Fort Bend County Municipal Utility District No. 116 Election FAQ

As many residents may already know, the Board of Directors (the "Board") of Fort Bend County Municipal Utility District No. 116 ("FBCMUD 116", or the "District") has called for three (3) authorization propositions to be on the election ballot for Saturday, May 1, 2021. To ensure that residents and other constituents of the District have accurate information regarding the proposed authorizations and the Board's goals for the District, we have put together answers for common questions. This page will be updated to address additional questions and provide additional information prior to the election.

What is the District?

The District is responsible for providing water, sanitary sewer, infrastructure and services to approximately 2222 equivalent residential connections within the 744.5090 acres of land within the District.

FBCMUD 116 currently operates and maintains one (1) groundwater plant with onsite water wells, and four (4) sanitary sewer lift stations; the District also utilizes the City of Richmond South Wastewater Treatment Plant-Phase 1. This infrastructure is connected by 23.67 miles of water lines, 12.69 miles of sanitary sewer lines, 2.27 miles of drainage ditches, and 10.80 miles of storm sewer lines.

What is the election?

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 May 1, 2021 uniform election, asking voters to select one (1) option of either FOR or AGAINST :

PROPOSITION A – THE ISSUANCE OF UP TO $48,000,000 BONDS FOR WATER, SANITARY SEWER, AND DRAINAGE AND STORM SEWER FACILITIES AND THE LEVY OF TAXES, WITHOUT LIMIT AS TO RATE OR AMOUNT, SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS

This is the proposition related to the bond authorization amount the District is seeking to complete projects and finance new infrastructure construction to meet growth projections within the District.

PROPOSITION B – THE ISSUANCE OF $7,500,000 BONDS FOR RECREATIONAL FACILITIES AND THE LEVY OF TAXES, WITHOUT LIMIT AS TO RATE OR AMOUNT, SUFFICENT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS

This is the proposition related to funding the park and trail system projects outlined in the Parks and Open Space Master Plan.

PROPOSITION C – THE ISSUANCE OF UP TO $5,000,000 BONDS FOR REFUNDING RECREATIONAL FACILITIES BONDS OF THE DISTRICT AND THE LEVY OF TAXES, WITHOUT LIMIT AS TO RATE OR AMOUNT, SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS

Refunding bonds are not bonds to be issued in addition to outstanding bonds; rather, they provide the ability, down the road, if conditions are favorable, to be able to refinance and replace outstanding bonds for a lower interest amount to save the District, and thus the taxpaying residents, debt service costs. Under current requirements applicable to the District, the District would typically need to demonstrate at least a three percent (3%) net present value savings before selling refunding 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 large 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 $1,940,000 in remaining bond authorization. The most recent bond authorization was in 1999, when the District's voters authorized a total of $47,630,000 for the purpose of constructing water, sanitary sewer, and drainage facilities. $45,690,000 of the bonds authorized in the 1999 election were issued between 2000 and 2020 to fund necessary projects for the water, sanitary sewer and drainage infrastructure in the District. Additionally, since 2000, as a result of prudent financial oversight by the Board, the District has managed its annual debt service expenses by refinancing bonds at lower interest rates through the issuance of refunding bonds. According to the District's Engineer, the remaining $1,940,000 bond authorization will not be sufficient to address the anticipated projects over the next fifteen to twenty (15-20) years, in addition to the development of new infrastructure within the District.

What will bond authorizations be used for?

The Bond Election Report submitted by the District engineer identifies the projects the Board anticipates will be necessary over the next 15-20 years to maintain, replace, or upgrade the aging water and drainage infrastructure owned and operated by the District. As a proactive measure, the Bond Election Report outlines the potential cost for those projects (and required bond issuance costs), considering all information available today, to be approximately $48,000,000, as outlined in Proposition A (above).

Key Bond Election Report projects include:

Rehabilitation of some of the District's water distribution lines;
Rehabilitation of the District's existing plant facilities; and
Rehabilitation of the District's lift stations.

Additionally, a portion of this authorization will be utilized to pay for new infrastructure that will meet the growing District capacity needs as more development occurs within the District.

As the District closes in on 2,500 equivalent residential connections, additional water treatment will be necessary. The District engineer recommends a new water treatment plant (WTP) as it will provide all the necessary water treatment for the full projected build-out of the District and will not require an agreement with another entity. As such, the new WTP would require land acquisition, design, and construction of the plant itself. The new WTP would be anticipated to provide capacity for an additional 1,788 connections; however, the existing wastewater treatment plant (WWTP) is limited to only an additional 1,120 connections with the current wastewater flow rate. Therefore, as the District approaches 3,167 equivalent residential connections, it will need to apply with the Texas Commission on Environmental Quality (TCEQ) to re-rate the wastewater flow rate. Attaining a lower flow rate from TCEQ will give the District approved wastewater treatment capacity for the full build-out of the District, matching the water treatment's additional 1,788 equivalent residential connections.

Lastly, the bonds authorized in Proposition B (above) would enable the District to build a public trail and park system complimenting the existing neighborhood park and green spaces. The trail system would add approximately 4.5 miles of walking trails and outdoor exercise space between the District's neighborhoods and connect the north and south side of Rabbs Bayou with a pedestrian bridge. Additionally, this will allow the District to construct a large public park south of Rabbs Bayou for all residents to play, gather, relax, and explore.

Why is it necessary to do these projects now?

The District was created in 1998 and much of the District's water, sewer and drainage 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 15-20 years pursuant to the Bond Election Report in order to proactively maintain, and, if necessary, implement repairs or replacement to 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 with the expectation they would eventually be annexed by a neighboring city, after which the city would pay for the costs of operating, maintaining, and repairing all District utility facilities. Under current circumstances, annexation of the District by the City of Richmond in the near future appears unlikely, so the District must prepare to fund all necessary costs of maintenance for the water, sanitary sewer and drainage 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 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 an increase in rates in the short-term in order to collect the required funds. This method places the financial burden for long term projects on current residents and could create delays and increase costs for the completion of large projects.

Authorizing the District to issue bonds would allow the Board to spread the costs of the necessary projects over numerous years and avoid the increases in maintenance tax rates and/or water and sanitary sewer rates typically required by a "pay as you go" approach. This method spreads the cost for these projects among both 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 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 when possible. For more details regarding tax rates, click here. As a result of prudent financial management, the District has earned an "A2" underlying rating from Moody's Investors Service.

Through careful supervision of expenses and planning for maintenance, the District currently has approximately 35 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 total tax rate increase as a result of bond issuance for the foreseeable future.

I have more questions…

Good! The goal is for the residents to have all the information at their disposal when voting approaches. Additional questions can be fielded through the Contact Us form on the District's website.

Further, the District will host two Virtual Election Education Webinars to provide additional information and give residents an opportunity to ask consultants and directors any questions they have in regard to the bond authorization process. There will be TWO opportunities to attend:

Tuesday, April 13, 2021 at 7:00 p.m.
Saturday, April 17, 2021 at 2:00 p.m.

To register for either event, visit the following link: https://attendee.gotowebinar.com/rt/6295664356627759888

After registering, you will receive a confirmation email with information about joining the live webinar.