A Public Improvement District (“PID”) is a funding tool created by the Public Improvement District Assessment Act as found in Chapter 372 of the Texas Local Government Code. The PID allows any city to levy and collect special taxes on property that is located within the city or within the city’s Extraterritorial Jurisdiction (“ETJ”). A county can also form a PID, but must obtain approval from a city if the proposed PID is within the city’s ETJ. The PID establishes a mechanism to finance improvement projects through the issuance of bonds guaranteed by special appraisals that encumber all benefited properties. Because PID bonds can be used to reimburse the developer for eligible infrastructure early in the development process, often before the first home closes.
Public Improvements Eligible for PID Funding are; Acquisition of Right of Way, Art, Creation of pedestrian plazas, Construction of foundations, Landscaping and other aesthetics, Library, Mass Transportation, Parks and Recreational or Cultural Facilities, Parking, Street and sidewalk. Supplemental security services for the improvement of the district, including public safety and security services. Complementary services related to businesses for the improvement of the district. Water, wastewater, health and sanitation or drainage.
Benefits of a PID
A PID can be established early in the development process, allowing the developer to receive funding after the public infrastructure is complete. Also, unlike a Municipal Utilities District (“MUD”), Water Control and Improvement District (“WCID”), or Fresh Water District (“FWSD”), PIDs do not require TCEQ approval and they are governed by the governing body of the city or county, thus alleviating concerns about board turnover and board integrity. If the city chooses to annex property that is within the boundaries of a PID, the city is not required to pay the assessments and the assessments do not affect the city’s borrowing capacity or rating.