I plan to move out of Houston west to Cypress, Katy, or Fulshear. My current total property tax rate (marginal) in Houston is 2.4%. I see established subdivisions in my target areas with about the same tax rate. However, I'm also considering a new build and those new subdivisions have tax rates from 3.3-3.6%, which will be several thousands of dollars more yearly in taxes for the same appraised value.

So, my questions to Aggies in the real estate business who may understand this:

1) Is it normal for new build subdivisions to have much higher tax rates than established subdivisions next to it? Is this to pay for new infrastructure or schools?
2) Is this supposed to be a temporary tax rate with an eventual rate like other subdivisions in the Houston metro area (around 2.4%)?
3) If temporary, how long before the rates eventually fall to the Houston metro area average?

Thanks in advance.

Will these MUD taxes decrease gradually over a 20-30 year period as more taxpayers move in and bonds are paid off? Basically could I expect a "normal" tax rate to gradually be achieved by the year 2040 or 2050?

They do decrease over time. You can see this by looking at the tax rates in various (for example) Cinco neighborhoods that were built at different times. There are like 20+ muds in Cinco and each has a slightly different tax rate. The oldest ones will be around 2.2-2.3 and the newest are around 3. At the time they were built they were over 3. Cross creek is similar, some sections are over 3 and some are under.

The question is whether they decrease at a fast enough rate to outpace tax valuation increases. I would not count on your tax payments going down significantly if at all.

Answers.

1. MUD taxes are the developers way of building all the infrastructure such as roads, sewers, common land usage such as pools, and they are the main drivers of the additional taxes.

2. No. My 21 year experience is they never go down because all infrastructure needs maintenance and improvements over time.

3. No. See above.

Unless you are annexed into a city which then assumes the MUD bonds. That doesn't happen often so assume it will live a long life

SteveBott said:

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Answers.

1. MUD taxes are the developers way of building all the infrastructure such as roads, sewers, common land usage such as pools, and they are the main drivers of the additional taxes.

2. No. My 21 year experience is they never go down because all infrastructure needs maintenance and improvements over time.

3. No. See above.

Unless you are annexed into a city which then assumes the MUD bonds. That doesn't happen often so assume it will live a long life

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don't forget the ever growing bonds that will "only add $100" but they people fail to recognize they've added 15 bonds over 10 years all claiming the same thing.

First ~7 years, it will remain constant and high assuming most of the property is developed in the first ~7 years. Then there's usually a reduction of about 25%. Then the rate slowly reduces by by about 80% over the next 40 years, or 2% per year. Then it will generally stay at that level for a responsibly-managed MUD.

That's the tax RATE though. As far as your actual tax bill to the MUD, still high for the first 7 years. Still pretty high for the next 20 years since the rate will be reducing slowly as property values climb and you will pay about the same each year. ~30 years after the subdivision was started, you can see a significant reduction in the actual taxes you pay. Up to half the cost for responsible MUDs.

Don't plan on a significant reduction in taxes until 30 years after the home was built.