One Building, Three Entities, One Bill: Should Hurst Creek MUD Be Charging the Village and POA for Office Space?

If you live in The Hills, you already know the unique governance puzzle that comes with your address. Three separate organizations share responsibility for keeping this community running: the Village of The Hills (the city government), Hurst Creek Municipal Utility District (the MUD), and The Hills Property Owners Association (the POA). And all three of them share the same building at 102 Trophy Drive.

What most residents may not realize is that Hurst Creek MUD owns the building, and the city and the POA appear to be tenants, paying rent to occupy office space inside it. On the surface, that might sound like a routine real estate arrangement. But look closer, and an uncomfortable question emerges: why are residents effectively paying themselves rent?

Every dollar that the Village pays in rent to the MUD comes from the same pool of resident-funded revenue: property taxes, sales taxes, and franchise fees. The Village of The Hills operates on a modest annual budget of roughly $1.06 million, funded almost entirely by property tax collections (approximately $503,000), sales tax revenue ($344,900), and franchise fees ($121,870), according to the Village’s proposed FY 2025-2026 budget. Any rent payment flowing out of this budget to Hurst Creek MUD is money that could otherwise go toward roads, parks, public safety, or holding down the tax rate.

How Did We Get Here?

When the Village of The Hills incorporated, the original plan was for both the POA and Hurst Creek MUD to merge into the new municipality. That never happened. According to the Village’s own history page, the POA had to remain independent because the roads in The Hills are private and the city cannot legally own or maintain private roads or gate security. The MUD, meanwhile, has not merged because it serves some customers outside the Village boundaries who pay ad valorem taxes on MUD debt.

The result is a community of approximately 2,500-3,000 residents governed by three overlapping entities, all headquartered under one roof at 102 Trophy Drive. Hurst Creek MUD was created in 1979, predating the city’s incorporation, and has operated the building and its staff for decades. The MUD even provided bookkeeping services to the city until late 2023, when that arrangement was formally transitioned and the city was given until February 2024 to hire its own City Secretary, according to the November 2023 MUD board meeting minutes.

In practical terms, the MUD has historically been the dominant administrative presence in The Hills. It has the staff, the infrastructure, and the institutional knowledge. The city, by contrast, has a tiny budget and limited personnel. The POA is managed by a third-party management company (currently GrandManors/CIRA). All three share the same phone number, the same physical address, and in many cases, the same staff answering the phones.

The Core Question: Should The MUD Be Charging Rent At All?

Here is where this gets interesting for residents.

Hurst Creek MUD is a political subdivision of the State of Texas. It is not a private landlord. It is a taxpayer-funded entity whose boundaries, by the Village’s own description, “generally coincide with the Village of The Hills.” The MUD’s five-member board is elected by the same residents who elect the Village’s City Council. The MUD’s operating revenue comes from property taxes levied on those same residents (the 2024 tax rate was $0.2304 per $100 of assessed value), plus water, wastewater, and trash service fees paid by those same households.

In other words: the landlord and the tenants are funded by the exact same people. The residents of The Hills pay property taxes to the MUD, pay property taxes to the Village, and pay POA dues to the POA. When the Village writes a rent check to the MUD, it is resident tax dollars flowing from one publicly funded entity to another publicly funded entity, both serving the same population.

This raises several questions that The Hills Observer believes residents deserve answers to:

1. How much rent does the Village of The Hills pay to Hurst Creek MUD annually, and how much does the POA pay? Neither the Village’s published budget nor the MUD’s publicly available financial summaries make this figure immediately transparent to residents. If these numbers exist in interlocal agreements or board-approved contracts, they should be easy to disclose.

2. What is the fair market value of the office space, and has an independent appraisal ever been conducted? When government entities transact with one another, best practice dictates that any financial arrangement reflect fair market terms. If the MUD is charging above or below market rate, residents should know.

3. Is there a formal interlocal agreement governing this arrangement? Under Texas Government Code Chapter 791, local government entities can enter into interlocal cooperation contracts. These agreements typically require approval by the governing bodies of all parties involved and should be a matter of public record. Has this arrangement been formalized under Chapter 791, or is it an informal legacy arrangement that has never been scrutinized?

4. Has anyone considered whether the MUD should simply provide the office space at no cost? If the MUD exists to serve the residents of The Hills, and the city government exists to serve those same residents, and all three entities need office space to fulfill their public duties, it is worth asking whether charging rent among these entities is an unnecessary friction that simply shuffles taxpayer money in a circle. The MUD already incurs the building’s maintenance costs. Adding a rent charge on top creates an administrative expense for the Village (which must budget for it, account for it, and pay it) and an administrative revenue line for the MUD (which must collect it, record it, and report it). Is there a net benefit to anyone other than the MUD’s balance sheet?

5. Does this arrangement create a conflict of interest? The MUD board opposes consolidation with the city, as stated on the Hurst Creek MUD website. If the MUD collects rent from the city, it has a financial incentive to remain separate. Does the rental income, however modest, contribute to the MUD’s institutional interest in maintaining the status quo?

What Texas Law Says About MUDs and Shared Governance

Under Texas law, a Municipal Utility District is a political subdivision created to provide water, wastewater, drainage, and related services. MUDs are regulated by the Texas Commission on Environmental Quality (TCEQ) and governed by elected boards. They have the authority to levy property taxes, issue bonds, and charge fees for services. Critically, a MUD is owned by the area it serves. It is not a private business. Its assets, including buildings, are public assets funded by taxpayer dollars.

Texas has over 1,200 special districts, many of which exist outside city limits where municipal services are unavailable. The Hills represents an unusual case: a MUD that exists entirely within (or nearly within) an incorporated city’s boundaries, serving the same population, yet remaining operationally independent. The Village’s own history acknowledges that consolidation was the original plan, but structural and legal obstacles prevented it.

Texas Government Code Chapter 791 allows local government entities (including MUDs and cities) to enter into interlocal cooperation contracts for shared services. These agreements are designed to promote efficiency and reduce costs. The spirit of this law suggests that when two government entities serving the same community can share resources, they should do so in a way that benefits taxpayers. Charging rent between two taxpayer-funded entities serving the same population may be legally permissible, but whether it aligns with the spirit of efficient, cooperative governance is a different question entirely.

The Bigger Picture: Governance Fragmentation in The Hills

The office space question is really a symptom of a larger issue: the governance of The Hills is fragmented across three entities that were never designed to coexist permanently.

Residents pay property taxes to the Village, property taxes to the MUD, and dues to the POA. Each entity maintains its own administration, its own board, its own legal counsel, its own website, and its own budget process. Each entity attends the others’ meetings (MUD minutes from March 2025 note that a City Council liaison reported on recent speed limit changes and a welcome committee initiative). The city council meets on the second Tuesday of each month; the MUD board meets on the third Monday. Both meet in the same conference room at 102 Trophy Drive.

The duplication of overhead is real. For a community of under 3,000 residents, this level of administrative complexity is worth examining. The rent question is just one visible thread. Others include: could the MUD and the city share staff more efficiently? Could the entities consolidate back-office functions like bookkeeping (which the MUD performed for the city until 2023)? Is there a path toward the consolidation that was originally envisioned when the city incorporated?

Unconfirmed Reports: Tensions Inside 102 Trophy Drive

The Hills Observer has received unconfirmed reports from multiple sources suggesting that the office-sharing arrangement at 102 Trophy Drive may not be as harmonious as it appears on paper. According to these accounts, city staff working inside the MUD-owned building have at times been subjected to rules and restrictions imposed by MUD personnel-rules that go beyond standard building management and begin to feel more like one entity asserting authority over another.

The specific nature of these reported incidents varies, but the theme is consistent: city employees have reportedly felt that they are treated as guests in someone else’s building rather than as co-equal public servants sharing a community facility.

The Hills Observer has not independently verified these accounts, and we want to be transparent about that. We are reporting their existence because, if true, they paint a picture that goes beyond a simple rent question. They suggest a power dynamic in which the MUD-as the building owner, the larger employer, and the entity with deeper institutional roots-may be exercising a degree of control over the city’s day-to-day operations simply by virtue of controlling the physical workspace.

Perhaps most telling is this: there are indications that the Village may be exploring the possibility of securing outside office space. If the city government is actively considering leaving 102 Trophy Drive and setting up its own office elsewhere, that is a significant development that residents should be paying attention to. It would mean the city has concluded that the current arrangement is untenable-and it would come with real financial consequences for taxpayers who would now be funding a separate office lease on top of the taxes they already pay to the MUD.

Think about what that would mean: residents already fund the MUD building through their MUD property taxes. If the city moves out and signs a commercial lease, residents would then be paying for two office spaces-one through MUD taxes and one through city taxes-to house two government entities that serve the same community of fewer than 3,000 people. That is a scenario no one should want, and it should motivate both the MUD board and the City Council to address whatever underlying tensions exist before they escalate to that point.

We want to be clear: we are not taking sides. If these reports are inaccurate, we welcome corrections from MUD and city leadership alike. But if there is friction inside 102 Trophy Drive-if the landlord-tenant dynamic between the MUD and the city has created a workplace environment where city staff feel subordinated-then the rent question becomes more than a financial curiosity. It becomes a governance problem.

Follow the Money: What Happens If the City Walks Out?

Let’s walk through the scenario that no one in The Hills should want, but that the current trajectory could produce: the Village of The Hills leaves 102 Trophy Drive and signs a commercial lease with a private landlord.

Commercial office space in the Lakeway and Bee Cave corridor currently averages in the range of $24 to $30 per square foot annually. Even a modest office for city operations-say 500 to 800 square feet for a city secretary, a small meeting area, and file storage-could cost the Village $12,000 to $24,000 per year in rent alone. Add utilities, internet, insurance, furniture, a security system, and the administrative overhead of managing a separate lease, and the realistic annual cost quickly approaches $30,000 or more.

For a city operating on a $1.06 million budget, that is not a trivial number. It represents roughly 3% of the Village’s entire annual revenue. That is money that would flow directly out of our community and into the pocket of a private commercial landlord who has no stake in The Hills, no obligation to its residents, and no accountability to anyone at the ballot box. Every dollar of that lease payment would be a dollar that does not go toward park improvements, road maintenance, public safety, or holding down the property tax rate.

And here is the part that should frustrate every taxpayer in this community: you already paid for a building. The office at 102 Trophy Drive was built and is maintained with resident tax dollars through the MUD. Its mortgage, its upkeep, its utilities-all funded by the people who live here. If the city government is forced to leave that building and rent space from a stranger because of internal tensions or a landlord-tenant power imbalance, residents are essentially paying twice: once for a building they already own through their MUD taxes, and again for a second office they should never have needed.

Meanwhile, the MUD’s building would have empty office space that was previously generating rental income. So the MUD either absorbs that lost revenue (and potentially raises rates or taxes to compensate) or finds a new tenant-possibly another outside party with no connection to The Hills. Either way, residents lose.

We Are One Community. It Is Time to Act Like It.

Step back from the budget spreadsheets and the legal frameworks for a moment and consider what The Hills actually is: a small, tight-knit community of families who chose to live in one of the most beautiful corners of the Texas Hill Country. We share the same streets, the same park, the same gate, and the same zip code. Our kids go to the same schools. We wave at each other on morning walks. We are neighbors.

The MUD, the city, and the POA are not three rival companies competing for market share. They are three arms of the same community, created to serve the same people. The MUD ensures clean water comes out of the tap. The city provides the municipal framework and representation. The POA maintains the private roads, the gates, and the architectural standards that protect property values. Each one exists because the others cannot do everything alone. They are, by design, partners.

Nobody who works for any of these entities should feel like an outsider in their own community’s building.

A city employee walking into 102 Trophy Drive should feel just as at home as a MUD employee. A POA manager should feel like a colleague, not a tenant. The people who staff these organizations are our neighbors too-they live here, they care about this place, and they deserve a professional environment where they can focus on serving residents without navigating bureaucratic turf wars or landlord-tenant power dynamics.

The original vision for The Hills was one community, one government. We ended up with three entities out of practical necessity, not because anyone thought fragmentation was ideal. But fragmentation does not have to mean friction. These three organizations can and should operate as a unified team, sharing the building, sharing resources, and treating each other with the mutual respect that partners deserve. That starts with the leadership of all three entities sitting down together-not in a formal board meeting with Roberts Rules and public comment periods, but in an honest conversation about how to make 102 Trophy Drive work for everyone.

If the rent arrangement needs to be restructured, restructure it. If the building rules need to be rewritten so that no entity feels like a second-class occupant, rewrite them. If the interlocal agreements need to be updated to reflect a genuine partnership rather than a landlord-tenant relationship, update them. The solutions here are not complicated. What is required is the will to prioritize community over institutional turf.

Because the alternative-a fractured community where the city government packs up and moves to a strip mall on RR-620 while an empty office sits inside the building that residents already paid for-is not just a waste of money. It is a failure of leadership on all sides.

What The Hills Observer Is Asking For

We are not alleging wrongdoing. We are asking questions that we believe every resident has a right to have answered.

We are calling on Hurst Creek MUD and the Village of The Hills to publicly disclose: (a) the current rental agreement or interlocal agreement governing office space at 102 Trophy Drive, (b) the annual rent amount paid by the Village and by the POA, (c) whether the rent has been subject to an independent fair market appraisal, and (d) whether the MUD board has ever considered providing the space at no cost given that all three entities serve the same taxpayer base.

We also encourage residents to attend the MUD board meetings (third Monday of each month, 9:00 AM, 102 Trophy Drive) and the City Council meetings (second Tuesday of each month, 9:00 AM, same location) to ask these questions directly. Public records requests under the Texas Public Information Act can also be submitted to either entity for any interlocal agreements, lease contracts, or financial arrangements related to the building.

The Hills Observer is a resident-run initiative dedicated to helping our neighbors stay informed about what happens in local government. We are not affiliated with the Village of The Hills, Hurst Creek MUD, or The Hills POA. If you found this piece valuable, subscribe to our channel and share it with a neighbor. An informed community is a stronger community.