Bond Authorization Election FAQ
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As many residents may already know, the Board of Directors of Newport Municipal Utility District has called for a $70 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 our residents’ common questions. This page will be updated to address additional questions and provide additional information as needed based on your feedback.
What is Newport MUD?
Newport MUD is responsible for providing water and sanitary sewer service to approximately 11,496 residents in over 3,832 Homes in the 2,350 acres that make up the District.
What is Newport asking for?
The District is requesting authorization from its voters to issue $70 million of bonds in several smaller increments over time, as needed, to fund the required construction, maintenance and rehabilitation of the District’s water and sanitary sewer infrastructure over the next 10 years. This plan will also include the expansion of the water treatment and wastewater treatment plants to provide greater capacity to residents and support the District’s proactive system goals.
Proposition A – The issuance of up to $70,000,000 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 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.
The most recent bond authorization was in 2005, when the District’s voters authorized a total of $30,000,000 for the purpose of constructing water, sanitary sewer, and drainage facilities as well as additional authorizations for recreational facilities. This authorization has almost been completely utilized and additional authorization is needed 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 identified by the District’s engineer in our Capital Improvement Plan (often referred to as the “CIP”).
The CIP identifies the projects anticipated to be necessary over the next 10 years in order to maintain, rehabilitate, or rebuild the aging water and sewer infrastructure.
Explanation of Increase from the Draft Amount of $53,000,000 to the final amount of $70,000,000
On June 25, 2019, the Draft Newport MUD Capital Improvement Plan (CIP) was presented to the Board of Directors at the Newport MUD Special Meeting. The June 2019 Draft CIP included funds for the following goals:
- To purchase new water, sanitary & drainage systems in the new housing developments
- To fulfill the District’s obligation to provide water & sanitary sewer service to the Newport Pointe Tract Defined Area & water service only to HCMUD #525
- To expand the wastewater treatment plant
- To rehabilitate approximately 30% of the sanitary sewer system and all of the lift stations
- To construct an approximately 2,000 square foot District administration building
- For 10% of construction cost contingencies
- For engineering services to include all planning, design, plan development, bidding, and construction phase services
- For bond issuance costs
As was explained to the Directors at that time, an evaluation of the need for a potential expansion of the District’s Surface Water Plant within the year 2020 – 2030 timeframe had not yet been completed in light of the new projections of connections.
From June to August, the evaluation of the projected connections and the District’s Groundwater Reduction Plan revealed that the Surface Water Plant would need to be expanded no later than year 2025. Water Plant 2 located at Port O’ Call was evaluated, and it was determined to be unable to meet with the current disinfection requirements set forth by the Texas Commission on Environmental Quality (T.C.E.Q.). Based on the evaluation it was determined that funds should be established for a replacement water well at the Surface Water Treatment Facility. The need for these projects increased the requested amount of voter-authorized bond funds from $53,000,000 to $70,000,000 and these adjustments were included in the updated Draft CIP provided to the Board on August 15, 2019.
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 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, and much of our system has already exceeded its expected lifespan.
The District intends to issue bonds only as necessary over the next 10 years as outlined in the CIP in order to proactively rehabilitate its facilities, repair or replace aged infrastructure, and expand capacity.
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.
Funding projects with maintenance taxes or water and sewer rates would require a major increase in rates in order to collect the required funds in advance of starting any project. This method places the entire financial burden on current residents and could create significant delays for the completion of large projects, especially if there was an emergency repair.
Authorizing the District to issue bonds will allow the Board to spread the costs of the necessary projects over 20-30 years similar to how a mortgage on a home works. This enables the District to complete necessary projects quickly and allows the costs of the required projects to be both spread over a longer timeframe and shared by both current and future users of the District’s system, including commercial property owners.
How does the District manage taxpayer dollars?
As a result of prudent financial management throughout the years, the District has earned an A rating from S&P Global Ratings.
Through careful supervision of expenses and planning for maintenance, the District currently has 9 months of reserve funding. These reserves are available for emergencies and play a significant role in the District’s credit rating and therefore the interest rate when issuing bonds.
How will the authorization affect our taxes?
Currently, the district’s engineer is projecting most (if not all) the funds will be needed over the next 10-15 years, but there are a number of variables that make it hard to accurately predict when and where the funds are used. At this point, based on the engineers plan and all the information available to the District, Newport would only need to sell $12-$13M over the first two years (2020-2021) which would involve a small increase of around $0.075 additional debt service tax rate to service that amount of debt (barring any emergency repairs or event).
For more information on the tax implications, residents are encouraged to attend one or both of the open house events that the MUD has scheduled on October 3rd and October 16th. There are a number of repair and rehabilitation projects that these funds are needed for and attending an open house will give residents a better understanding how these funds will be used to maintain the district’s infrastructure and superior water rating moving forward. Bond authorization will give the Board an alternative way to pay for necessary expenses, rather than just from water and sewer revenues.
Who is responsible for drainage facilities within the District?
Harris County maintains the public roadways including the storm drainage system within it. Harris County Flood Control District maintains the drainage channels that convey the storm water, such as Gum Gully, within the District. Newport MUD maintains six detention facilities that have been constructed according to the Harris County standards in place at the time of design.
How will ongoing communication be handled regarding District projects?
The Board understands that improving communication with residents regarding its projects and goals is vital. That is why we have hired our communications firm Touchstone District Services to assist us in an effort to educate our residents on this bond issue. We will be using direct mailers, conversations with residents, news posts on the District’s website and two education open house events to ensure residents are able to make an informed decision in November.
I have more questions…
Further, we will be hosting two Open Houses on October 3rd and 16th, 2019, to provide additional information and answer resident questions regarding the bond authorization. Each Open House will include exhibits and consultants on hand to explain the needs of the District and the goals of the Board of Directors. Details are in the link above and on the District’s website.