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Signed Into Law
Signed June 20, 2025Effective 2025-09-01
SB2366

Regular Session

Relating to a grant program to fund certain short line railroad projects.

Government Affairs & Regulatory Compliance Analysis

SB2366: Government Affairs Overview

SB2366 establishes a statutory framework for TxDOT to award grants for short line rail maintenance, rehabilitation, and expansion, effective September 1, 2025. While the program creates a legal vehicle for funding, actual liquidity depends on future legislative appropriations; Rural Rail Transportation Districts and operators must immediately align project scopes with statutory categories and secure the required 10% non-state match to be eligible when funds become available.

Sen. Bryan Hughes·Senate Bill·Regular Session

Moderate
Low Cost
Effective:2025-09-01
Business Impact

Who SB2366 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: moderate

Notable regulatory updates (effective 2025-09-01). Consider how these changes may affect your operations.

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Transportation

Affected business types:

  • Trucking companies
  • Towing operators
  • Fleet operators
  • Logistics providers
View all transportation legislation

Key Operational Considerations

  • 1Grant Administration: Designate a specific officer to manage the application process. This individual must understand TxDOT’s grant portal and state audit requirements.

Estimated Cost Impact

lowMinimal cost impact anticipated.

Enforcing Agencies

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SB2366
Moderate
Relating to a grant program to fund certain short line railroad projects.
Moderate Compliance Urgency
Requires near-term attention
Cost Impact
Low
Effective
2025-09-01
Enforcing Agencies
Texas Department of TransportationTexas Transportation Commission
Primary Author: Sen. Bryan Hughes
89th Texas Legislature
jdkey.com
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Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025
  • Compliance Deadline: Q4 2025 / Q1 2026 (Estimated). While the law is effective in September, "compliance" is triggered only when you apply for funds. You must be grant-ready when the first call for projects opens.
  • Agency Rulemaking: The Texas Transportation Commission is mandated to adopt implementing rules by October 1, 2025.
  • *Regulatory Gray Zone:* Between now and October 2025, the specific scoring criteria (e.g., how "economic development" is weighted against "safety") remain undefined.

Immediate Action Plan

  • 1. Audit Capital Plans: Immediately segregate planned 2026-2027 projects into "grant-eligible" vs. "ineligible" based on the statutory definitions.
  • 2. Secure the Match: Engage local government partners or private equity sources now to secure the 10% match commitment letter.
  • 3. Engage the District: If you are a private operator, initiate a strategic planning session with your oversight District to determine who will act as the applicant.
  • 4. Monitor Appropriations: Watch the legislative appropriations process closely; the bill creates the car, but the Legislature must still buy the gas.

Operational Changes Required

Contracts

  • Lease Agreements: Review all agreements between Rural Rail Transportation Districts (RRTDs) and private operators. If the District receives the grant for infrastructure improvements, the lease must clarify ownership of those improvements and whether rent adjustments are triggered.
  • Vendor Procurement: Construction and engineering contracts funded by this program will be subject to state procurement standards. Do not sign sole-source agreements for grant-eligible projects now; they may be disqualified later for lack of competitive bidding.

Hiring/Training

  • Grant Administration: Designate a specific officer to manage the application process. This individual must understand TxDOT’s grant portal and state audit requirements.
  • Project Classification: Engineering teams must categorize all capital needs into one of three statutory buckets: (1) track/bridge maintenance, (2) capacity construction, or (3) restoration. Projects outside these definitions are ineligible.

Reporting & Record-Keeping

  • Financial Segregation: Establish a separate general ledger code for grant funds. Commingling state grant dollars with general operating revenue is a primary cause of audit failure.
  • Match Verification: You must generate auditable proof (bank letters, escrow agreements, or municipal resolutions) confirming you possess the 10% non-state matching funds.

Fees & Costs

  • Matching Requirement: Applicants must cover at least 10% of the total project cost (or match amount, pending rule clarification) using private, local, or federal funds. State funds cannot be used for the match.
  • Administrative Overhead: Budget for legal and engineering costs required to prepare the grant application; these pre-award costs are typically non-reimbursable.

Strategic Ambiguities & Considerations

The Texas Transportation Commission must resolve the following via rulemaking by October 1, 2025. Legal counsel should monitor the docket for:

  • 1. Applicant Eligibility: The statute targets "Districts." It is unclear if a private operator leasing a line from a District can be the primary applicant/signatory, or if the District must serve as the pass-through entity.
  • 2. Funding Source Definitions: The bill explicitly prohibits using the State Highway Fund. Rulemaking will determine if federal pass-through dollars managed by TxDOT count as "state" (ineligible for match) or "federal" (eligible for match).
  • 3. Scoring Weight: The statute lists safety, economic development, and congestion relief as goals but does not rank them. We do not yet know which metric will be the deciding factor in competitive rounds.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 12, 2025
Passed Senate
Apr 30, 2025
Passed House
May 28, 2025
Signed
Jun 20, 2025
Effective
Sep 1, 2025
TopicsHighwaysState FinancesState Finances--appropriationsTransportationTransportation--miscellaneousTransportation--railroadsTransportation Commission, TexasTransportation, Texas Department of
03

Senate Authors

Sen. Bryan HughesRepublican · Primary Author
Joint Authors
Coauthors (1)

House Sponsor

Rep. Cole HefnerRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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Quick Reference

Frequently Asked Questions

Common questions about SB2366

Q

What does Texas SB2366 do?

SB2366 establishes a statutory framework for TxDOT to award grants for short line rail maintenance, rehabilitation, and expansion, effective September 1, 2025. While the program creates a legal vehicle for funding, actual liquidity depends on future legislative appropriations; Rural Rail Transportation Districts and operators must immediately align project scopes with statutory categories and secure the required 10% non-state match to be eligible when funds become available.

Q

Who authored SB2366?

SB2366 was authored by Texas Senator Bryan Hughes during the Regular Session.

Q

When was SB2366 signed into law?

SB2366 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce SB2366?

SB2366 is enforced by Texas Department of Transportation (TxDOT) and Texas Transportation Commission.

Q

How significant are the changes in SB2366?

The regulatory priority for SB2366 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB2366?

The cost impact of SB2366 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does SB2366 address?

SB2366 addresses topics including highways, state finances, state finances--appropriations, transportation and transportation--miscellaneous.

Q

What are the key dates for SB2366?

Key dates for SB2366: Effective date is 2025-09-01. Rulemaking: Adopt rules establishing the application process, selection criteria, and administration of the short line railroad grant program. (2025-10-01). Consult with legal counsel regarding applicability.

Q

Which Texas businesses are affected by SB2366?

SB2366 primarily affects transportation and logistics companies. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026