TITLE 43. TRANSPORTATION
PART 1. TEXAS DEPARTMENT OF TRANSPORTATION
CHAPTER 7. RAIL FACILITIES
SUBCHAPTER
G.
The Texas Department of Transportation (department) adopts new §§7.120 - 7.134 concerning the Off-System Rail Grade Separation State Fund Program. The new §§7.120 - 7.122, 7.124, 7.125, 7.127, 7.128, 7.130, and 7.132 - 7.134 are adopted without changes to the proposed text as published in the July 4, 2025 issue of the Texas Register (50 TexReg 3857). The rules will not be republished. New §§7.123, 7.126, 7.129, and 7.131 are adopted with changes to the proposed text as published in the July 4, 2025 issue of the Texas Register (50 TexReg 3857). The rules will be republished.
EXPLANATION OF ADOPTED NEW SECTIONS
New §§7.120 - §7.134, contained in new Subchapter G of Chapter 7, describe the policies and procedures for the implementation and administration of the Off-System Rail Grade Separation State Fund Program (Program), as authorized by S.B. 1555 (89th Regular Session, 2025) and codified as Transportation Code, §471.010.
New §7.120, Purpose, states the purpose of the new subchapter.
New §7.121, Definitions, defines the terms used in the new subchapter.
New §7.122, Program Eligibility, sets criteria a project must meet to be eligible for the Program. This includes the statutory criteria that the project must (1) be for the construction of either a highway-rail grade separation structure that will eliminate at least one at-grade rail-highway crossing or a grade-separated pedestrian-rail crossing, (2) be off the state highway system, (3) increase public safety, enhance economic development, or reduce traffic, and (4) be sponsored by the political subdivision that has jurisdiction over the project's location. In order to maximize efficiency and use of available funds, the program must also constitute a logical, self-contained unit of work that could be constructed as an independent project.
New §7.123, Funding and Eligible Costs, sets the allowable costs under the program. To maximize use of funding, allowable costs are limited to direct grade-separation-related costs, including planning, detailed design activities, environmental, right of way acquisition, and utility adjustments. Costs for items such as improving rail capacity or adding mass transit infrastructure, are not allowable, although such an element can be included in the project if it is funded with non-Program funds.
New §7.124, Non-State Funding Match, addresses the statutory requirement that at least 10 percent of total project costs must be provided by a source other than the state as matching funds and the federal regulatory requirement that a railroad participate in the cost of a grade-separation under certain circumstances. The Texas Transportation Commission (commission) may adjust the minimum local matching requirement in accordance with Transportation Code, §222.053. The standard policies apply, that the matching funds must be provided before the work begins, that donated services may be used to reduce the cost of the project but do not constitute matching funds, and that the department's costs of oversight are included as a project cost.
New §7.125, Call for Project Nominations, provides that projects will be selected through a competitive process in order to make the best use of available funding. A program call describing the required application contents will be published in the Texas Register.
New §7.126, Nomination Package, requires a project sponsor to submit project nominations in the form prescribed by the department. A complete nomination package must be received by the department by the deadline or it will be deemed ineligible.
New §7.127, Project Evaluation Committee, requires the executive director to appoint a project evaluation committee consisting of department staff to make recommendations for the selection of projects funded under the program.
New §7.128, Nomination Screening, requires the project evaluation committee to screen each nominated project to determine its eligibility under statutory and regulatory requirements. It provides for notification if a project is found ineligible and for an appeals process.
New §7.129, Project Evaluation, requires the project evaluation committee to evaluate the benefits of eligible applications based on statutory requirements, the goals of the program, and specific selection criteria set forth in the program call. The department will provide the evaluation criteria with each program call.
New §7.130, Project Selection and Approval, requires the project evaluation committee to make recommendations for project selection to the department's Railroad Division Director. It further requires that at least 10% of funding be recommended for eligible projects in rural areas, in order to ensure equitable use of funds, unless sufficient rural project nominations are not submitted. The division director will make a final recommendation of selected projects to the commission for approval.
New §7.131, Inclusion of Selected Projects in Planning Documents, requests the project sponsor to include the selected project in the local transportation improvement programs.
New §7.132, Project Implementation, requires the project sponsor and applicable railroad to comply with all applicable laws and regulations, including all applicable state procedures, requirements, and standards and specifications. It requires opportunity for public involvement and any required environmental documentation. An agreement between the state and the project sponsor is required, which must include the responsibilities and duties of the parties, local match funding commitment, the scope and course of the project, and the maximum amount of available funding. As required by Transportation Code, §471.010(d), the agreement must also designate the department to manage the project under the laws and regulations applicable to state highway projects.
New §7.133, Elimination of Project from the Program, provides the department's executive director criteria for eliminating a project after selection. A project may be eliminated from the program if a project sponsor does not meet the requirements of the program, if a project sponsor chooses to withdraw, if significant deviations from the approved scope of work would be required, if construction has not been initiated within three years of project selection, or if the required agreement is not signed within one year after project selection.
New §7.134, Reporting to the Commission, requires the department to submit to the commission annually a report regarding project nominations and selected projects.
COMMENTS
The department posted the rules for comment in the July 4, 2025, issue of the Texas Register. The department received comments through August 4, 2025. In total the department received comments from two entities. Harris County and the Transportation Advocacy Group of Houston provided comments and proposed language amendments to support the program.
The department received one comment concerning §7.122. The comment requested that eligibility extend to entities with roadway responsibility over the project's location, in addition to having jurisdiction over the project's location. The department agrees that a project may have an entity with jurisdiction over the project's location that is different than the entity with roadway responsibility, and that both entities would serve a critical role. However, the entity with jurisdiction over the location must be the project sponsor and sign the project agreement. No revision is made to the proposed rule, but the department will modify the application to allow entities with roadway responsibility to submit their support of the project.
The department received two comments concerning §7.123. One comment requested to add environmental costs as an eligible cost. The department agrees and has revised the proposed rules to include "environmental" as an eligible cost. The other comment requested that grant funds be allowed to be utilized on eligible projects that are in conjunction with ineligible projects. The department acknowledges this request and finds that §7.123(d) as proposed accomplishes this.
The department received one comment concerning §7.124 requesting that in-kind services be allowed as part of match requirements. The department acknowledges the value of in-kind services and they are permitted to reduce the overall cost of the project, but cannot be considered as matching funds due to accounting and audit constraints. In the application process, the department will clarify that payments for right-of-way acquisition and utility adjustments are eligible costs and can be counted towards match in compliance with §7.124(b). No revision is made to the proposed rule.
The department received one comment concerning §7.126. The request is to ensure city, county, and other special purpose districts can all apply and be eligible for awards within the same region. The proposed language allows for the entity with jurisdiction to apply. The department has modified the proposed language to no longer limit the number of projects a sponsor can submit.
The department received one comment concerning §7.128, requesting that a prescreening period be included in the application process to prevent projects from being rejected for non-compliance with program requirements. The program documents will provide for a two-step application process, including an initial round with minimal requirements and quick turnaround, followed by a second round with additional project detail requirements. The department will also offer technical assistance during the call for projects. No revisions are made to the proposed rule.
The department received three comments concerning §7.129. The commenter requested that 1) evaluation criteria be released when the application period opens, 2) travel time savings be measured using quantitative numbers, and 3) air quality, flooding, noise, and visual impacts be included when evaluating a project's merit. Regarding the first two comments, the evaluation criteria, which uses both quantitative and qualitative metrics for project evaluation, will be available to project sponsors at the time of the program call. Regarding the third comment, the rule language tracks the statutory language, which provides "increasing public safety, enhancing economic development, and reducing traffic" as the primary project requirements. However, the rule also provides that project nominations may address "any other benefit" of the project for consideration by the Commission. No revision is made to the proposed rule.
The department received one comment concerning §7.130, that rural be defined as all unincorporated areas within counties across the state. The department intends to use census urbanized areas to distinguish urban and rural, which will be outlined in program documents and based on the most current information available at the time of the call. No revision is made to the proposed rule.
The department received one comment concerning §7.131, requesting to ensure a project is eligible for selection even if it is not included in an existing regional Transportation Improvement Program (TIP) prior to selection. Projects do not need to be listed in a TIP prior to selection to be eligible. The proposed language provides that TxDOT will request that the applicable Metropolitan Planning Organization add the project to its TIP after the project is selected. However, proposed subsection (b) has been removed because it was determined that projects funded under this program do not need to be included in the State Transportation Improvement Plan.
The department received one comment concerning §7.132. The comment requests that local governments be permitted to manage the project using the local let process with TxDOT oversight. In compliance with Transportation Code §471.010(d), the department is required to manage the project. No revision is made to the proposed rule.
STATUTORY AUTHORITY
The new rules are adopted under Transportation Code, §201.101, which provides the commission with the authority to establish rules for the conduct of the work of the department, and more specifically, Transportation Code, §471.010, which authorizes the commission to adopt rules as necessary to implement that section.
The authority for the new rules is provided by S.B. No. 1555, 89th Regular Session, 2025. The primary author and the primary sponsor of that bill are Sen. Robert Nichols and Rep. Jared Patterson, respectively.
CROSS REFERENCE TO STATUTES IMPLEMENTED BY THIS RULEMAKING
Transportation Code, §471.010
§7.123.
(a) Funding under the program is subject to the Texas Grant Management Standards developed by the comptroller under the Government Code, Chapter 783.
(b) Planning, detailed design activities, environmental, right of way acquisition, and utility adjustments are eligible costs.
(c) A cost is not eligible for funding under the program if it:
(1) was incurred before the department authorizes work to proceed under the agreement required under §7.132 of this subchapter (relating to Project Implementation); or
(2) is related to rail capacity improvements or the addition of mass transit infrastructure.
(d) A project may include elements that are not eligible for funding under the program. Funds used to pay for those elements do not qualify as matching funds under §7.124 of this subchapter (relating to Non-State Funding Match).
§7.126.
(a) To nominate one or more projects during a program call, the project sponsor must submit each nomination in the form prescribed by the department.
(b) The nomination package must present persuasive evidence of support for the proposed project from the affected communities and, if applicable, include a commitment to provide the non-state funding match required by §7.124 of this subchapter (relating to Non-State Funding Match) or an explanation of the project sponsor's eligibility for a funding match adjustment under Transportation Code, §222.053.
(c) A complete nomination package must be received by the department not later than the specified deadline published in the Texas Register. A nomination package that fails to include any of the items specified in this section or the respective program call is considered to be incomplete and will not be considered for funding.
(d) The department may request supplemental information as needed to conduct project screening and evaluation.
§7.129.
The project evaluation committee will evaluate the public safety, economic development enhancement, traffic reduction, and any other benefit of each nominated project that is determined to be eligible under §7.128(a) of this subchapter (relating to Nomination Screening) based on the specific selection criteria set forth in the program call. Evaluation criteria will be provided for each program call.
§7.131.
If a project selected is to be implemented in a metropolitan area, the department will request that the Metropolitan Planning Organization for that area immediately begin the process required to include the selected project in its Transportation Improvement Program.
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 September 25, 2025.
TRD-202503432
Angie Parker
Senior General Counsel
Texas Department of Transportation
Effective date: October 15, 2025
Proposal publication date: July 4, 2025
For further information, please call: (512) 463-3164