Llano County MUD #1, formed around the original Water District in Blue Lake, is a state chartered municipal utility district and operates as a Texas state municipal entity. It is also subject to the rules and regulations of the Texas Commission on Environmental Quality for water quality.

In addition to the operation of the water plant and the distribution lines, it is responsible for six (6) miles of streets in Blue Lake, having assumed that responsibility from the property owners association in 1987. It also contracts for garbage disposal for its residents. In 2000 it assumed the responsibility for streetlights from the property owners association.

In 1996 the District contracted with the Lake LBJ Municipal Utility District for waste disposal and treatment and in that connection built transmission lines, lift stations, and provided grinder pumps to all properties in Blue Lake, Deerhaven and Sandy Harbor that elected to participate in the program. The system was completed early in 1997 at a cost of $2,100,000, funded by a loan from the Rural Development Administration of $990,000 and a governmental grant of $1,100,000. Waste water disposal is contracted with The City of Horseshoe Bay.

The District constructed a return water line from the treatment plant to the golf course to provide effluent water for the course. The return water line was paid for ($165,000) by the property owners association after it received a 10 year loan for that purpose. The District provides the maintenance of the line from the treatment plant to the pumps that serve the golf course.

In 1998 the District contracted with the Lake LBJ Municipal Utility District for fire and emergency medical services. In 2006, The City of Horseshoe Bay was formed and the fire and emergency services were relagated to the City. Blue Lake is a part of Emergency Services District #1. The MUD District office also serves as a Community Office for Blue Lake Estates POA where you can drop off payments and forms to be picked up by the POA.