Municipal Utility District vs. HOA, What is the Difference?

What is a MUD and HOA?

Municipal Utility District

A Municipal Utility District (a “MUD”) is a political subdivision of the State of Texas authorized by the Texas Legislature, Texas Constitution, and the Texas Commission on Environmental Quality (the “TCEQ”) to provide water, sewage, drainage and other services within the MUD boundaries.


A Homeowners Association (a “HOA”) is membership of homeowners that is responsible for the enforcement of the Covenants, Conditions and Restrictions for the properties in their immediate subdivision.

How are they Created?

Grand Mission MUD No. 2

Grand Mission Municipal Utility District No. 2 (the “District”) was created in 2005 by the TCEQ. The District was approved by the majority of the registered voters within the boundaries of the District. The District currently contains 688.4 acres.


HOA’s are created under and regulated by state law. In Texas, a committee of at least three land owners in the boundaries of the proposed HOA must form to petition for the creation of an HOA. The committee must file official written notice and requires at least 60% of the property owners to sign and approve the petition for creation. Typically, most HOA’s are created by the Developer and/or Homebuilder in the neighborhood’s early stages. Most HOA’s are created as a non-profit entity for the purpose of serving the community.

Who is the Governing Body?


The governing body of an HOA is referred to as the Board of Directors. The By-Laws of each HOA state the number of Board members, how they are elected or appointed, and their terms of office.

The District

The governing body of a MUD is an elected Board of Directors. The Board of Directors is typically comprised of five (5) people who are property owners (or registered voters) within the boundaries of the MUD and are elected to four (4) year staggered terms by a majority vote of the registered voters within the District.

The District employs the following consultants to assist the Board of Directors in the management and operations of the District:

  • Engineer – Quiddity Engineering, LLC
  • Attorney – Coats Rose, P.C.
  • Operator – Municipal District Services
  • Bookkeeper – Myrtle Cruz, Inc.
  • Financial Advisor – Rathmann & Associates, L.P.
  • Tax Assessor/Collector – Tax Tech, Inc.

How are they Funded?

The District

The District is funded through ad-valorem taxes and water and sanitary sewer revenue. The District has authority to tax all property owners within its jurisdictional boundary. Water and sanitary sewer rates are imposed on all residential and commercial users, which may include a combination of single family subdivision(s), multifamily, commercial, or other types of property.


HOA’s are typically funded through annual assessments or special assessments. Only residents within the specific HOA’s boundaries pay assessments to the HOA.

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