# Why Did WTCMUD1 Borrow the Entire $5.81 Million Before It Needed All the Money?
**URL:** https://clearasmud1.discourse.group/t/why-did-wtcmud1-borrow-the-entire-5-81-million-before-it-needed-all-the-money/60
**Category:** From the Editor
**Created:** [September 10, 2026, 1:15am UTC](https://clearasmud1.discourse.group/t/why-did-wtcmud1-borrow-the-entire-5-81-million-before-it-needed-all-the-money/60 "2026-09-10T01:15:14Z")
**Posts on this page:** 3
**Page:** 1
### Author:  [@Tom\_Morrow](https://clearasmud1.discourse.group/u/Tom_Morrow)
#### Post date: [September 10, 2026, 1:15am UTC](https://clearasmud1.discourse.group/t/why-did-wtcmud1-borrow-the-entire-5-81-million-before-it-needed-all-the-money/60/1 "2026-09-10T01:15:14Z")
# Why Did WTCMUD1 Borrow the Entire $5.81 Million Before It Needed All the Money?
The WTCMUD1 board has issued $5.81 million in bonds. Only after finalizing the sale did it offer six main reasons or defenses for borrowing:
1. The District has important infrastructure projects.
2. Bonds provide “generational equity.”
3. Bonds preserve unrestricted operating funds.
4. The board relied on professional financial advice.
5. The bonds do not require an increase in the total tax rate.
6. The District received an unusually strong bond rating.
These points may explain why bonds are an available financing tool. They do not explain why the District needed to borrow the entire amount now, before much of the money is needed.
## 1. Necessary projects do not require immediate borrowing
The District has legitimate infrastructure needs, including lift-station rehabilitation, electronic meters, sewer repairs, service-line inventory, and water-main replacement.
No one disputes the need for this work. The question is how and when to pay for it.
At the March 18 meeting, I noted that the District held approximately $5.3 million in reserves—about one year of operating expenses and nearly as much as the entire bond project list.
Beth Jones later acknowledged that the District had enough cash to pay for the bond-funded work. At approximately 32:40 in the [August 26 meeting](https://player.vimeo.com/video/1221931166?h=74d748ddd9), while discussing the projects covered by the bonds, she said: “Do we have the money to pay it right now? We do.” Her argument was not that the District lacked the money, but that spending it would reduce the savings available for emergencies.
The District could have used part of those reserves for the most urgent projects over the next several years. It could then have borrowed later as additional projects became ready.
Needing projects does not mean the District must borrow their entire estimated cost years before construction.
## 2. Generational equity does not require borrowing now
“Generational equity” means that people who benefit from a long-lasting asset should share its cost.
For example, if a water line will serve residents for 25 years, it may be fair for both present and future residents to help pay for it. Bonds accomplish that by spreading payments over many years.
That can be a reasonable argument for borrowing. It is not an argument for borrowing before the money is needed. The District could issue bonds in stages as projects become ready and still distribute their costs among future residents.
The generational-equity argument also leaves out the role of home prices.
Buyers consider property taxes, infrastructure conditions, public services, and future liabilities when deciding what a home is worth. Higher expected taxes and liabilities tend to reduce what buyers will pay. Lower taxes and well-maintained infrastructure tend to increase value.
Economists call this “capitalization.” Research indicates that buyers account for long-term property-tax obligations when purchasing homes. [American Economic Association](https://www.aeaweb.org/articles?id=10.1257%2Fpol.20200443)
This means a homeowner who sells before a future infrastructure bill comes due does not necessarily escape the cost. If buyers know about the obligation, they can reflect it in the price they offer.
But that process depends on accurate information.
If the District keeps its operating rate artificially low while failing to account for the continuing cost of replacing aging infrastructure, home prices may reflect an incomplete picture of future obligations. Reducing the maintenance-and-operations rate and replacing it with debt service does not make the District less expensive. It simply moves capital costs from one column to another.
Real generational equity requires a clear capital plan showing when projects will occur, what they will cost, and how each generation will contribute. It does not require borrowing the maximum amount available before every project is ready.
## 3. A reimbursement resolution could have preserved unrestricted funds without borrowing now
The board says bonds preserve unrestricted operating reserves. Its [August 31 bond FAQ](https://wtcmud1.org/posts/2026-08-31/2026-wtcmud-1-bond-issue/) explains that paying for all the projects with cash would leave little in reserve for emergencies.
That presents a false choice between spending nearly all the reserves immediately and issuing all the bonds immediately.
A reimbursement resolution offered a middle course. The District could have paid for urgent projects from operating funds as expenses arose and reimbursed eligible expenditures with bonds issued later, subject to the applicable requirements.
This would have preserved the District’s unrestricted funds over the financing cycle. Only the cash needed for immediate projects would have been spent, and eligible expenditures could have been returned to the operating fund when the bonds were eventually issued.
Tom Vacek, Cole, and I each told the board about this option before it completed the bond sale. The board did not publicly explain why it rejected it.
A reimbursement approach could have:
- allowed urgent projects to proceed;
- maintained a reasonable emergency reserve;
- preserved the ability to restore that reserve later; and
- postponed interest until borrowed money was needed.
## 4. “The professionals told us to” does not answer the timing question
At the September 9 meeting, Chris Rocco, Beth Jones, and Hanoi Avila each invoked professional advice while defending the board’s decisions against criticism of issuing the bonds now.
At approximately 13:31 in the recording, immediately after my public comment challenging the timing, Rocco said, “We have hired experts to advise us on our financial position” and “I trust the professionals that we hire.” At approximately 27:51, Jones said, “He is a financial advisor” and “We don’t do this ourselves. We get advice from the professionals.” Avila then said at approximately 29:09 that the board had “brought professionals to inform the public” while telling residents to “look at the facts.”
In context, those statements suggested that the financial adviser supported the decision to issue the bonds now. But Corey Howell did not make that timing recommendation.
The distinction matters because professional expertise has a scope. A surgeon can explain how an operation would be performed, but that does not by itself establish that surgery is the best course. A mortgage broker can find and structure a mortgage, but borrowers should not treat that as independent advice that they ought to take on a mortgage in the first place. In the same way, a bond adviser’s ability to structure and market debt does not transfer the board’s responsibility to decide whether the District should borrow, how much it should borrow, or when it should borrow.
Although Howell is called the District’s financial adviser, his work on this matter was centered on the proposed financing: evaluating the bond market, preparing the financing structure, obtaining a rating, soliciting bids, and completing the sale. His contract permits the board to request separate work such as a long-term financial plan, but the board has not pointed to such a plan supporting this decision. A bond-sale analysis is not a substitute for a long-term comparison of staged borrowing, reimbursement financing, pay-as-you-go construction, and the effects of debt service on future operating budgets.
As an aside, this is one gap a district manager—the type of position the board is now considering—could have helped fill. A manager looking across the District’s operations and long-term needs could have advised the board to commission a genuine financial plan from Howell or another qualified professional before deciding how much to borrow and when.
At the [March 24 bond meeting](https://player.vimeo.com/video/1174966015?h=0edc75b7c7), Howell introduced the issue as “timing, now versus later” and identified it as a question I had raised.
His answer separated engineering urgency from financing. He said he did not know how urgent the projects were. He could describe the current bond market, but he could not predict what rates would be three years later.
He concluded by saying he would “defer to the board” about how to proceed.
That was not a recommendation to issue bonds now. Howell provided market information and expressly left the timing decision to the directors.
The board owns that decision.
## 5. “We don’t have to raise taxes” hides a large operating cut
The board emphasizes that it intends to keep the total tax rate at 27.34 cents per $100 of taxable value—the same nominal rate as last year.
But the total rate is only the headline. The allocation underneath it changes substantially.
The August tax-rate study showed that taxable value fell approximately 5.4%, to about $890 million. A smaller tax base produces roughly 5% less revenue before any money is shifted to debt.
Initially, 1.5 cents of the rate is also redirected from operations to debt service. That removes approximately another 5% of the current rate from operations.
The combined initial effect is approximately 10% less operating-tax support.
The larger reduction begins in 2028, when the debt-service rate rises to approximately 4.4 cents. That consumes about 16% of the current 27.34-cent total rate.
The arithmetic is straightforward:
- The smaller tax base leaves about 95% of the previous revenue.
- After 4.4 cents is assigned to debt, about 84% of the current rate remains for operations.
- Applying 84% of the rate to 95% of the tax base leaves about 80% of the previous operating support.
In other words, the District would have approximately 20% less property-tax support for operations.
If the RM 620 widening removes another estimated 2% of taxable value, the operating shortfall approaches 22%.
An unchanged total rate therefore does not preserve the District’s financial position. It leaves operating-tax support approximately 20–22% below its previous level after accounting for the smaller tax base and debt service.
The bond financing requires approximately $5.81 million in principal and $4.15 million in interest, for total debt service of about $9.96 million. The financing analysis estimates that the District will eventually need approximately $402,000 per year in debt-service taxes.
Residents pay that debt service even if the headline tax rate remains unchanged. The board avoids an immediate rate increase by taking money away from operations. Without the bonds, that portion of the rate could have supported maintenance, funded projects directly, rebuilt reserves, or reduced the total tax rate.
### An artificially low rate now hides future tax increases
That 20–22% shortfall does not disappear. The District must eventually respond by cutting services or maintenance, drawing down reserves, finding another source of revenue, or increasing the tax rate.
Keeping the rate artificially low now lets the board advertise an unchanged rate today while hiding the likely need for an increase in the near future—particularly after the debt-service requirement rises in 2028.
The tax-rate study allowed a total rate of 29.716 cents without a mandatory election. Even at that rate, revenue would have increased only about 3% over the previous year—potentially less than the increase in the District’s costs.
A rate that does not keep pace with costs may sound taxpayer-friendly in the short term, but it risks deferred maintenance, depleted reserves, and a sharper tax increase later.
## 6. Issuing bonds tends to lower—not strengthen—the District’s credit rating
The board has also emphasized that Moody’s gave the bonds an Aa2 underlying rating, which Corey Howell described at the August 26 meeting as placing the District in approximately the 99th percentile of Texas MUDs.
That is good news, but it is not a reason to borrow now. A credit rating measures the District’s ability to repay debt; it does not determine whether taking on the debt is necessary or well timed.
The rating also reflects financial strengths accumulated before this bond issue. At the March meeting, Howell identified the District’s large tax base, strong operating reserves, low tax rate, and lack of outstanding debt as favorable factors. Issuing bonds necessarily gives up the last of those advantages.
Reserves are another part of the picture, but Howell repeatedly qualified their effect. In March, he said he could not represent that falling below a twelve-month reserve would jeopardize the rating because Moody’s considers many factors. He also said that movement by one notch within the same broad rating category would not materially affect bond pricing. When the issue was revisited on August 26, he again said he did not know whether reducing reserves to six months would have changed the rating, although his “gut reaction” was that the District might not have received Aa2.
The board is therefore reversing cause and effect. Years without outstanding bonds, together with high cash reserves and other favorable conditions, helped establish the District’s strong credit. That strength made borrowing inexpensive, but inexpensive borrowing is not automatically necessary borrowing—and using the rating as a reason to borrow consumes part of the debt-free financial position that helped produce it.
## The question the board still has not answered
The question is not whether the District has infrastructure needs, whether bonds are legally available, or whether bonds can spread costs over time.
The question is:
**Why borrow the full $5.81 million now and begin paying interest now when much of the money may not be needed for years?**
Necessary projects could proceed in phases. Generational equity could be achieved through staged borrowing. A reimbursement resolution could have allowed immediate work to proceed while delaying the bonds.
The board has explained why bonds can be used. It still has not adequately explained why issuing all of them now was the financially responsible choice.
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### Author:  [@tomvacek](https://clearasmud1.discourse.group/u/tomvacek)
#### Post date: [September 10, 2026, 11:12am UTC](https://clearasmud1.discourse.group/t/why-did-wtcmud1-borrow-the-entire-5-81-million-before-it-needed-all-the-money/60/2 "2026-09-10T11:12:09Z")
So very well stated. For the next few years, the District has three choices: 1) run deficits; 2) go to minimum maintenance on parks; or 3) raise taxes.
This isn’t even planning for long-term asset replacement. If we have $100M replacement costs for underground assets with a 100-year lifespan, then we need to be investing or replacing $1M in assets each year long term to keep up. (For simplicity, this assumes that the future costs of construction and future value of our savings change at the same rate. I think $100M is low and 100 years is long.) But the district does not save $1M per year. Peak frugality, maybe $600k. The 2027 budget spends $130k more than 2026 and takes in $300k less, because of the property value reduction and the beginning of debt service.
In my opinion, the bond created a political necessity to claim no tax increases when tax increases or a major reshuffle of the MUD’s expenses will be necessary to put the District on a fiscally prudent path. This board boxed itself into a political corner, but with long term ramifications.
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### Author:  [@Tom\_Morrow](https://clearasmud1.discourse.group/u/Tom_Morrow)
#### Post date: [September 10, 2026, 11:56pm UTC](https://clearasmud1.discourse.group/t/why-did-wtcmud1-borrow-the-entire-5-81-million-before-it-needed-all-the-money/60/3 "2026-09-10T23:56:06Z")
FYI, I just greatly expanded my post at the top of this thread to challenge 3 other arguments the board has made:
- The board relied on professional financial advice.
- The bonds do not require an increase in the total tax rate.
- The District received an unusually strong bond rating.