Katy-Area Development Bonds, MUD Contracts and Construction Insurance

Section 10.06.004 of Katy's Code of Ordinances says no final plat will be recorded and no building, utility or other city permit, including a certificate of occupancy, will issue for property in a subdivision until the developer has completed the required public improvements and the city has accepted them for maintenance with the required maintenance bonds. The alternative is a guarantee of construction approved by the city attorney.

The ordinance prices the guarantee by form. Cash or a cashier's check is 100% of the installation cost with an agreement guaranteeing installation. A letter of credit is 100%, irrevocable and for a term covering completion, maintenance and warranty but not less than two years, payable on a sight draft and city certificate. A surety bond or subdivision performance bond is 125% of the installation cost, executed by a surety licensed in Texas and payable to the city. The guarantee lasts as long as the estimated construction time, and if the work is not finished when it expires, the city may require cash from the developer, owner or surety or an extension.

The 125% figure means a bond consumes more surety capacity than the same guarantee in cash or credit. A developer weighing the three should also note that the city sends notice of a withdrawn plat approval to any surety that posted a performance bond, which can bring the surety into the file early.

Katy's ordinance gives a third path: an interlocal agreement with a governmental entity that will construct and maintain the improvements or accept their dedication, and that requires the entity to require performance, payment and maintenance bonds in the amount of the installation cost. Around Katy, that entity is often a municipal utility district. Under Water Code Section 54.016, land in a city's limits or ETJ cannot be included in a district without the city's written consent by resolution or ordinance, and the city may not require annexation as a condition of consent.

Once a district is contracting, Water Code chapter 49 applies. Section 49.273 requires advertised sealed bids for contracts over $150,000 and written bids from at least three bidders for contracts over $25,000 up to $150,000. Section 49.271 requires bid security of at least 2% of the bid on construction contracts over $50,000, and Section 49.275 requires the contractor to give performance and payment bonds under Government Code chapter 2253. TCEQ supervises districts and reviews the bond issues that finance their infrastructure, and its rule at 30 TAC Section 293.47 generally requires a developer contribution of not less than 30% of certain construction costs, subject to listed exemptions.

For a contractor, MUD work around Katy reads like public work even when a developer is advancing the money. The obligee is the district, the bonds follow chapter 2253 and the district's engineer inspects and reports on compliance. For the developer, reimbursement from district bonds depends on facilities that pass that review, so the contractor's bonds and insurance protect the developer's recovery too.

Since September 1, 2023, subchapter D of Local Government Code chapter 42 lets residents or the owners of a majority in value of an area petition a city to release land from its extraterritorial jurisdiction. Under Section 42.104, the signatures must be collected within 180 days, and the petition needs a map and a boundary description. Section 42.105 says that if the petition has the required signatures, the municipality shall immediately release the area. Section 42.101 lists areas the subchapter does not apply to.

For a Katy-area project, a release can change whose subdivision regulations and guarantee rules apply to future plats. County rules and any district's requirements would still govern. Contract exhibits, bond forms and insurance requirements that name the city or cite its code should be reviewed whenever an ETJ release is under way.

Katy's drainage section, 10.05.006, borrows from two neighbors. Open channels and detention ponds follow the Harris County Flood Control District's Policy, Criteria and Procedure Manual dated July 2019, while storm sewers, box culverts and runoff coefficients follow the current City of Houston Infrastructure Design Manual. Inside the Addicks Reservoir, Barker Reservoir and upper Cypress Creek watersheds, the district's March 2016 supplemental guidelines also apply, and the code addresses conflicts between those standards and another entity's criteria.

The code is specific about construction as well. Storm sewers are bedded in one and one-half sack per cubic yard cement-stabilized sand at least 12 inches thick, the 100-year hydraulic grade line may sit no higher than 12 inches above the top of curb or roadway center and unlined ditches have a 3-to-1 maximum side slope. Those details are the ones an inspector checks and a warranty claim later argues about.

For storm drain and site contractors, the insurance issues follow the drainage work: water damage to neighboring property during construction, silt discharge and settlement over storm lines after acceptance. Builders risk on detention ponds and outfalls, contractors pollution liability and completed-operations coverage that lasts through the maintenance bond period all deserve a look.

Water Code Section 49.279 lets a district located in or within the ETJ of one or more cities adopt a city's or county's prevailing wage rate for its public works. A contractor bidding district work near Katy should confirm which rate the district adopted, because a payment bond claim or a wage dispute can follow a mistake. Section 49.277 requires the district engineer to report on contract compliance during the work and at completion.

On a mixed project, a contractor may hold a Katy-form surety bond on streets, a chapter 2253 bond to a district on utilities and county requirements on other pieces. Each has its own claim procedure and release date. A broker review can map those bonds against the contractor's completed-operations coverage and the developer's builders risk, so each improvement stays protected from groundbreaking to the end of its maintenance period.