49.216).
  • Solid waste collection and recycling. It may sign an exclusive contract with a private company (§54.203).
  • Voters must approve: bonds paid from property taxes, other than refunding bonds, by majority vote (§54.505; Const. art. XVI §59(c)); a maintenance and operations (O&M) tax (§49.107(b)); taxes to pay a contract (§49.108(b)); tax-supported park bonds (§49.4645); street-repair bonds (§54.522(c)); and a fire plan with its bonds and taxes (§49.351(i)).
  • Road bonds issued under Const. art. III §52 need a two-thirds vote (art. III §52(b)).
  • No vote needed: bonds paid only from revenues such as water and sewer charges (§54.505).
  • TCEQ: before issuing bonds for projects that TCEQ's rules cover, the district needs a TCEQ order finding the project feasible (§49.181; 30 TAC ch. 293). Some refunding bonds and some federal or state-agency loans are exempt.
  • Attorney General: must approve all bonds before they are delivered. The Comptroller then registers them (§49.184).
  • Park bonds: property-tax-backed park bonds are allowed only in Bastrop, Bexar, Brazoria, El Paso, Fort Bend, Galveston, Harris, Montgomery, Travis, Waller and Williamson counties. They need their own vote, and a park plan must be filed before the election. Park debt outstanding may not exceed 1% of the district's taxable value (up to 3% if the district meets certain conditions). No tax-backed bonds may be used for swimming pools or golf courses (§49.4645; Const. art. XVI §59(c-1)). Everywhere else, park bonds can't be backed by property taxes (§49.464(a)).
  • In counties over 3.3 million people and the counties next to them, the share of the O&M tax spent on recreational facilities may not exceed 10 cents per $100 of value (§49.107(h)).
  • Before building parks, the board must make findings that it has taken existing and planned city and county parks into account (§49.465).
  • Street and security lighting can't be financed with property-tax bonds unless it comes under the district's road powers or park rules (§54.236(b)).
  • Road bonds under art. III §52 are capped at one-quarter of the assessed value of real property in the district (Const. art. III §52(b)).
  • Before using O&M tax money to reimburse a developer for facilities, the district needs approval from TCEQ's executive director (§49.107(f)).
Water Control and Improvement District (WCID)
Water Code ch. 51 + ch. 49
  • Water supply, flood control, irrigation, drainage and levees (§51.121, §51.125).
  • Sewer, wastewater and local storm water, if the district has the "Subchapter H" waste powers. A district that lacks them can add them (§51.331, §51.332).
  • Parks and recreational facilities under Water Code ch. 49, even where a city or county provides similar facilities (§51.335(c); §49.463).
  • Fire protection, if it provides drinking water or sewer service (§49.351).
  • Peace officers, employed or under contract (§49.216).
  • Solid waste: its waste powers cover solid wastes (§51.331(a)), and any water district may contract to collect and dispose of municipal solid waste (§49.213(c)(6)).
  • Roads: chapter 51 gives no general road power. It covers only bridges and culverts where district canals and ditches cross roads (§51.133). Any other road power would have to come from another law.
  • Bonds: need a majority vote in a district organized under Const. art. XVI §59, or a two-thirds vote in a district organized under art. III §52 (§51.414).
  • O&M tax (§49.107(b)) and contract taxes (§49.108(b)) need a vote.
  • Borrowing for newly added waste and storm-water powers needs a vote (§51.332(b)).
  • Tax-supported park bonds follow the same rules as for MUDs (§49.4645).
  • TCEQ (§49.181) and Attorney General (§49.184) approval apply as for MUDs.
  • Debt may not exceed what the Constitution allows (§51.403). For art. III §52 districts, that cap is one-quarter of the assessed value of real property (Const. art. III §52(b)).
  • When using its waste and storm-water powers, the district may not duplicate a service that another government already provides adequately, unless it has a contract with that government (§51.335(b)). Parks are the exception (§51.335(c)).
  • The park-bond limits are the same as for MUDs (§49.464(a), §49.4645).
Municipal Management District (MMD)
Local Government Code ch. 375
  • The improvement projects and services listed in LGC §375.112(a):
    • landscaping; lighting, banners and signs; streets and sidewalks; pedestrian skywalks, crosswalks and tunnels; drainage;
    • solid waste, water, sewer and power facilities;
    • parks, plazas, lakes and recreation areas; fountains and works of art;
    • off-street parking, bus terminals and mass transit;
    • "supplemental services" such as advertising, economic development, promoting the area, health and sanitation, public safety, security, maintenance, business recruitment, traffic relief, recreation and cultural enhancement;
    • the costs of running the district.
  • Roads, under Const. art. III §52 (§375.0921).
  • The general powers of water districts, including those in Water Code ch. 54 (§375.091).
  • Improvements and services that directly benefit property in the district, even if located outside it (§375.092(f)).
  • Voters must approve: bonds paid in whole or in part from taxes (§375.244(a)). The board may call a bond election only after owners of a majority of the assessed value of the property sign a petition (§375.243). That petition rule does not apply to districts with elected boards (§375.0645(f)). District elections are held under Water Code ch. 54 (§375.241(b)).
  • No vote needed: assessments, and bonds not paid from taxes (§375.244(b)). However, assessment-funded projects need a petition from owners of a majority of the assessed value (or, for some assessments, of the land area) (§375.114), plus published notice and a public hearing (§375.113, §375.115).
  • TCEQ approval is needed only for bonds that pay for water, sewer or drainage facilities (§375.208).
  • Attorney General approval is needed for bonds that are "public securities," and the Comptroller then registers them (§375.205).
  • The city must approve bond issues and project plans, or approve a capital budget of up to five years (§375.207).
  • Single-family homes, duplexes, triplexes and fourplexes are exempt from the district's assessments, impact fees and taxes. The exemption does not cover a tax approved by voters or a charge for a service such as water and sewer (§375.161). It does not apply in districts with elected boards (§375.0645(f)).
  • Assessments must follow the special benefit to each property. Owners may appeal to the board and then to district court (§375.111, §375.119, §375.123–§375.124).
  • Bonds may run no longer than 40 years (§375.202(a)).
  • The district has no power of eminent domain (§375.094).
  • Bidding: the water-district bidding rules (Water Code ch. 49, Subchapter I) apply to contracts for construction, equipment, materials and machinery. The board may adopt rules waiving bidding in an emergency, for a sole source, when the supplier must do the design, or when only one bidder responds (§375.221).
Improvement district created by its own act
Special District Local Laws Code. Example: Harris County Improvement District No. 14, ch. 3882

Every special-law district has its own chapter. Read it first. The HCID 14 example:

  • Anything LGC ch. 375 allows (see the MMD row), unless ch. 3882 says otherwise. It may use any money available to it (§3882.007, §3882.202). The Legislature's findings include "water, wastewater, drainage, road, and recreational facilities" (§3882.004(d)(4)).
  • Contracts for law enforcement with a qualified provider, including Harris County or the City of Houston (§3882.104).
  • Economic development programs, including loans and grants of public money, with a city's powers under LGC ch. 380 (§3882.106). It also has development-corporation powers under LGC ch. 505 (§3882.101).
  • Parking facilities (§3882.151, §3882.153).
  • Dues to charities or nonprofits whose work furthers a district purpose (§3882.105).
  • A nonprofit corporation, appointed by the board, to carry out projects and services for the district (§3882.102).
  • Voters must approve: any property tax or sales and use tax, and any bonds paid from property taxes (§3882.212(b)). The O&M tax rate may not exceed the rate voters approved (§3882.208). Contract taxes need voter approval of the contract (§3882.209). The ch. 375 petition requirement for bond elections does not apply (§3882.212(c)).
  • No vote needed: bonds secured by other revenue or by voter-approved contract payments (§3882.212(a)).
  • Assessments: need a petition from owners of a majority of the assessed value of the real property (§3882.203).
  • Attorney General approval for public-security bonds (LGC §375.205). TCEQ approval only for water, sewer or drainage bonds (LGC §375.208). Both apply through §3882.007.
  • Directors: five, appointed by TCEQ from people the board recommends (§3882.051–§3882.052).
  • The Water Code park-debt cap (§49.4645) does not apply (§3882.210(c)). Neither does the 10-cent cap on the recreational share of the O&M tax (§3882.208(c)).
  • The ch. 375 exemption for single-family and small residential property does not cover taxes or service charges such as water and sewer (§3882.207).
  • Bidding: Water Code ch. 49, Subchapter I applies, and the ch. 375 waiver rules do not (§3882.213).
  • The district has no eminent domain power (§3882.108).
  • It is meant to add to county services, not replace them (§3882.003(c)).
  • The board must set by resolution how many director signatures a payment needs, and the procedure for payments (§3882.201).
  • Taxes for a "defined area" need a vote of the voters in that area (§3882.252).
Joint-powers or regional agency created by contract among districts
e.g. a regional water agency
  • Whatever the contract authorizes, but only within its members' own powers. Under the Interlocal Cooperation Act, a contract may cover only a governmental function or service that each party could perform on its own (Gov't Code §791.011(c)(2)).
  • Water districts may contract for joint construction, financing, ownership and operation of facilities (Water Code §49.213(a)) and may act jointly with other public or private entities (§49.227). Two or more districts may run a joint fire department under a contract (§49.351(d)).
  • For a member district to pay the agency from taxes other than its O&M tax, its voters must approve the contract (Water Code §49.108(b)). A substantially final form of the contract must be filed for public inspection before early voting starts (§49.108(g)).
  • A member district whose bonds need TCEQ approval must also get approval from TCEQ's executive director before committing to collect a tax for debt lasting more than three years. That rule does not apply to its share of another district's bonds that TCEQ has already approved (§49.108(e)).
  • If the agency issues its own bonds, the approvals depend on the law it was created under. Ask for that law and the contract.
  • An interlocal contract must be approved by each member's board. It must state its purpose, terms, rights and duties, and say that paying members pay from current revenues. Payments must fairly compensate the party doing the work (Gov't Code §791.011(d)–(e)).
  • A contract between districts may leave out a maximum amount of bonds or spending only if it includes one of the safeguards in Water Code §49.108(i). These include requiring consent from two-thirds of the affected boards to enlarge the service area, or prior approval by the districts that will pay.
  • Information the agency gathers or keeps for a member district can be public information if the district owns it, has a right of access to it, or pays public money for it (Gov't Code §552.002(a)(2)).

Limits that apply to every district

Read the laws: Water Code ch. 49 · ch. 51 · ch. 54 · LGC ch. 375 · SDLLC ch. 3882 (HCID 14) · Const. art. III · Const. art. XVI

Good practice: what well-run boards do beyond the law

Each item below is labeled. Law means a statute or rule requires it, and the section is cited. Good practice means no law requires it, but it makes a board's decisions easier for residents to follow. A district that skips a good practice is not breaking the law.

Accountability: who checks, and what residents can do

Who oversees what

WhoWhat they check
TCEQ (Texas Commission on Environmental Quality)
  • Approves bond-funded projects as feasible and enforces the developer-reimbursement rules (Water Code §49.181; 30 TAC ch. 293). For MMDs, this covers only water, sewer and drainage bonds (LGC §375.208).
  • Receives annual audits and may review them, ask questions and examine records (§49.194–§49.196). If an audit points to a crime, TCEQ's executive director must notify the county or district attorney and the Attorney General (§49.195(e)).
  • Approves developer reimbursement from maintenance taxes (§49.107(f)) and fire plans (§49.351(h)).
  • Rules on residents' petitions about where meetings are held (§49.062(c-1)).
  • Can seek civil penalties for missed filings (§49.003).
  • Appoints the directors of some districts, such as HCID 14 (§3882.052).
Attorney General
  • Approves bonds before they are issued (§49.184; LGC §375.205).
  • Decides whether a district may withhold records: a district that wants to withhold requested information must ask the AG for a ruling within 10 business days (Gov't Code §552.301). The AG can also sue to enforce the Public Information Act (§552.321, §552.3215).
  • Under the Open Meetings Act, the AG's own power to sue covers only one notice rule (§551.142(c)). Most other Open Meetings complaints go to local prosecutors or to court (see below).
  • Receives TCEQ's list of districts that fail to file audits (§49.194(f)).
Comptroller Registers bonds after the AG approves them (§49.184(c); LGC §375.205(c)). It may receive and post district audits and debt information (LGC §140.008(g)–(h)), and it sets the format districts use to post tax-rate and budget information online (Tax Code §26.18). We did not find a statute giving the Comptroller power to approve or reject a district's tax rate.
County tax office and appraisal district The appraisal district sets property values and keeps a property-tax database (Tax Code §26.17). The county assessor-collector posts tax-rate information on the county website (§26.16). Many districts hire their own tax assessor-collector instead (Water Code §49.059). Before adopting a tax rate, a district must publish notice of the meeting (§49.236).
The district's auditor A CPA hired by the board audits the books every year (§49.191) and checks developer reimbursement requests before payment (30 TAC §293.70). An audit tests the financial records. It does not decide whether each expense was wise or within the district's powers.
Voters
  • Elect MUD and WCID directors (Water Code §49.102–§49.103; §51.072).
  • Approve tax bonds, maintenance taxes and contract taxes. In some districts, they can also vote on the tax rate (§49.23601–§49.23603).
  • Many MMD boards are not elected. The city council approves directors recommended by the board (LGC §375.064), unless the district was created with an elected board (§375.0645).
  • HCID 14's directors are appointed by TCEQ from the board's own recommendations (§3882.052).
  • For joint agencies, each member's representatives are chosen as the contract says.
Courts and prosecutors
  • Courts hear Open Meetings suits (Gov't Code §551.142), Public Information Act suits (§552.321) and appeals of MMD assessments (LGC §375.124).
  • County and district attorneys decide whether to prosecute criminal Open Meetings violations (§551.143–§551.145) and conflict-of-interest violations (LGC §171.003).
  • They also handle written complaints about records requests (§552.3215(e)).
State Auditor May audit the finances of any district it decides needs an audit (Water Code §49.199(b)).

What residents can do

This is a plain-English summary, not legal advice.