Skip to main content
News Releases

Hurricane Harvey’s impact shines spotlight on municipal utility district bond financing, says Dallas Fed’s Southwest Economy

Latest issue also looks at FEMA’s evolving role in recovery, state banking conditions, craft brewing boom

For Immediate Release: June 25, 2018

DALLAS—The historic devastation from Hurricane Harvey has posed new challenges for a development financing tool used widely in the Houston area, according to the latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy.

Municipal utility district (MUD) bonds have long been a cornerstone of Houston residential development, write Laila Assanie and Michael Weiss in “Harvey Highlights Houston MUD Bond Development Funding.” MUDs enable developers to issue tax-exempt debt to provide infrastructure for new housing developments.

“Harvey’s massive flooding heightened awareness of hazards that may prompt investors to seek a greater risk premium for future MUD bond issues,” the authors write. “Among the concerns is rising mortgage delinquency rates that could lead to foreclosure, affecting property inside and outside of MUDs.”

These pressures could make MUD funding more expensive and raise home prices in residential developments, according to the authors. That could, in turn, erode the area’s affordability—a key advantage in attracting people and businesses to the area.

Harvey’s impact can also be seen in the evolving role of the Federal Emergency Management Agency (FEMA) in recovery from the storm. The agency has emphasized immediate recovery costs; however, that focus will likely shift to infrastructure improvements as the effort continues, write Rachel Brasier and Jesse Thompson in “FEMA to Play Long-Term Role in Recovery from Harvey.”

Looking across the state, the latest issue of Southwest Economy also provides an update on Texas banking conditions. In “Texas Banking Conditions Improve, but Risks and Uncertainty Remain,” Kelsey Reichow writes that profitability for district banks improved in 2017. That contrasts with nationwide bank profitability, which declined largely as a result of one-time costs related to the Tax Cuts and Jobs Act.

In “On the Record,” staffing firm executives David Howard and Dan Howard provide insight into the state’s labor market. With the Texas unemployment rate near a record low, companies are struggling to fill job openings. On the other side of the equation, “the current environment gives workers with little experience a chance to work their way up,” they said.

Also in this issue, the “Go Figure” infographic looks at Texas’ craft brewing business, which has expanded since a change in the state law in 2013 that allowed brewpubs to sell both on-site and to retailers, and the “Spotlight” feature examines how Texas border cities have missed out on the state’s economic upturn.

-30-

Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org