TITLE 31. NATURAL RESOURCES AND CONSERVATION

PART 10. TEXAS WATER DEVELOPMENT BOARD

CHAPTER 363. FINANCIAL ASSISTANCE PROGRAMS

The Texas Water Development Board (TWDB) adopts 31 Texas Administrative Code §§363.2, 363.17, 363.402, 363.405, 363.1302, 363.1304, and 363.1305. The proposal is adopted without changes as published in the January 2, 2026, issue of the Texas Register (51 TexReg 37). The rules will not be republished.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE ADOPTED AMENDMENT.

Chapter 363 contains the TWDB's programmatic rules for many of the agency's state funded financial assistance programs. The adopted amendments implement legislation.

House Bill 3582, 88th R.S. (2023) and Senate Bill 469, 88th R.S. (2023), amended Chapters 15 of the Water Code by adding two similar but non-identical general definitions of "rural political subdivision." Senate Bill 971, 89th R.S. (2025) repealed SB 469's definition of rural political subdivision. HB 3582 also amended Chapter 15 of the Water Code by making a conforming change to a permissible use of funds category in the Flood Infrastructure Fund program by substituting "a rural political subdivision" in place of "an area outside of a metropolitan statistical area". The adopted amendments implement HB 3582's definition of "rural political subdivision" applicable to the agency's state funded financial assistance programs in Chapter 363.

Senate Bill 1967, 89th R.S. (2025), amended Chapter 15 of the Water Code by specifying that under the TWDB's Water Loan Assistance Fund program, certain drainage districts are eligible to receive grants for water supply projects, including projects that contain a flood control element, and prohibits disqualification because a district lacks historical data water use, does not provide retail water service, or does not have a certificate of convenience and necessity. The adopted amendments implement SB 1967's grant eligibility of certain drainage districts under the Water Loan Assistance Fund program rules in Chapter 363.

SB 1967 also amended Chapter 15 of the Water Code by adding additional criterion that TWDB must consider when prioritizing projects for financial assistance under the State Water Implementation Fund for Texas (SWIFT) program. When prioritizing projects under the SWIFT program, the TWDB must also consider whether a project is a water supply project that contains a flood component, regardless of whether the applicant holds a certificate of convenience and necessity. The adopted amendments implement SB 1967's additional prioritization consideration under the SWIFT program rules in Chapter 363.

SB 1967 additionally amended Chapter 15 of the Water Code by expanding the definition of "Flood project" applicable to the TWDB's Flood Infrastructure Fund (FIF) program. The definition of "Flood project" now includes the construction of multi-purpose flood mitigation and drainage infrastructure projects that control, divert, capture, or impound flood water, stormwater, agricultural runoff water, or treated wastewater effluent and treat and distribute the water for the purpose of creating an additional source of water supply. The adopted amendments implement SB 1967's expanded definition of a Flood Project under the FIF program rules in Chapter 363.

Senate Bill 1261, 89th R.S. (2025), amended TWDB's SWIFT Program in Chapter 15 of the Water Code by specifying the not to exceed term for an "eligible project", as defined by Section 1373.001 of the Government Code. The loan term for an "eligible project" may not exceed the lesser of the expected useful life of the facility or 40 years. The adopted amendments implement SB 1261's not to exceed term parameters for an "eligible project" under TWDB's SWIFT program rules in Chapter 363.

SECTION BY SECTION DISCUSSION OF ADOPTED AMENDMENTS.

Chapter 363 Financial Assistance Programs

Subchapter A. General Provisions

Division 1. Introductory Provisions

§363.2. Definitions of Terms.

The adopted amendment revises the definition of rural political subdivision in §363.2(26) to implement HB 3582.

Division 2. General Application Provisions

§363.17. Grants from Water Loan Assistance Fund.

The adopted amendment expands the grant eligibility of certain drainage districts under the Water Loan Assistance Fund program by the addition of §363.17(c) and (d) to implement SB 1967 and renumbers the remaining subsections.

Subchapter D. Flood Financial Assistance.

§363.402. Definitions.

The adopted amendment expands the definition of flood project by the addition of §363.402(6)(G) to implement SB1967. The adopted amendment also removes the definition of a metropolitan statistical area currently in §363.402(8) to implement HB 3582 and renumbers the remaining subsections. To avoid duplicative definitions across Subchapters in Chapter 363, TWDB intends to rely on the amended definition of rural political subdivision in §363.2(26) for TWDB's FIF program projects.

§363.405. Use of Funds.

The adopted amendment revises §363.405(a)(2) by substituting "a rural political subdivision" in place of "an area outside of a metropolitan statistical area" to implement HB 3582.

Subchapter M. State Water Implementation Fund for Texas and State Water Implementation Revenue Fund for Texas Water Development Board

§363.1302. Definition of Terms.

The adopted amendments add a definition of flood control component, remove the definition of rural political subdivision currently in §363.1302(15), and renumber the subsections accordingly. Unless in conflict, Subchapter A of Chapter 363 applies to projects under Subchapter M of Chapter 363. To avoid duplicative definitions across Subchapters in Chapter 363, TWDB intends to rely on the amended definition of rural political subdivision in §363.2(26) for TWDB's SWIFT program projects.

§363.1304. Prioritization Criteria.

The adopted amendment implements SB 1967's additional criterion that TWDB must consider when prioritizing SWIFT projects for financial assistance with the addition of §363.1304(12) and renumbers the remaining subsection. The adopted amendment awards one point for water supply projects that contain a flood control component and zero points for water supply projects that do not contain a flood component. An amendment is also adopted for §363.1304(6) to correct a typographical error and to account for the addition of adopted criterion.

§363.1305. Use of Funds.

To implement SB 1261 the adopted amendment revises §363.1305(a)(2)(B) and establishes the "not to exceed" term parameters for an "eligible project", as defined by §1373.001 of the Texas Government Code, under TWDB's SWIFT Program.

REGULATORY IMPACT ANALYSIS DETERMINATION (Texas Government Code §2001.0225)

The TWDB reviewed the adopted rulemaking in light of the regulatory analysis requirements of Texas Government Code §2001.0225 and determined that the rulemaking is not subject to Texas Government Code §2001.0225, because it does not meet the definition of a "major environmental rule" as defined in the Administrative Procedure Act. A "major environmental rule" is defined as a rule with the specific intent to protect the environment or reduce risks to human health from environmental exposure, a rule that may adversely affect in a material way the economy or a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The intent of the rulemaking is to implement legislation and clarify eligibility requirements.

Even if the adopted rulemaking was a major environmental rule, Texas Government Code §2001.0225 still would not apply to this rulemaking because Texas Government Code §2001.0225 only applies to a major environmental rule, the result of which is to: (1) exceed a standard set by federal law, unless the rule is specifically required by state law; (2) exceed an express requirement of state law, unless the rule is specifically required by federal law; (3) exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; or (4) adopt a rule solely under the general powers of the agency instead of under a specific state law. This rulemaking does not meet any of these four applicability criteria because it: (1) does not exceed any federal law; (2) does not exceed an express requirement of state law; (3) does not exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; and (4) is not adopted solely under the general powers of the agency, but rather Texas Water Code §6.101, §15.011, §15.439, §15.472, and §15.537. Therefore, this adopted rulemaking does not fall under any of the applicability criteria in Texas Government Code §2001.0225.

TAKINGS IMPACT ASSESSMENT (Texas Government Code §2007.043)

The TWDB evaluated this adopted rulemaking and performed an analysis of whether it constitutes a taking under Texas Government Code, Chapter 2007. The specific purpose of this rule is to implement legislation and clarify requirements for borrowers. The adopted rule would substantially advance this stated purpose by aligning the rule's definitions, permissible use of funds, eligibility, and loan term parameters with Water Code, Chapter 15.

The TWDB's analysis indicates that Texas Government Code, Chapter 2007 does not apply to this adopted rule because this is an action that is reasonably taken to fulfill an obligation mandated by state law, which is exempt under Texas Government Code §2007.003(b)(4). The TWDB is the agency that implements the applicable financial assistance programs.

Nevertheless, the TWDB further evaluated this adopted rulemaking and performed an assessment of whether it constitutes a taking under Texas Government Code Chapter 2007. Promulgation and enforcement of this adopted rulemaking would be neither a statutory nor a constitutional taking of private real property. Specifically, the subject adopted regulation does not affect a landowner's rights in private real property because this rulemaking does not burden, restrict, or limit the owner's right to property and reduce its value by 25% or more beyond that which would otherwise exist in the absence of the regulation. In other words, this rule is merely an amendment to conform with statutory changes by aligning the rule's definitions, permissible use of funds, borrower eligibility, and loan term parameters with Water Code, Chapter 15. Therefore, the adopted rulemaking does not constitute a taking under Texas Government Code, Chapter 2007.

PUBLIC COMMENTS (Texas Government Code §2001.033(a)(1))

The public comment period ended February 2, 2026. No comments were received and no changes were made.

SUBCHAPTER A. GENERAL PROVISIONS

SUBCHAPTER D. FLOOD FINANCIAL ASSISTANCE

STATUTORY AUTHORITY (Texas Government Code §2001.024(a)(3))

The amendment is adopted under the authority of Texas Water Code §6.101, which provides the TWDB with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, and also under the authority of Texas Water Code §15.537.

This rulemaking affects Water Code, Chapter 15.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 6, 2026.

TRD-202601477

Ashley Harden

General Counsel

Texas Water Development Board

Effective date: April 26, 2026

Proposal publication date: January 2, 2026

For further information, please call: (512) 475-1673

SUBCHAPTER M. STATE WATER IMPLEMENTATION FUND FOR TEXAS AND STATE WATER IMPLEMENTATION REVENUE FUND FOR TEXAS

STATUTORY AUTHORITY (Texas Government Code §2001.024(a)(3))

The amendment is adopted under the authority of Texas Water Code §6.101, which provides the TWDB with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, and also under the authority of Texas Water Code §15.439 and §15.472.

This rulemaking affects Water Code, Chapter 15.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 6, 2026.

TRD-202601478

Ashley Harden

General Counsel

Texas Water Development Board

Effective date: April 26, 2026

Proposal publication date: January 2, 2026

For further information, please call: (512) 475-1673