## Notes from 06 May 2025 [[2025-05-05|← Previous note]] ┃ [[2025-05-07|Next note →]] I’ve always found the idea of [[Intergovernmental Relations|special-purpose districts]] compelling. They offer a form of governance that doesn’t really exist in Brazil. In our system, all municipalities are treated as if they were equal. Legally, São Paulo and a small rural town have the same structure and the same list of responsibilities, even though their capacities couldn’t be more different. There are laws that informally take this disparity into account by setting different obligations according to size, but there is no legal framework that recognises different municipal archetypes. That's why I'm fascinated by the idea of single-mission districts. Imagine if you took a city and said: "From now on, education in this part of the city will no longer be the responsibility of the mayor. Instead, it will be the responsibility of a separate district, with its own elected board, its own budget, and its own power to raise taxes". This isolates the function, aligns voter incentives with a specific outcome, and gives the district's leadership a narrow mandate. The goal is not perfection but clarity: one leader, one job, one form of accountability. And because the structure is purpose-built and not tied to the legacy bureaucracy, the administrative apparatus can, at least in theory, be leaner, more agile and shaped around the logic that emerges from service delivery. Reading Connor Tabarrok's [latest newsletter](https://alltrades.substack.com/p/the-texas-mud-model) helped me see how this logic plays out in the context of housing development in Texas. He breaks down how Municipal Utility Districts, or MUDs, have allowed the state to expand housing supply on a large scale and [precisely because of this](https://littlebuilt.com/p/no-expensive-uk-housing-market-builds) avoid the kind of rent inflation seen elsewhere. A MUD is essentially a local government created to provide infrastructure in new areas on the urban fringe. It starts when a developer petitions the state to create a district, builds roads, water and sewerage systems with private capital, and is then repaid by taxes collected from future residents. The district is managed independently, with its own board of directors, and is focused solely on providing infrastructure. This model is particularly interesting because of its financing mechanism. Instead of the state or city paying the upfront cost of infrastructure, the developer advances the funds and is only repaid when homes are built and residents begin paying taxes. This arrangement shifts financial risk away from the public sector and creates incentives for more careful, data-driven decisions about where to build. Because repayment depends on actual demand, developers and bond markets are pushed to gather more accurate information about where, and how, it makes sense to grow. It encourages a kind of analytical rationality that is hard to replicate in government, where investment decisions are often blunt, slow or politically distorted. It also creates a stronger sense of certainty for those entering new areas, since infrastructure comes first. Roads, water, sewage: all in place before homebuilding begins. [Of course, there are trade-offs](https://www.youtube.com/watch?v=3saU5racsGE). By design, the MUD is a narrow governance unit, and early on, its democratic legitimacy is thin. Some districts are created with just a handful of residents temporarily housed on-site to approve major bond issuances. Once populated, residents do vote for the board, but by then the major financial commitments have already been made. Coordination across multiple MUDs can also be messy, especially when it comes to managing common resources like water. And because the structure encourages development on cheap, peripheral land, it often leads to sprawl. Many districts are later annexed into city governments, but this is not automatic, and there is no built-in sunset clause to trigger that transition when the original purpose has been fulfilled. Still, the broader lesson holds. MUDs are not a comprehensive solution, but they are a tool...one that makes it possible to align incentives, finance infrastructure, and build at scale without relying on strained public budgets. In the United States, special purpose districts exist for almost everything, from flood control to street lighting to managing the land under [Disney World] (https://en.wikipedia.org/wiki/Central_Florida_Tourism_Oversight_District). It is a form of institutional imagination that many countries lack. In places like Brazil, where governance is centralized and uniformly structured, it is worth asking what new possibilities might emerge if we allowed for more targeted mandates, clearer accountability, and delivery models that can actually adapt to the task at hand.