RealManage Insight

What is a PID or PUD, and How do they Impact your Community Association?

by Benjamin Yaeger on Aug 13, 2019 8:11:00 AM

Understanding HOAs, COAs and POAs is already confusing. On top of that, the terms PID and PUD are often bandied about and are sometimes confused with community associations. However, they are not the same thing at all. Here's how and why they exist, and how they differ from community associations.

What is a PID?

A PID is a Public Improvement District. This basically means an entity that has been created by the city or county to levy a special tax for specific improvements to a specific neighborhood. Examples might include roads, moving utilities underground, etc. PIDs are often temporary, and are not under the control of homeowners the way a HOA is. PIDs also sell bonds and pays for them through additional property taxes.

PIDs are sometimes called SIDs (Special Improvement Districts) or special tax districts. They are more common in some states than others. If your home is in a PID, you will be taking on an extra tax obligation, but this obligation will generally be paid off when the specific infrastructure improvement is paid for. This is generally in 20 to 40 years. A buyer may also pay off the entire bill up front. In some states, such as New Mexico, sellers are required to disclose some details of the PID bonds before accepting an offer.

Some developers will negotiate for a PID rather than setting up a HOA, because PID assessments, unlike HOA dues, are tax deductible. In some states, a MUD (Municipal Utility District) will be created to pay for the initial build out of basic infrastructure such as roads and power cables.

What is a PUD?

You might hear PUD used as a shorthand for Planned Unit Development. However, in this context we're talking about Public Utility Districts. This is another thing which can be confused with a HOA, and it can also be confused with a PID due to the similarity.

A Public Utility District is, like a HOA, created by the community and operated under an elected board. However, it exists solely to provide electricity, water, sewer and telecommunications (for example, a PUD may set up a local broadband and cable television company that can sometimes give owners a better deal. They purchase electricity and water wholesale, but in some rare cases may even own and operate their own power plant.

PUDs are not regulated by utility commissions, which means they may not be subject to any price control. However, they are also non profit entities that have no shareholders to keep happy. If you are looking at buying a home with a PUD, then look at the prices and reliability and compare it with other locations. For example, if the local cable companies are all notoriously bad, then you might be better off with the service provided by a PUD.

Neither, however, is a HOA. Public improvement districts may levy taxes (not dues), which are tax deductible, but are controlled by the city or county not the homeowners. PUDs are controlled by the homeowners, but provide a specific, limited service independent of anything with the HOA.

How Does this Affect HOAs?

A HOA needs to work closely with both a PID board and a PUD. In working with the PID, it's important to consider who is responsible for what. In some cases PIDs are actually arranged for by a HOA to help fix a specific infrastructure problem rather than doing a special assessment. This can be advantageous to homeowners because of the tax differences. However, it can also cause a lack of control over how a problem is fixed.

When it comes to public utility districts, the HOA needs to know what, exactly, the PUD covers and what it doesn't, and how to work with them to ensure the best service for homeowners.

In short, while PIDs and PUDs are sometimes confused with community associations, they are not the same thing and serve different, and fairly specific, purposes.

Rules and Regulations Download - CTA

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