As many residents may already know, the Board of Directors (the "Board") of Newport Municipal Utility District (the "District" or “Newport MUD”) has called for a bond authorization proposition to be on the election ballot for Tuesday, November 5, 2024. To ensure residents and other constituents of the District have accurate information regarding the proposed authorization 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.
The District is responsible for providing water, wastewater, stormwater, and detention to over 13,000 residents across 2,411 acres, servicing the following neighborhoods:
- County Club Villas of Newport
- Deerpointe
- Golf Terrace
- Newport Country Club Estates
- Newport Court
- Newport Pointe
- Oaks at Newport
- Seven Oaks North
- Seven Oaks South
- Patio Woods
- Villas at Newport
- The Preserve at Newport
- Sections 1-10
- Section 12
Services also include commercial and public properties such as a gas station, Newport Elementary School, and the IUOE International Training and Conference Center.
Newport MUD currently operates and maintains two (2) water plants with two (2) onsite water wells, twelve (12) sanitary sewer lift stations, and one (1) wastewater treatment plant. This infrastructure is connected by 56.44 miles of water lines and 56.64 miles of sanitary sewer lines. Additionally, Newport MUD has seven (7) detention basins and operates five (5) parks (Newport Trails, Flying Bridge Parks, Port O’Call Park, South Diamondhead Park, and ViaDora Park).
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 November 5, 2024 election, asking voters to select either FOR or AGAINST on the following proposition:
PROPOSITION A – THE ISSUANCE OF BONDS IN THE MAXIMUM AMOUNT OF ONE HUNDRED TEN MILLION DOLLARS ($110,000,000) FOR WATER, SEWER AND DRAINAGE SYSTEM IMPROVEMENTS AND THE LEVY OF AD VALOREM TAXES SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON SAID BONDS
This proposition is related to the bond authorization amount the District is seeking to complete water infrastructure projects in the District.
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 $27,780,000 in bonding authority. The most recent bond authorization was in 2020, and the amount of bonds authorized by the District's voters in the 2020 election totaled $52,960,000 for the purpose of water, sanitary sewer, and drainage facilities. The authorized bond amounts were issued periodically, as needed, to fund necessary projects for the water, sanitary sewer and drainage infrastructure in the District.
The Bond Election Report submitted by the District engineer identifies the projects the Board anticipates will be necessary over the next 6 years to rehabilitate, maintain, replace, and expand the aging water, sanitary sewer 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.
The District was originally two separate MUDs created in 1972 and 1977. These MUDs were combined to create the current Newport MUD in 1998.
As the infrastructure ages, it requires maintenance, rehabilitation, and sometimes waterline replacement as part of its lifecycle. On average, infrastructure lasts about 30 years with optimal maintenance and operations.
Through inspections of the District infrastructure, the District engineer found much of the sanitary sewer lines need to be rehabilitated and/or replaced. This is due to multiple factors: age of the original infrastructure, material of the pipes, and environmental factors like tree roots breaking through and protruding into the pipes.
Additionally, the District and its Engineer have been notified by state and federal regulation agencies there needs to be a berm constructed around the existing wastewater facilities, to promote floodwater risk mitigation. This berm represents a substantial engineering undertaking to offer that flood risk protection to the District facilities, to keep them functional even during stormwater and flooding events.
The District intends to issue bonds only as necessary over the next 6 years pursuant to the Bond Election Report in order to proactively maintain, and, where 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, wastewater and drainage and detention infrastructure.
Municipal Utility Districts were initially 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 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.
The primary alternative to authorizing the bonds is to fund all necessary projects on a "pay as you go" basis. Accordingly, utilizing this approach would likely require large increases in the District’s maintenance tax rates and/or water and sanitary sewer rates in order to collect the required funds. Further, the law requires the District to have the necessary funds in hand before it can proceed with a required project. If the District is forced to raise the necessary money on an as-you-go basis, it could create significant delays in the completion of large projects. Much like a home equity loan for a major roof repair, when the District issues bonds it spreads the costs of the necessary projects over several years and avoids the increases in tax rates and/or water and sanitary sewer rates typically required by a "pay as you go" approach. Moreover, the interest rates for the District on the repayments of its municipal bonds can be substantially lower than the comparable rates for traditional construction loans; tax-exempt bonds are an efficient use of funding for District engineering projects. Finally, issuing these bonds on an as-needed basis enables the District to complete necessary projects quickly when the need arises.
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 M&O), 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.
For details regarding tax rates, click here. As a result of prudent financial management, the District has earned an “A” rating from Standard & Poor’s Financial Service.
Through careful supervision of expenses and planning for maintenance, the District has more than one year of operating reserves, which exceeds the common benchmark for Municipal Utility Districts. Reserve funds earn interest and are available for emergencies. However, these reserves would not be sufficient for large-scale rehabilitation, repair, or replacement, such as those projects that are included in the engineer’s report.
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.