ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 1. ADMINISTRATION PART II. Texas Ethics Commission CHAPTER 26.Political and Legislative Advertising 1 TAC sec.26.19 The Texas Ethics Commission adopts new sec.26.19, concerning political advertising. sec.26.19 is adopted without change to the proposed text as published in the August 22, 1997, issue of the Texas Register (22 TexReg 8329) and will not be republished. This section provides the form that may be used on political advertising to indicate that a candidate or political committee subscribes to the Code of Fair Campaign Practices, Chapter 258, Election Code. No comments were received on the proposed rule. This new rule is adopted under Texas Government Code, Chapter 571, sec.571.062, which provides the commission with the authority to promulgate rules to implement laws administered and enforced by the commission; and under Texas Election Code, Chapter 258, sec.258.008, which requires the commission to determine the form that may be used on political advertising to indicate that a candidate or political committee subscribes to the Code of Fair Campaign Practices. This rule affects Texas Election Code, Chapter 258, sec.258.008. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715593 Tom Harrison Executive Director Texas Ethics Commission Effective date: December 9, 1997 Proposal publication date: August 22, 1997 For further information, please call: (512) 463-5800 PART IV. Office of the Secretary of State CHAPTER 81.Elections Political Parties 1 TAC sec.sec.81.145-81.157 The Office of the Secretary of State adopts new sec.sec.81.145-81.157, concerning joint primary election funding, without changes to the proposed text as published in the October 3, 1997, issue of the Texas Register (22 TexReg 9783). The new sections concern the financing of the 1998 joint primary elections with state funds, including the determination of necessary and proper expenses relating to the proper conduct of joint primary elections by party officials and the procedures for requesting reimbursement by the parties for such expenses. The new sections are necessary for the proper and efficient conduct of the 1998 joint primary elections. It is in the public interest to establish adequate procedures to insure the best use of state funding. Written comments were received by Mr. Kenn Carr, El Paso Republican Party County Chair. Comment: Is the requirement that the co-judge reside in the precinct statutory? If possible, it should by changed? Response: Yes. In accordance with sec.32.051 of the Texas Election Code, the general eligibility requirement of a judge is that he/she be a qualified voter of the precinct. Comment: El Paso County holds primary elections in each polling place, but cannot always find a resident to act as judge in every precinct; therefore, judges are picked from elsewhere in the county to serve. Does sec.81.150 mean we could not follow this same procedure and hold a joint primary? Response: A joint primary can be conducted; however, this office recommends that you combine or consolidate precincts and recruit a qualified co-judge within the combined or consolidated precincts. The new sections are adopted under the Texas Election Code, sec.31.003 and sec.173.006, which provides the Office of the Secretary of State with the authority to obtain and maintain uniformity in the application, interpretation, and operation of provisions under the Texas Election Code and other election laws, and, in performing such duties, to prepare detailed and comprehensive written directives and instructions based on such laws, and to adopt rules consistent with the Election Code that reduce the cost of the primary elections or facilitate the holding of the elections within the amount appropriated by the Legislature for that purpose. The new sections are also adopted under the Texas Election Code, sec.172.126(c) and (I) and sec.173.011(c) which provide the Office of the Secretary of State with the authority to prescribe procedures for the appointment of election day workers, to ensure orderly and proper administration, as well as fair and efficient financing of joint primary elections. The Texas Election Code, Chapter 173, Subchapter A, sec.173.006 is affected by these adopted rules. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 24, 1997. TRD-9715837 Clark Kent Ervin Assistant Secretary of State Office of the Secretary of State Effective date: December 15, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-9875 PART V. General Services Commission CHAPTER 126. Surplus and Salvage Property Programs State Surplus and Salvage Property 1 TAC sec.sec.126.1-126.4 The General Services Commission adopts amendments to sec.sec.126.1-126.4, concerning the State Surplus and Salvage Property Program, without changes to the text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10091). The amendments to sec.sec.126.1-126.4 will change the chapter heading for 1 TAC, Chapter 126 to a more descriptive heading, the Surplus and Salvage Property Programs; and will allow for the implementation of Senate Bill (S.B.) 833, 75th Legislature, which expedites the process for disposing of surplus and salvage property. The amendments to 126.1-126.4 will reduce storage and advertising costs currently borne by state agencies in disposing of surplus property. No comments have been received regarding adoption of amendments to sec.sec.126.1-126.4. The amendments are adopted under the Texas Government Code, Title 10, Subtitle D, Chapter 2175, which provides the General Services Commission with authority to promulgate rules consistent with the Code. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 17, 1997. TRD-9715499 Judy Ponder General Counsel General Services Commission Effective date: December 8, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 463-3960 TITLE 7. BANKING AND SECURITIES PART VII. State Securities Board CHAPTER 114.Federal Covered Securities 7 TAC sec.114.4 Editor's Note: The Texas Register inadvertently omitted the following adopted rule from the November 28, 1997, issue of the Texas Register. The State Securities Board adopts an amendment to sec.114.4, concerning filings and fees for federal covered securities, without changes to the proposed text as published in the August 12, 1997, issue of the Texas Register (22 TexReg 7436). The rule recognizes new Form NF, Uniform Investment Company Notice Filing, and clarifies when filings and fees are due for federal covered securities, including certain industrial bonds. The provision will clarify filing and fee requirements and increase uniformity with other securities regulators by allowing certain issuers to file new uniform Form NF. Two comment letters were received regarding adoption of the amendment. The first letter, from the Investment Company Institute, supported adoption of the amendment. The Board agreed and adopted the amendment as published. The second letter, from Thompson & Knight, requested clarification that existing exemptions from dealer and agent registration may apply to transactions in federal covered securities and suggested an amendment be made to subsection (g). The Board agreed that a clarification should appear, however, it should be placed in sec.114.1(b), concerning availability of a corresponding state exemption, rather than sec.114.4(g). Accordingly, the Board did not make the suggested alteration to sec.114.4(g), but is proposing an amendment to sec.114.1(b) to address this concern. The amendment is adopted under Texas Civil Statutes, Articles 581-28-1 and 581- 5.T. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes. Section 5.T provides that the Board may prescribe new exemptions by rule. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 12, 1997. TRD-9715211 Denise Voight Crawford Securities Commissioner State Securities Board Effective date: December 2, 1997 Proposal publication date: August 12, 1997 For further information, please call: (512) 305-8300 TITLE 16. ECONOMIC REGULATION PART II. Public Utility Commission of Texas CHAPTER 23.Substantive Rules Customer Service and Protection 16 TAC sec.23.59 The Public Utility Commission of Texas adopts an amendment to sec.23.59 relating to Nuclear Decommissioning Trusts with changes to the proposed text as published in the June 3, 1997 Texas Register (22 TexReg 4854). The amendment will allow utilities to invest decommissioning trust funds in certain types of mutual funds, and to increase the amount of equity securities in the funds' investment portfolios with some restrictions. The amendment is adopted under Project Number 14908. The commission received written comments on the proposed amendment from all five of the Texas regulated utilities with nuclear plants: Central Power and Light (CPL), El Paso Electric Company (EPEC), Entergy Gulf States (EGS), Houston Lighting and Power (HL& Pnd TUEC Electric Company (TUEC). In addition, comments were received from four investment firms: LCG Associates (LCG), NISA Investment Advisors (NISA), Phoenix Duff and Phelps (Phoenix), and RCM Capital Management (RCM). All commenters responded that the prudent investor standard, which has been adopted by the Federal Energy Regulatory Commission (FERC), should be adopted in lieu of the proposed investment restrictions. Extensive comments were filed on this issue although such comments were not specifically requested by the commission. Due to their preference for the prudent investor standard, commenters asked that many sections of the rule be deleted. Some commenters proposed revisions to the published rule in the event the commission did not adopt the prudent investor standard. The remaining paragraphs of this preamble address the specific suggestions made in lieu of adopting the prudent investor standard. The commission is concerned that adopting the prudent investor standard will result in a wide variation in investment strategies because each utility will write its own investment guidelines without adequate guidance from the commission. As discussed by Phoenix on page 8 of its comments, in a highly competitive environment resulting from deregulation, utilities will want to reduce their business risks, including their unfunded decommissioning liability. To accomplish this task, the utility must increase the risk exposure of its trust fund investments. Some utilities will take a more aggressive investment strategy than others, and may expose the trust to more risk than the commission believes is appropriate for these ratepayer supplied funds. While it is impossible to prevent the risk of all potential losses through this rule, the commission believes this amended rule provides general investment guidelines and investment restrictions that minimize the trust's exposure to risks it considers inappropriate. The Texas commission is not required to follow the FERC's position on the issue of investment guidelines. The FERC portion of decommissioning expense for utilities in Texas is relatively small compared to the retail portion overseen by the commission. Further, the five nuclear plants for which the commission has partial responsibility for providing decommissioning funds are a more homogeneous group than the large group of nuclear plants which are partially overseen by the FERC. By providing general investment guidelines for all of the utilities, the commission will have greater assurance that the funds will be invested in a more consistent manner than the prudent investor standard would allow, while still allowing some investment flexibility. (c)(1)(C) Asset allocation goal. There was general agreement among the commenters that the investment emphasis should shift during the life of the trust, but the commenters disagreed with the proposed timing of the shift occurring 10 years prior to the commencement of decommissioning. NISA, LCG, EGS, CPL, TUEC, RCM, and EPEC commented that the investment emphasis should be tied to the investment horizon, i.e., the life of the trust, rather than the funding period. EGS and CPL commented that the transition in investment emphasis should be broadly stated with no specific time frame for changing investment emphasis. TUEC commented that the investment emphasis of current income and preservation should apply to the last four years of the trust. RCM and TUEC suggested the commission look to the FERC's decision in the Yankee Atomic case, Docket Number ER95-835-000, 75 FERC sec.61,043 (April 10, 1996), for guidance on this issue. EPEC also commented that the transition in investment objective should be gradual and based on matching the objective with the liability to be met. The commission agrees that the appropriate investment horizon is the life of the trust. The rule has been revised to show that the investment emphasis should shift when the weighted average remaining life of the liability reaches five years. The use of weighted average remaining life will take into account the timing of decommissioning expenditures, and will better match the investment objective to the liability. (c)(1)(D) Goal on selection of investments. CPL commented that in selecting investments, the consideration of the investment's impact on the overall portfolio's volatility and return is more appropriate than consideration of the volatility and return of the individual investment. TUEC and LCG commented that selection of investments should be based on net after-tax return. The commission agrees and this portion of the rule has been modified to incorporate the comments. (c)(2)(A) Fees limitation. CPL and EGS commented that the proposed cap on fees is too low and many mutual funds charge more than this. EGS and TUEC responded that the proposed limit is arbitrary, unduly restrictive, and may not allow the flexibility to efficiently manage the trust. CPL, EPEC and TUEC expressed concerns that the proposed cap does not take into account the returns that are expected to be generated compared to the fees paid. CPL, RCM and TUEC commented that this section is redundant if the net after tax return goal is included in (c)(1)(D), and should be deleted. Based on a review of the comments and a schedule of fees paid for a fully diversified pension fund, the commission agrees that this cap as proposed may be too low once the trust portfolios are fully diversified into investment segments that have higher management fees. The commission has modified this section to clarify that the cap is based on fees for the entire portfolio so that investment in mutual funds with higher expense ratios is not precluded. Further, the commission has increased the portfolio cap to 0.7%; this cap is based on a 60% allocation to equities with a weighted average cost of 0.8%, and a 40% allocation to fixed income investments with a weighted average cost of 0.5%. Even though the commission revised (c)(1)(D) to reflect the net after tax return goal, it disagrees that this section should be deleted. The goal in (c)(1)(D) is a general guideline for the selection of individual investments, while this section relates to the reasonableness of the fees for the entire portfolio. (c)(2)(B) Diversification requirements. TUEC commented that this section could be misinterpreted such that mutual funds would be considered a security rather than as a group of securities for purposes of determining the portfolio's compliance with this diversification requirement. The commission agrees that this was not its intent, and has added clarifying language to consider the individual securities within a mutual fund when applying this standard. TUEC and RCM also commented that clause (ii), which requires at least 20 securities, appears to be redundant of clause (i), which limits securities from one issuer to 5% of the portfolio, and that it should be deleted. The commission disagrees that the language is redundant. The reason for clause (ii) of this requirement was to ensure that there were at least 20 different securities in the portfolio in the event the only issuer was the federal government, which is specifically excluded from clause (i). No change has been made to this section at this time. (c)(2)(D) Derivatives. CPL, HL&P, RCM and LCG commented that the types of derivatives prohibited should be more narrowly defined. TUEC responded that the use of derivatives should be limited to enhance return without a corresponding increase in risk, or to reduce overall risk of the portfolio. LCG, Phoenix, CPL and TUEC commented that the use of a small amount of derivatives to reduce portfolio risk should be allowed for privately managed funds as well as commingled funds. TUEC also commented that the 5% limitation should be deleted. The commission agrees with these comments. This portion of the rule has been revised to allow derivatives to reduce portfolio risk in commingled or privately managed funds, with no specified limitation. High-risk derivatives are prohibited, and a listing of some examples of inappropriate types of derivatives has been added as suggested by several commenters. (c)(2)(F) Investment limits in equity securities. All commenters were critical of the timing of the equity cap reduction as too early in the fund's life. The commenters generally said that such an early change in allocation will severely reduce earnings when the funds are at their largest, and that this portion of the rule should be deleted or revised. The amended rule proposed to reduce equity exposure to 20% ten years prior to the commencement of decommissioning. CPL and HL&P commented that the life of their funds for one unit extends 35 years past the shutdown of the unit due to extended periods of spent fuel storage. A limitation of 20% equities for this long of an investment horizon would be unreasonable they, and others, commented. NISA commented that a constant allocation to equities over the investment horizon, rather than the proposed declining equity allocation, will provide the same or higher return with less risk because of greater diversification. LCG commented that the equity cap should be deleted or increased to 80% until 10 years prior to decommissioning, and then be reduced to 60% until four years prior to the end of the trust's life. NISA also commented that an investment strategy based on predetermined limits based solely on time are inefficient compared to a dynamic strategy based on the timing of decommissioning costs, the funded status of the trust, the financial condition of the utility, and prevailing economic and market conditions. NISA and EGS commented that a fixed schedule of reducing equity allocation should be based on the expected life of the trust. Phoenix suggested that the maximum cap should apply while the duration of the liability exceeds four years, then a cap of 50% of the maximum when the duration is between four and two years, and finally, that the cap should be zero when the duration of the liability is less than two years. The commission later obtained additional comments on Phoenix's proposal. The commission agrees with these comments in part. The commission disagrees with increasing the equity cap above 60%, and with the claim that a constant equity cap is superior to a declining cap. Equity securities are by their nature more risky investments in the short-term, and their allocation should be reduced as the end of a decommissioning fund's life approaches. Further, the commission's equity cap is reasonable when compared to NISA's 1997 study of decommissioning trusts, which shows only about 20% of nuclear utilities have equity exposure greater than 60%. However, the commission agrees that the equity percentage should be based on the life of the trust rather than the funding period, and should take into account the remaining liability. For the commission's final decision on this issue, refer to additional question (1) later in this preamble. CPL commented that the cap would be ineffective because it specifies that reductions be achieved by directing future transfers to debt securities. CPL states that during this period, the contributions would be small relative to the annual investment growth of the trust and these transfers would be insufficient to achieve the required reduction in equities. HL&P suggested that the word "transfers" be changed to "contributions". The wording of this section was changed to clarify that if the equity cap is ever exceeded due to market fluctuations, that the utility may rely solely on future contributions to maintain compliance with the cap. No restriction on the sale of equities to maintain the cap was intended, so this section now states that the sale of equity securities is permitted to effect compliance with the equity cap. The commission recognizes that the proposed reductions in the equity cap will require the sale of equities because the contributions alone are too small to effect the reduction in equity level within a reasonable period of time. Also, the commission has made compliance less burdensome by specifying that the market value of the portfolio shall be measured monthly, rather than continuously as implied by the current wording of the rule. (c)(2)(G) Restriction from investment in securities issued by the utility or its affiliates. EPEC and Phoenix commented that the restrictions should be the same for commingled funds and independently managed funds. The commission does not agree that independently managed funds should be allowed to invest in the utility's own securities or those of an affiliate. Commingled funds are exempted from this requirement because the selection of investments within a commingled fund is not within the utility's control, and this restriction might limit investment in an otherwise appropriate commingled fund. (c)(3)(A) Restrictions on fixed income investments. HL&P, LCG and TUEC commented that the minimum portfolio quality level of "AA" should be reduced to "A". CPL and HL&P also suggested that below investment grade be defined to be below BBB-, or Baa3. TUEC and RCM commented that the minimum allowable percentage of below investment grade securities should be increased to 20%. RCM also recommended that below investment grade bonds be allowed in independently managed accounts. The commission disagrees that the portfolio quality level should be reduced to "A" or that independently managed decommissioning funds be allowed to be invested in below investment grade instruments. Most decommissioning trusts, according to a study by NISA, maintain a minimum quality level of "AA" for their fixed income investment portfolio. Further, neither CPL nor HL&P invest their pension funds in below investment grade bonds. However, the commission agrees that investment grade should be defined to be below BBB- or Baa3, as suggested by CPL and HL&P. Also, an incorrect reference to "equity security" was corrected to state "debt security" as suggested by HL&P. To be consistent with the quarterly quality check added to (c)(3)(B) for the equity portfolio, the commission has added that the quality of the fixed income portfolio be checked on a quarterly basis. This revision will reduce the burden of compliance with this requirement. (c)(3)(B) Equity investment restrictions. CPL, EGS, LCG, RCM and NISA all commented that the restriction that the issuer must have paid dividends for at least five years and the debt rating restriction for equity investments should be deleted. CPL commented that the dividend and debt rating restrictions are overly restrictive, do little to assure the trust does not suffer investment losses, and unintentionally prevent investment in many companies with potential for significant gains. LCG suggested that a better test of equity quality is whether the stock is listed on a major stock exchange. TUEC and Phoenix commented that equity ratings are easier to obtain and are more appropriate, if a quality standard must be used. Most commenters stated that the $100 million capitalization requirement was a reasonable screen for determining the liquidity of equity securities. The commission agrees with these comments in part. The commission agrees that the minimum $100 million capitalization requirement is a reasonable standard, but disagrees that the listing of a stock in a major stock exchange is a sufficient screen for selecting equities. The commission asked an additional question regarding the use of a quality rating service which is summarized later in this preamble. Based on the initial comments, the commission eliminated the 5-year dividend requirement, but maintained the $100 million minimum capitalization requirement for selection of equity investments. Refer to additional question (2) later in this preamble for the commission's final decision on the use of a quality rating. (c)(3)(C) Commingled funds. LCG and RCM suggested that the commission add actively managed U.S. equity funds, real estate investment trust funds, and money market funds to the list of examples of appropriate commingled funds. TUEC suggested changing "net return" to "net after-tax return". HL&P and TUEC commented that loads are generally not levied on institutional investors investing in load funds, and that the restriction should be reworded to state that the payment of the load, rather than the load fund, should be avoided. TUEC recommended that the reference to 12b-1 fees be eliminated because they are not always avoidable, and the restriction may prevent investment in an otherwise prudent fund. The commission agrees with these changes and the rule was revised to incorporate these comments. Additional Questions On October 3, 1997 additional questions were published in the Texas Register (22 TexReg 10055) relating to this rulemaking project. These questions concerned: (1) use of duration to determine when to reduce the proportion of equity investments; (2) the use of Standard and Poor's (S&P's) earnings and dividend rankings or other rating service for common stock to assess the quality of the overall equity portfolio; and (3) whether utilities should be required to appoint an investment manager when the trust achieves a certain size. CPL, EPEC, EGS, HL&P, TUEC, LCG, RCM and Phoenix responded to these questions. In addition to answering the specific questions published, many respondents made additional comments. Many commenters reiterated their preference for a prudent investor standard rather than a detailed rule. Question 1. Phoenix and HL&P commented that the weighted average life is a slightly higher number of years than the duration of the remaining liability because the duration is discounted. They also commented that the use of a weighted average life to determine the timing of reducing the equity cap is simpler and would avoid disagreements on the appropriate discount rate. Entergy proposed an annual reduction in the equity cap beginning four years prior to the commencement of decommissioning by the percentage of each year's decommissioning expenditures to the total liability. The commission agrees that use of a weighted average remaining life is simpler and less controversial, and has adopted its use in (c)(2)(F). The commission prefers a periodic reduction in the equity cap to the annual reduction schedule presented by Entergy because a fixed schedule provides less flexibility than the proposed methodology. Market conditions and tax implications may make the timing of equity liquidations an important consideration, and a less rigid schedule may be preferable. After consideration of these additional comments, the commission has adopted two triggers for decreasing the equity allocation in the portfolio to 30%. These triggers are the liability's weighted average remaining life of the liability falling below five years and the expenditure of any funds for decommissioning of the units during the year. This requirement will reduce equity exposure at the end of the fund's life and during years of significant decommissioning outlays if they occur earlier in the fund's life. Further, the commission is requiring the equity allocation to drop to 0% during the last few years of decommissioning activities, when the weighted average remaining life falls below 2.5 years. The dual triggers allow utilities that have long investment periods following the decommissioning of the nuclear plant because of spent fuel storage to increase their equity allocation to 60% again once the decommissioning of the units is complete, until the weighted average remaining life falls below the five-year threshold. Question 2. TUEC and EGS commented that a S&P quality rating of B- or better would be an appropriate quality ranking for the equity portfolio; RCM and LCG commented that B or better would be appropriate. Phoenix said that B- is an appropriate screen for individual equity securities. LCG stated that checking the quarterly composite ranking of the portfolio would be very difficult and costly, while TUEC and RCM stated it would not be overly burdensome once the subscription to the rating service was acquired. Four of the other commenters stated that a quarterly quality check could be labor intensive and that it would depend on the size of the portfolio. CPL stated that the S&P quality rating was inappropriate to use as a screen for equity securities because it only considers some factors that drive stock price; instead, the company suggested that the trusts investments could be monitored by the commission through the filing of quarterly reports by the utilities. EPEC, Phoenix and HL&P stated that no quality screen was necessary because a minimum capitalization screen of $100 million was sufficient. EGS expressed concern that a quality rating would preclude investment in commingled funds. RCM requested that unranked securities be allowed for investment and be excluded from the quality ranking, if one is adopted. TUEC, LCG, RCM, and HL&P stated that the S&P ratings were better tools to measure the equity portfolio quality than bond ratings. LCG and TUEC stated that there are a number of quality ranking services, and RCM provided a comparison of S&P quality ratings to ratings by Ford Investor Service. Phoenix commented that Value Line ranks 3500 companies and is readily available, but would be labor intensive and could leave many stocks unranked. Several commenters stated that the ranking should be applied only to the portfolio, and not be used as a screen for individual securities. TUEC stated that the utility or investment manager should have the discretion to use the rating service they consider most useful. The commission recognizes that a properly managed and diversified equity portfolio will enhance return on decommissioning funds and reduce the contributions that must be made by ratepayers. Further, it also recognizes that equity holdings that carry the greatest potential returns also carry the greatest risk for loss of investment. The commission agrees with the commenters that there is not a perfect standard that will effectively screen equity investments for potential losses, and that many factors need to be evaluated to determine the appropriate portfolio of equity investments in addition to historical performance. However, it is the commission's preference that the bulk of the equity portfolio be invested in financially sound companies with a proven earnings and dividend record, even if this practice results in a reduced portfolio return. Therefore, the commission is revising the rule to require that at least 70% of the equity portfolio be ranked by a major rating service such as Standard and Poor's earnings and dividend ranking or Ford Investor Service's quality ranking on common stock, and that the composite ranking of the portfolio be checked quarterly and be maintained at a level equivalent to the composite rating of the S&P 500 index by the same rating service. The remaining 30% or less of the equity portfolio must be in the securities of companies with at least $100 million of capitalization. The commission does not believe that a quarterly monitoring of the equity portfolio quality is unduly burdensome. Question 3. All commenters stated that utilities should not be required to appoint an investment manager when the trust reaches a certain size even though all but one have external investment managers managing the entire portfolio. Phoenix submitted an excerpt from a FERC order on rehearing in Docket Number RM94-14- 001, which confirms that the funds under their jurisdiction must have external managers; and clarifies that the managers, rather than the utilities, must be the selector of mutual fund investments. Phoenix also stated that NRC regulations that require the decommissioning funds be "outside the licensee's administrative control" have been interpreted by most parties to be applicable to the trustee and management functions. EPEC stated that $20 million was an appropriate threshold for requiring an investment manager. The commission believes that all trusts assets should be managed by external managers, but is not proposing a modification to the rule at this time since all but one utility have already appointed external managers. This amendment is adopted under the Public Utility Regulatory Act, 75th Legislature, Regular Session, chapter 166, sec.1, 1997 Texas Session Law Service 732 (Vernon) (to be codified at Texas Utilities Code Annotated sec.14.002) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction. Cross Index to Statutes: Public Utility Regulatory Act sec.14.002. sec.23.59.Nuclear Decommissioning Trusts. (a) Duties of electric utilities. (1)-(2) (No change.) (3) The utility shall retain the right to replace the trustee with or without cause. In appointing a trustee, the electric utility shall have the following duties, which will be of a continuing nature: (A) A duty to determine whether the trustee's fee schedule for administering the trust is reasonable, when compared to other institutional trustees rendering similar services, and meets the requirement of subsection (c)(2)(A) of this section; (B)-(E) (No change.) (4) The utility shall retain the right to replace the investment manager with or without cause. In appointing an investment manager, the utility shall have the following duties, which will be of a continuing nature: (A) A duty to determine whether the investment manager's fee schedule for investment management services is reasonable, when compared to other such managers, and meets the requirement of paragraph (c)(2)(A) of this section; (B)-(E) (No change.) (b) Agreements between the electric utility and the institutional trustee or investment manager. (1) The utility shall execute an agreement with the institutional trustee. The agreement shall include the restrictions in subparagraphs (A) - (E) of this paragraph and may include additional restrictions on the trustee. An electric utility shall not grant the trustee powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations of this section. (A)-(D) (No change.) (E) The agreement shall comply with all applicable requirements of the Nuclear Regulatory Commission. (2) The utility shall execute an agreement with the investment manager. (If the trustee performs investment management functions, the contractual provisions governing those functions must be included in either the trust agreement or a separate investment management agreement.) The agreement shall include the restrictions set forth in subparagraphs (A) - (E) of this paragraph and may include additional restrictions on the manager. An electric utility shall not grant the manager powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations of this section. (A)-(D) (No change.) (E) The agreement shall comply with all applicable requirements of the Nuclear Regulatory Commission. (3)-(4) (No change.) (c) Trust investments. (1) Investment portfolio goals. The funds should be invested consistent with the following goals. The utility may apply additional prudent investment goals to the funds so long as they are not inconsistent with the stated goals of this subsection. (A) The funds should be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the trusts. (B) In keeping with prudent investment practices, the portfolio of securities held in the decommissioning trust shall be diversified to the extent reasonably feasible given the size of the trust. (C) Asset allocation and the acceptable risk level of the portfolio should take into account market conditions, the time horizon remaining before the commencement and completion of decommissioning, and the funding status of the trust. While maintaining an acceptable risk level consistent with the goal in subparagraph (A) of this paragraph, the investment emphasis when the remaining life of the liability, as defined in paragraph (2) (F)(iv) of this subsection, exceeds five years should be to maximize net long-term earnings. The investment emphasis in the remaining investment period of the trust should be on current income and the preservation of the fund's assets. (D) In selecting investments, the impact of the investment on the portfolio's volatility and expected return net of fees, commissions, expenses and taxes should be considered. (2) General requirements. The following requirements shall apply to all decommissioning trusts. Where a utility has multiple trusts for a single generating unit, the restrictions contained in this subsection apply to all trusts in the aggregate for that generating unit. For purposes of this section, a commingled fund is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency. (A) Fees limitation. The total trustee and investment manager fees paid on an annual basis by the utility for the entire portfolio including commingled funds shall not exceed 0.7% of the entire portfolio's average annual balance. (B) Diversification. For the purpose of this subparagraph, a commingled or mutual fund is not considered a security; rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including commingled funds) held in the decommissioning trust(s) contains securities with an aggregate value in excess of $20 million, it shall be diversified such that: (i) no more than 5.0 % of the securities held may be issued by one entity, with the exception of the Federal Government, its agencies and instrumentalities, and; (ii) the portfolio shall contain at least 20 different issues of securities. Municipal securities and real estate investments shall be diversified as to geographic region. (C) Qualified trusts. The utility may invest the decommissioning funds by means of qualified or unqualified nuclear decommissioning trusts; however, the utility shall, to the extent permitted by the Internal Revenue Service, invest its decommissioning funds in "qualified" nuclear decommissioning trusts, in accordance with the Internal Revenue Service Code sec.468A. (D) Derivatives. The use of derivative securities in the trust is limited to those whose purpose is to enhance returns of the trust without a corresponding increase in risk or to reduce risk of the portfolio. Derivatives may not be used to increase the value of the portfolio by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of Collateralized Mortgage Obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics. (E) The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for the trust is prohibited. (F) Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value. (i) Except as noted in clause (ii), when the weighted average remaining life of the liability exceeds five years, the equity cap is 60%; (ii) When the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be 30%. Additionally, during all years in which expenditures for decommissioning the nuclear units occur, the equity cap shall also be 30%; (iii) When the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be 0%; (iv) For purposes of this subparagraph, the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each decommissioning outlay, where the weights are based on each year's expected decommissioning expenditures divided by the amount of the remaining liability in that year; and (v) Should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the utility shall, as soon as practicable, reduce the market value of the non-fixed income investments below the cap. Such reductions may be accomplished by investing all future contributions to the fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities. (G) A decommissioning trust shall not invest in securities issued by the electric utility collecting the funds or any of its affiliates; however, investments of a decommissioning trust may include commingled funds that contain securities issued by the electric utility if the securities of the utility constitute no more than 5.0% of the fair market value of the assets of such commingled funds at the time of the investment. (3) Specific investment restrictions. The following restrictions shall apply to all decommissioning trusts. Where a utility has multiple trusts for a single generating unit, the restrictions contained in this subsection apply to all trusts in the aggregate for that generating unit. (A) Fixed-income investments. A decommissioning trust shall not invest trust funds in corporate or municipal debt securities that have a bond rating below investment grade (below "BBB-" by Standard and Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased and shall reexamine the appropriateness of continuing to hold a particular debt security if the debt rating of the company in question falls below investment grade at some time after the debt security has been purchased. Commingled funds may contain some below investment grade bonds; however, the overall portfolio of debt instruments shall have a quality level, measured quarterly, not below a "AA" grade by Standard and Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the Federal government shall be considered as having a "AAA" rating. (B) Equity investments. (i) At least 70% of the aggregate market value of the equity portfolio, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 index assuming equal weighting of each ranked security in the index. If the quality rating, measured quarterly, falls below the minimum quality standard, the utility shall as soon as practicable and prudent to do so, increase the quality level of the equity portfolio to the required level. (ii) A decommissioning trust shall not invest in equity securities where the issuer has a capitalization of less than $100 million. (C) Commingled funds. The following guidelines shall apply to the investments made through commingled funds. Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity- indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds. (i) The commingled funds should be selected consistent with the goals specified in paragraph (1) and the requirements in paragraph (2) of this subsection. (ii) In evaluating the appropriateness of a particular commingled fund, the utility has the following duties, which shall be of a continuing nature: (I) A duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) A duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) A duty to investigate the reasonableness of the net after-tax return and risk of the fund relative to similar funds, and the appropriateness of the fund within the entire decommissioning trust investment portfolio. (iii) The payment of load fees shall be avoided. (iv) Commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the trust's overall investment portfolio mix. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 20, 1997. TRD-9715632 Rhonda Dempsey Rules Coordinator Public Utility Commission of Texas Effective date: December 10, 1997 Proposal publication date: June 3, 1997 For further information, please call: (512) 936-7308 PART VIII. Texas Racing Commission CHAPTER 303.General Provisions SUBCHAPTER A.Organization of the Commission 16 TAC sec.303.2 The Texas Racing Commission adopts the repeal of sec.303.2, concerning the Commission sections without changes to the proposal text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10095). This repeal is necessary for the Commission's rules to be consistent with Texas Civil Statutes, Article 179e. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, the Commission's separate horse and greyhound sections were eliminated. This repeal is necessary for the Commission's rules to be consistent with applicable state law. No comments were received regarding the adoption of the proposal. The repeal is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.2.02, which specifies the make-up of the Commission. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715762 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 The Texas Racing Commission adopts a new sec.303.2, concerning the Commission responsibilities. The new section is adopted with changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10096). The new section is adopted to ensure that the Commission is complying with the legislative mandate in Texas Civil Statutes, Article 179e, sec.2.21 and the public will have notice of the specific policymaking responsibilities of the Commission. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, the Commission is required by rule to clearly separate the policymaking responsibilities of the Commission and the management responsibilities of the executive secretary, the chief executive officer of the agency. This new section sets out the policymaking responsibilities of the Commission. The changes from the proposed text clarify the Commission's role in supervising the implementation of policies and the actions of the executive secretary. No comments were received regarding the adoption of the proposal. The new section is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.2.21, which requires the Commission to adopt rules separating the policymaking responsibilities of the Commission from the management responsibilities of the executive secretary and staff. sec.303.2.Commission Responsibilities. (a) The commission shall formulate policy objectives for the agency and supervise the implementation of these policies and the actions of the executive secretary. The commission may approve/disapprove actions of the executive secretary on its own motion or on request of the executive secretary. (b) The commission shall propose, adopt, amend, and repeal rules as authorized or required by law, including under the Act and under Chapter 2001, Government Code. (c) The commission shall approve all operating plans required to be filed by law which are prospective in nature, such as legislative appropriation requests and the biennial strategic plan. (d) The commission shall issue all racetrack licenses and licenses to conduct race meetings. (e) The commission shall issue final orders and assess administrative penalties as authorized by law. (f) The commission may delegate any power or duty to a committee of its members or to the agency's executive secretary. The chair may establish a committee and appoint committee members in an open meeting. The chair may appoint committee members who are not members of the commission, but a committee of such members will be advisory only. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715763 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 16 TAC sec.303.7 The Texas Racing Commission adopts an amendment to sec.303.7, concerning Commission employees. This amendment is adopted without changes to the proposed text as published in the October 10, 1997 issue of the Texas Register (22 TexReg 10096). The amendment is adopted to ensure that the Commission's rules are consistent with applicable state law and that the Commission's employees and potential employees will have ample notice of possible disqualifications. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, the provisions relating to conflicts of interest for Commission employees were modified. This amendment brings the Commission rule regarding grounds for disqualification as a Commission employee into compliance with the new state law. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.2.12, which specifies the employment disqualifications applicable to Commission employees. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715764 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 16 TAC sec.303.8 The Texas Racing Commission adopts an amendment to sec.303.8, concerning the executive secretary. This amendment is adopted without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10097). The amendment is adopted to ensure that the Commission's rules are consistent with applicable state law and that the public will have notice of the specific management responsibilities of the executive secretary. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, the Commission is required by rule to clearly separate the policymaking responsibilities of the Commission and the management responsibilities of the executive secretary. This section sets out the management responsibilities of the executive secretary, the chief executive officer of the agency. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.2.21, which requires the Commission to adopt rules separating the policymaking responsibilities of the Commission from the management responsibilities of the executive secretary and staff. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715765 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 SUBCHAPTER B.Powers and Duties of the Commission 16 TAC sec.303.42 The Texas Racing Commission adopts an amendment to sec.303.42, concerning charity race days. This amendment is adopted without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10098). The amendment is adopted to ensure that the Commission's rules are clear and unambiguous and that charities designated for charity race days will receive the benefit of all wagering conducted at a licensed racetrack facility on that race day. The amendment clarifies the type of revenue that a licensed racetrack is to use in determining the amount to be paid to a charity for a charity race day. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.sec.8.02 and 10.01, which require licensed pari-mutuel racetracks to conduct charity race days and which authorize the Commission to adopt rules relating to the conduct of charity race days This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715766 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 SUBCHAPTER D.Texas Bred Incentive Program Programs for Greyhounds 16 TAC sec.303.101 The Texas Racing Commission adopts an amendment to sec.303.101, concerning the greyhound breed registry. This amendment is adopted without changes to the proposed text published in the October 10, 1997 issue of the Texas Register (22 TexReg 10098). This amendment is adopted to ensure that the legislative mandate in Texas Civil Statutes, Article 179e, sec.6.09(f) will be implemented and pari- mutuel racing will be humane for the racing animals. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, the Commission is required by rule to require the award of a grant to a person for the rehabilitation of greyhounds or to locate homes for greyhounds. The amendment implements that legislation by establishing the grant program and providing procedures for the awarding and reporting of the grants. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.6.09(f), which requires the Commission to adopt rules requiring the award of grants for the rehabilitation and relocation of retired greyhounds. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 20, 1997. TRD-9715767 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 CHAPTER 305.Licenses for Pari-mutuel Racing SUBCHAPTER A.General Provisions 16 TAC sec.305.5 The Texas Racing Commission adopts an amendment to sec.305.5, concerning fingerprints. This amendment is adopted with changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10099). This amendment is adopted to ensure that the legislative mandate in Texas Civil Statutes, Article 179e, sec.7.10 will be implemented and the licensing process for certain participants in pari-mutuel racing will be less burdensome without sacrificing the integrity of the Commission's regulatory responsibilities. The amendment establishes the criteria the Commission will use in determining which license applicants will not be required to submit fingerprints. The change from the proposed text corrects a typographical error. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.7.10, which authorizes the Commission to waive the fingerprinting requirements for any license applicant. sec.305.5.Fingerprints. (a) Except as otherwise provided by this section, an applicant for a license must submit a complete set of the applicant's fingerprints with the application documents. If the applicant is not an individual, the applicant must submit a complete set of fingerprints for each individual who: (1) serves as a director, officer, or partner of the applicant; (2) holds a beneficial ownership interest in the applicant of 5.0% or more; or (3) owns any interest in the applicant, if requested by the Department of Public Safety. (b)-(f) (No change.) (g) Waiver. (1) Pursuant to Texas Civil Statutes, Article 179e, sec.7.10, the commission will waive the fingerprint requirements in this section for an applicant for a license as a race animal owner or trainer if: (A) the individual presents proof of a valid owner or trainer license issued in a racing jurisdiction that requires the submission of fingerprints to the Federal Bureau of Investigation and the commission verifies that fingerprints were submitted by that jurisdiction for the applicant within the five years preceding the date of the application in Texas; and (B) the applicant's permanent residence is outside the State of Texas. (2) This subsection does not apply to an applicant who: (A) has a criminal history in another state, as revealed by a report by the Federal Bureau of Investigation or other reliable criminal information sources; (B) maintains a residence or is employed, whether self-employed or otherwise, in Texas; or (C) obtains a license badge issued by the commission which gives the applicant access to a restricted area on association grounds. (3) Notwithstanding a waiver of the fingerprint requirements under this subsection, the commission reserves the right, at its sole discretion, to require the submission of fingerprints after a license has been issued. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 20, 1997. TRD-9715768 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 16 TAC sec.305.7 The Texas Racing Commission adopts an amendment to sec.305.7, concerning the duration of pari-mutuel licenses. This amendment is adopted without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10100). This amendment is adopted to ensure that the legislative mandate in Texas Civil Statutes, Article 179e, sec.7.07 will be implemented and the licensing process for agency staff and for participants in pari-mutuel racing will be less burdensome, costly, and time-consuming. The amendment changes the expiration of occupational licenses from December 31 of each year to a 12-month revolving system. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.7.07, which authorizes the Commission to adopt a system under which licenses expire on various dates during the year. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715769 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 CHAPTER 309.Operation of Racetracks SUBCHAPTER A.General Provisions Facilities and Equipment 16 TAC sec.309.32 The Texas Racing Commission adopts an amendment to sec.309.32, concerning automatic banking machines. This amendment is adopted with changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10101). This amendment is adopted to ensure that the legislative mandate in Texas Civil Statutes, Article 179e, sec.11.04 will be implemented and patrons at pari-mutuel racetracks will have the convenience of automatic banking machines. The amendment eliminates the former prohibition against automatic banking machines and establishes a licensing process for vendors of the machines and accounting and auditing requirements for the deposit of the fee authorized by the legislation. The changes from the proposed text gives the Commission discretion in occupational licensing of the vendor representative and in setting payment dates. Comments from three companies were received regarding the adoption of the proposal. The Commission agreed with two of the company's suggestion that the executive secretary designate the representative from the ATM vendor to be occupationally licensed. Two companies also asked for a change in the date the statutory fees are payable to the Commission. The Commission's change gives that flexibility to the executive secretary to set a due date certain with each vendor. One company suggested changes to the maximum withdrawal amount. As the statute sets that amount, no modification was made. The Commission disagreed with the one company who suggested a change to the Commission's inspection of the vendor contract as that is an established procedure. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.11.04, which authorizes the Commission to adopt rules permitting the placement of automatic banking machines on the grounds of pari-mutuel racetracks. sec.309.32.Automatic Banking Machines. (a) Machines Permitted. An association may permit the placement of an automatic banking machine on association grounds only in accordance with this section. For purposes of this section, "automatic banking machine" means an electronic terminal, as that term is defined by Regulation E, Electronic Fund Transfers, 12 CFR 205. (b) Vendor. (1) If an association contracts with a vendor to provide an automatic banking machine, the contract is subject to inspection by the commission. The contract may not contain any provision that violates or is inconsistent with the Texas Racing Act or these rules. The association shall make the contract available to the commission on request. (2) A vendor of automatic banking machines for pari-mutuel racetracks must be licensed by the commission. If the vendor is not an individual, a designated representative of the vendor selected by the executive secretary officer must be licensed. (c) Configuration. An automatic banking machine placed on association grounds must be configured with the following restrictions: (1) A customer using the machine may withdraw funds only from his or her checking account at a bank or other financial institution. A customer may not use the machine to withdraw funds from a savings account. (2) A customer may withdraw no more than $200 per day per account. For purposes of this paragraph, a "day" is the 24-hour period beginning at 12:00 midnight. (3) For each transaction at a machine, a statutory fee of $1.00 must be withdrawn from the customer's account in addition to the amount delivered to the customer and any other fees authorized and imposed by the bank or other financial institution, by the association, or by the vendor. (4) Before the customer authorizes the transaction, the machine must display a screen that notifies the customer of the statutory fee and permits the customer to cancel the transaction. The notice must state the following or its equivalent: UNDER TEXAS RACING ACT, sec.11.04(e), A $1 FEE MUST BE COLLECTED ON EACH TRANSACTION AT THIS MACHINE FOR DEPOSIT INTO THE TEXAS STATE TREASURY. (d) Collection and Payment of Fee. (1) The association or vendor, if applicable, shall collect the statutory fee periodically and pay the total amount of the statutory fees collected during the preceding month to the commission not later than a date set by the executive secretary. Payment of the statutory fee must be made in accordance with procedures established by the executive secretary. (2) Failure to collect and pay the proper amounts for the statutory fee may result in disciplinary action against the association or vendor. (e) Records and Audit. (1) The association or vendor, if applicable, shall maintain complete records regarding all transactions conducted at each machine placed by the association or vendor on association grounds. The records must be maintained for at least three years after the date of the transaction. (2) The commission may audit the records at any time to ensure the proper collection and payment of the statutory fees. (f) Compliance with Other Laws. A machine placed on association grounds under this section must comply with all other applicable state and federal statutes and regulations. This section may not be construed to supersede any other state or federal statutes or regulations applicable to automatic banking machines. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 20, 1997. TRD-9715770 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 CHAPTER 313.Officials and Rules of Horse Racing SUBCHAPTER D.Running of the Race Jockeys 16 TAC sec.313.408 The Texas Racing Commission adopts an amendment to sec.313.408, concerning jockey agents. This amendment is adopted without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10102). This amendment allows jockey agents at quarter horse meets to represent the same number of riders as at thoroughbred or mixed meets. The amendment clarifies the requirements relating to the use of jockey agents during quarter horse race meetings. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.6.06, which authorizes the Commission to adopt rules relating to all aspects of the operation of pari-mutuel racetracks. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 20, 1997. TRD-9715771 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 CHAPTER 319.Veterinary Practices and Drug Testing SUBCHAPTER A.General Provisions 16 TAC sec.319.10 The Texas Racing Commission adopts an amendment to sec.319.10, concerning prohibited substances and devices. This amendment is adopted without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10102). This amendment is adopted to ensure that the legislative initiative in Texas Civil Statutes, Article 179e, sec.3.16 will be implemented and that pari-mutuel racing will be safe and humane for the racing animals and will be of the utmost integrity for the wagering public and the participants in the racing. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, the Commission's authority was clarified and restated with respect to prohibiting the possession of certain devices and substances at pari-mutuel racetracks. The amendment clarifies the types of substances and devices, such as hypodermic syringes, which are prohibited at a pari-mutuel racetrack and limits the prohibition for possession of such substances and devices to the restricted and secure areas of pari-mutuel racetracks. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.3.16, which authorizes the Commission to adopt rules prohibiting the unlawful influence of racing, including rules relating to the use of a prohibited device or prohibited substance at a racetrack. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715772 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 SUBCHAPTER D.Drug Testing Testing Procedures 16 TAC sec.319.336 The Texas Racing Commission adopts an amendment to sec.319.336, concerning the payment of drug testing costs. This amendment is adopted without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10103). This amendment is adopted to ensure that the legislative initiative in Texas Civil Statutes, Article 179e, sec.3.07(e) will be implemented and the costs of drug testing for race animals will be equitably borne by all pari-mutuel racetracks in the state. The Texas Racing Act was revised by sunset legislation effective September 1, 1997, and in that legislation, pari-mutuel racetracks are authorized to use the revenue from wagering vouchers to pay the costs of drug testing. The amendment implements that change and codifies a procedure by which the uncashed mutuel ticket revenue from all pari-mutuel racetracks may be pooled to pay the total cost of drug testing for all pari-mutuel racetracks. No comments were received regarding the adoption of the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the Commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.3.02(e), which authorizes pari-mutuel racetracks to use revenue from pari-mutuel vouchers to pay drug testing costs; and sec.6.06, which authorizes the Commission to adopt rules on all matters relating to the operation of pari-mutuel racetracks. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 20, 1997. TRD-9715773 Paula C. Flowerday General Counsel Texas Racing Commission Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 833-6699 TITLE 22. EXAMINING BOARDS PART III. Texas Board of Chiropractic Examiners CHAPTER 73. Licenses and Renewals 22 TAC sec.73.3 The Texas Board of Chiropractic Examiners adopts an amendment to sec.73.3(1)(B), concerning Continuing Education, with changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10228). The changes to the proposed text are changes in wording to state more clearly the intent of the amendment; no substantive changes are made. The amendment deletes the current yearly two-hour continuing education course which is presented by a board representative and required to be attended by licensees. The board intends to present a course only when it deems it necessary, such as when changes in state law or board rules or other circumstances make such a course desirable as a means of providing timely information or additional training to licensees. Under the new amendment, licensees will be required to complete a board course as part of their annual continuing education hours only if the board schedules a course for the upcoming calendar year. Other non-substantive changes in grammar were made for consistency in format. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 4512b, sec.4(c), sec.4a, which authorize the board to adopt rules necessary for performance of its duties, the regulation of the practice of chiropractic, and the enforcement of the Act, and sec.8b(c), which requires the board to adopt rules relating to mandatory continuing education. The following is the statute affected by the adopted amendment: Texas Civil Statutes, Article 4512b, sec.sec.4(c), 4a, 8b(c). sec.73.3. Continuing Education. A licensee is required to attend continuing education courses as a condition of renewal of a license. (1) Requirements. (A) (No change.) (B) The 16 hours of continuing education may be completed at any course or seminar elected by the licensee, which meets the criteria set forth in the Continuing Education guidelines of the Education Committee of the board. However, in any year in which the board schedules a course presented by a board representative, a licensee must attend the course, and it shall be counted as part of the 16-hour requirement. (C)-(D) (No change.) (2)-(3) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 18, 1997. TRD-9715514 Joyce Kershner Director of Licensure Texas Board of Chiropractic Examiners Effective date: December 8, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-6700 CHAPTER 79. Provisional Licensure 22 TAC sec.79.1 The Texas Board of Chiropractic Examiners adopts an amendment to sec.79.1(a), concerning Provisional Licensure, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10229) and will not be republished. Subsection (a)(3) provides that an applicant for a provisional license must not have failed a licensure exam conducted by the board. As amended, this restriction would apply only to an examination which an applicant failed within the last 10 years prior to application. The intent of this provision is to preclude an applicant for licensure under the Chiropractic Act, sec.10 who has failed a board examination from using the provisional licensure procedure to circumvent the requirements of sec.10. A 10-year prohibition, instead of the currently unlimited time constraint, reasonably fulfills the intent and purpose of subsection (a)(3). Other non-substantive changes in grammar were made for consistency in format. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 4512b, sec.4(c), sec.4a, which authorize the board to adopt rules necessary for performance of its duties, the regulation of the practice of chiropractic, and the enforcement of the act, and sec.9(c), which permits the board to grant a provisional license to eligible applicants. The following is the statute affected by the adopted amendment: Texas Civil Statutes, Article 4512b, sec.sec.4(c), 4a, 9(c). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 18, 1997. TRD-9715515 Joyce Kershner Director of Licensure Texas Board of Chiropractic Examiners Effective date: December 8, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-6700 PART VIII. Texas Appraiser Licensing and Certification Board CHAPTER 153. Provisions of the Texas Appraiser Licensing and Certification Act 22 TAC sec.153.5 The Texas Appraiser Licensing and Certification Board adopts an amendment to sec.153.5, concerning Fees, without changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9424). The text will not be republished. The Board adopted an amendment to sec.153.5(a)(6) relating to fees for temporary non-resident appraiser registration. The adopted amendment increases the fee for non-resident appraiser temporary registration from $50 to $75. No written comments were received regarding the adoption of the amendment. No oral comments were made at the October 23, 1997, meeting of the Texas Appraiser Licensing and Certification Board at which this amendment was considered and public comments were solicited. This amendment was adopted under the Texas Appraiser Licensing and Certification Act (Article 6573a.2, V.T.C.S.), sec.5(a)(6) which provides the Texas Appraiser Licensing and Certification Board with authority to establish reasonable fees to implement the Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715667 Renil C. Liner Commissioner Texas Appraiser Licensing and Certification Board Effective date: January 1, 1998 Proposal publication date: September 19, 1997 For further information, please call: (512) 465-3950 22 TAC sec.153.25 The Texas Appraiser Licensing and Certification Board adopts an amendment to sec.153.25, concerning Temporary Certification and Licensure, without changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9425). The text will not be republished. The Board adopted amendments to the section title of sec.153.25 from Temporary Certification and Licensure to Temporary Non-Resident Registration to more accurately reflect the terminology in use. The Board also adopted new sec.153.25(d) to provide for a 150 day extension of temporary non-resident registration for federally related transactions to comply with Policy Statement 5 from the Appraisal Subcommittee of the Federal Financial Institutions Examinations Council (FFIEC) as required by (federal) Title XI, Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA, 12 U.S.C. Section 3331, et seq.) The amendment also provides for an additional fee for the extension equal to the original temporary non-resident registration fee. No written comments were received regarding the adoption of the amendment. No oral comments were made at the October 23, 1997, meeting of the Texas Appraiser Licensing and Certification Board at which this amendment was considered and public comments were solicited. The amendment is adopted under the Texas Appraiser Licensing and Certification Act (Article 6573a.2, V.T.C.S.), sec.5, which provides the Texas Appraiser Licensing and Certification Board with authority to adopt rules for the licensing and certification of real estate appraisers which are consistent with, but no more stringent than, applicable federal law and to establish reasonable fees. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715666 Renil C. Liner Commissioner Texas Appraiser Licensing and Certification Board Effective date: January 1, 1998 Proposal publication date: September 19, 1997 For further information, please call: (512) 465-3950 PART XVIII. Texas State Board of Podiatric Medical Examiners CHAPTER 379. Fees 22 TAC sec.379.1 The Texas State Board of Podiatric Medical Examiners adopts an amendment to sec.379.1, concerning Fees and License Renewal, without changes to the proposed text as published in the October 3, 1997, issue of the Texas Register (22 TexReg 9797). The text will not be republished. The rule is being amended to include new charges for continuing medical education printouts and duplicate certificates. The amendment will add a charge of $5.00 for a copy of the doctors' CME printout and a charge of $10.00 for a duplicate certificate. No comments were received regarding adoption of the amendments. The amendment is adopted under Texas Civil Statutes, Article 4568(j), which provides the Texas State Board of Podiatric Medical Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by-laws not inconsistent with the law regulating the practice of podiatric medicine, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatric medicine, and the enforcement of the law regulating the practice of podiatric medicine. The adopted amendment implements the Podiatric Medical Practice Act, Articles 4571 and 4574. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 18, 1997. TRD-9715539 Janie Alonzo Staff Services Officer I Texas State Board of Podiatric Medical Examiners Effective date: December 9, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 305-7000 CHAPTER 382. Podiatric Medical Technicians 22 TAC sec.382.1 The Texas State Board of Podiatric Medical Examiners adopts a repeal of sec.382.1, concerning Podiatric Medical Technicians, without changes to the proposed text as published in the August 19, 1997, issue of the Texas Register (22 TexReg 7984). The rule is being repealed due to changes in the Texas Department of Health rules for persons performing radiologic procedures. The repeal will allow us to adopt new rules that follow the new Texas Department of Health rules. No comments were received regarding adoption of the repeal. The repeal is adopted under Texas Civil Statutes, Article 4568(j), which provides the Texas State Board of Podiatric Medical Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by- laws not inconsistent with the law regulating the practice of podiatric medicine, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatric medicine, and the enforcement of the law regulating the practice of podiatric medicine. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 18, 1997. TRD-9715540 Janie Alonzo Staff Services Officer I Texas State Board of Podiatric Medical Examiners Effective date: December 31, 1997 Proposal publication date: August 19, 1997 For further information, please call: (512) 305-7000 22 TAC sec.sec.382.1-382.6 The Texas State Board of Podiatric Medical Examiners adopts new sec.sec.382.1- 382.6, concerning Podiatric Medical Radiologic Technicians. Section 382.2 is adopted with changes to the proposed text as published in the August 19, 1997, issue of the Texas Register (22 TexReg 7982). The change is a date correction in sec.382.2(A), which was listed as January 1, 1988 and should have been January 1, 1998. Sections 382.1 and 382.3-382.6 are adopted without changes and will not be republished. The new rules are being adopted to allow for the changes in the Texas Department of Health rules for persons performing radiologic procedures. The new rules set out the guidelines for registering to take x-rays in a podiatric physicians' office. No comments were received regarding adoption of the new rules. The new rules are adopted under Texas Civil Statutes, Article 4568(j), which provides the Texas State Board of Podiatric Medical Examiners with the authority to adopt all reasonable or necessary rules, regulations, and by-laws not inconsistent with the law regulating the practice of podiatric medicine, the laws of this state, or of the United States; to govern its proceedings and activities, the regulation of the practice of podiatric medicine, and the enforcement of the law regulating the practice of podiatric medicine. sec.382.2. Definitions. The following words or terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise: Board - The Texas State Board of Podiatric Medical Examiners. CME - continuing medical education. Non-certified podiatric medical technician or registrant - A person who: (A) has completed a training program approved by the Texas Department of Health and the Board by January 1, 1998; however, if the person is employed after January 1, 1998, the training program approved by the TDH and the Board shall be completed prior to the person performing podiatric radiological procedures for any podiatric medical purpose; (B) is registered with the Board. Supervision - Responsibility for the control of quality, radiation safety and protection, and technical aspects of the application of ionizing radiation to the foot and ankle for production of standard radiographs utilized in podiatric medicine for diagnostic purposes. TDH - The Texas Department of Health. TRCR - Texas Regulations for Control of Radiation, 25 TAC, Chapter 289. The regulations are available from the Standards Branch, Bureau of Radiation Control, Texas Department of Health or from the Board office. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 18, 1997. TRD-9715541 Janie Alonzo Staff Services Officer I Texas State Board of Podiatric Medical Examiners Effective date: January 1, 1998 Proposal publication date: August 19, 1997 For further information, please call: (512) 305-7000 PART XXII. Texas State Board of Public Accountancy CHAPTER 501. Professional Conduct Professional Practices 22 TAC sec.501.11 The Texas State Board of Public Accountancy adopts an amendment to sec.501.11, concerning Independence, with changes to the proposed text as published in the August 12, 1997, issue of the Texas Register, (22 TexReg 7459). The change is the deletion of subparagraph (C) because it duplicates information in subsection (b)(4)(A)(iv)(III). The amendment allows for a clear understanding by consumers, CPAs and clients that supervising a CPA applicant under sec.511.124 (relating to Acceptable Supervision) may impair the CPAs independence. The amendment to sec.501.11 will function by stating that a CPA's independence may be impaired if the CPA is supervising an individual pursuant to sec.511.124 (relating to Acceptable Supervision). No comments were received concerning adoption of the rule. The rule is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law. sec.501.11. Independence. (a) A certificate or registration holder who is performing an engagement in which the certificate or registration holder will issue a report on financial statements of any client (other than a report in which lack of independence is disclosed) must be independent with respect to the client in fact and in appearance. (b) Independence will be considered to be impaired if, for example, during the period of his professional engagement or at the time of expressing an opinion, the certificate or registration holder: (1) had or was committed to acquire any direct or material indirect financial interest in the client; (2) was a trustee of any trust or executor or administrator of any estate if such trust or estate had or was committed to acquire any direct or material indirect financial interest in the client; (3) had any joint closely-held business investment with the client or any officer, director, partner, or principal stockholder thereof which was material in relation to the net worth of the certificate or registration holder; or (4) had any loan to or from the client or any officer, director, partner, or principal stockholder thereof other than certain "grandfathered loans" and "other permitted loans" which will not be considered to impair independence. (A) Grandfathered loans - Loans from a financial institution made under that institution's normal lending procedures, terms, and requirements, and that meet the other specified conditions stated herein. Grandfathered loans must, at all times, be current as to all terms and such terms shall not be renegotiated after the latest of the dates in clauses (i)-(iv) of this subparagraph. Grandfathered loans include those which: (i) existed as of January 1, 1997; (ii) were obtained from a financial institution prior to its becoming a client requiring independence; (iii) were obtained from a financial institution for which independence was not required and that were later sold to a client for which independence is required; or (iv) were obtained from a firm's financial institution client requiring independence, by a borrower prior to his or her becoming a member of the firm or registration holder, such as: (I) loans obtained by the certificate or registration holder which are not material to the net worth of the borrower; (II) home mortgages; and (III) other secured loans in which the collateral must equal or exceed the remaining balance of the loan at January 1, 1997, and at all times thereafter. (B) Other permitted loans - Personal loans obtained from a financial institution client from which independence is required which were made under that institution's normal lending procedures, terms and requirements. Such loans must, at all times, be kept current as to all terms. Other permitted loans include: (i) automobile loans and leases collateralized by the automobile; (ii) loans of the surrender value under terms of an insurance policy; (iii) loans fully collateralized by cash deposits at the same financial institution; and (iv) credit cards and cash advances on checking accounts with an aggregate balance not paid currently of $5,000 or less. (c) Independence also will be considered to be impaired if, during the period covered by the financial statements, during the period of the professional engagement, or at the time of issuing his report, the certificate or registration holder: (1) was connected with the client as a promoter, underwriter, or voting trustee, a director or officer, or in any capacity equivalent to that of a member of management or of any employee; (2) was a trustee for any pension or profit-sharing trust of the client; (3) receives from a third party, or had a commitment to receive from the client or third party, with respect to services or products procured or to be procured by the client, other compensation which was material in relation to the aggregate normally-recurring fees charged annually to the client for reports on financial statements; (4) had a commitment from the client for a contingent fee in violation of sec.501.15 of this title (relating to Services for Fees); or (5) had an engagement to provide for the supervision of an individual as provided for in sec.511.124(a)(1) of this title (relating to Acceptable Supervision). (d) Independence will be presumed to be impaired if the certificate or registration holder performs audit services, other than for charitable organizations, for a fee that is less than the direct labor cost reasonably expected, at the time the engagement was accepted, to be incurred in performing such services. For this purpose direct labor costs means the total compensation of the person or persons expected to perform the service for the time they are expected to serve on the audit plus all payroll expenses related to such compensation. (e) A certificate or registration holder's independence may be impaired by a close relative's association with a client. Close relatives are defined as spouses and dependent persons, whether or not related, and defined as dependent and non-dependent children, grandchildren, stepchildren, brothers, sisters, parents, grandparents, parents-in-law, and their respective spouses. (1) Certificate and registration holders must consider whether the strength of personal and business relationships between the certificate or registration holder and the close relative would lead a reasonable person who is aware of all the facts to conclude that the situation poses an unacceptable threat to the certificate or registration holder's objectivity and appearance of independence. In reaching this conclusion, the certificate or registration holder should consider the specific association with the client. (2) A certificate or registration holder's independence will be presumed to be impaired with respect to a client if: (A) during the period of the professional engagement or at the time of expressing an opinion, the certificate or registration holder participating in the engagement has knowledge of a close relative who has a material financial interest in the client; (B) during the period covered by the financial statements, during the period of the professional engagement, or at the time of expressing an opinion: (i) the certificate or registration holder participating in the engagement has a close relative who could exercise significant influence over the operative, financial, or accounting policies of the client or is otherwise employed in a position in which the close relative's activities are normally an element of or subject to significant internal accounting controls; (ii) a proprietor, shareholder, or individual in a managerial position in a certificate or registration holder's office, has a close relative who could exercise significant influence over the client's operating, financial, or accounting policies, if that proprietor, shareholder or individual participates in a significant portion of the engagement. (f) The examples of impaired independence described in subsections (b) - (e) of this section are not intended to be all-inclusive. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1997. TRD-9715686 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 11, 1997 Proposal publication date: August 12, 1997 For further information, please call: (512) 305-7800 General Provisions 22 TAC sec.501.40 The Texas State Board of Public Accountancy adopts an amendment to sec.501.40, concerning Registration Requirements, without changes to the proposed text as published in the September 26, 1997, issue of the Texas Register, (22 TexReg 9594). The amendment allows for the recognition and exemption of the situation where a CPA who is a full-time employee of a law firm prepares income tax returns for the law firm's clients in connection with the law firm's practice of law, removes certain language as may be required by Miller v. Stuart (11 Cir. 1997) and corrects the spelling of "insured." The amendment to sec.501.40 will function by complying with an appellate court's opinion, by having a clearer understanding of the registration exemption for CPA employees of law firms and by correcting the spelling of "insured." No comments were received concerning adoption of the rule. The rule is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law and Miller v. Stuart (11 Cir. 1997). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1997. TRD-9715687 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 11, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 305-7800 22 TAC sec.501.43 The Texas State Board of Public Accountancy adopts an amendment to sec.501.43, concerning Advertising, without changes to the proposed text as published in the September 26, 1997, issue of the Texas Register (22 TexReg 9594). The amendment allows for the relocating of the word "improperly" to a more logical location. The amendment to sec.501.43 will function by relocating the word "improperly" to a more logical location. No comments were received concerning adoption of the rule. The rule is adopted under Texas Civil Statutes, Article 41a-1, sec. 6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1997. TRD-9715688 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 11, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 305-7800 CHAPTER 511. Certification as a CPA General Information 22 TAC sec.511.57 The Texas State Board of Public Accountancy adopts an amendment to sec.511.57, concerning Definition of Accounting Courses, without changes to the proposed text published in the October 3, 1997, issue of the Texas Register (22 TexReg 9797). The amendment allows for the elimination of elementary accounting as an accounting core course, changes the income tax accounting course semester hours into a total divisible by 3, consolidates two references to internships into one reference, explains that the knowledge to be gained should be accounting knowledge, states what the employer should be providing for the student in an internship program, and renumbers the subsections due to the elimination of former subsection 1(A). The amendment to sec.511.57 will function by more accurately stating what the board expects its applicants to have received from their accounting core courses and internships. No comments were received concerning adoption of the rule. The rule is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law and sec.12 which authorizes the board to establish by rule the education and experience requirements for applicants. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1997. TRD-9715690 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 305-7800 CHAPTER 521. Fee Schedule 22 TAC sec.521.1 The Texas State Board of Public Accountancy adopts an amendment to sec.521.1, concerning License Fees, without changes to the proposed text as published in the September 26, 1997, issue of the Texas Register (22 TexReg 9595). The amendment allows practice unit registration fees to be increased to cover increased expenditures as required by Rider 5 of the Board's current appropriations. The amendment to sec.521.1 will function by increasing the practice unit registration fee to $40 effective with the 1998 license. The Board received comments from three CPA firms. All three opposed the method by which the fee increase would be applied to practice units. Two commenters said the fee increase was unfair to small CPA firms because they would pay the same license fee amount as large CPA firms, and because the fee increase would not apply to those CPAs who are employed in industry. The third commenter said the Board was treating CPAs who are not engaged in public practice as inferior to those CPAs who are engaged in public practice and wanted to know why the board was making this distinction. The board considered all three comments and did not make any changes to the proposed rule as a result of the comments. In response to all three commenters: First, it will be more cost effective for the board to assess and collect a $15 a year fee increase from approximately 10,200 practice units once a year, at year end. It would be more expensive for the board to assess and collect a $5 a year fee increase from approximately 52,400 individual CPAs throughout a year, at their respective birth month re- licensing. Secondly, many CPA firms pay the license fees for their CPA owners and employees. It would be more expensive for any CPA firm with more than three CPAs on staff to pay $5 for each individual CPA licensee than it would be for the firm to pay a flat $15 per year fee increase. In response to the third commenter: When the Legislature enacted the $200 professional fee increase, the fee increase applied to sixty percent of the CPAs who are not engaged in the public practice of accountancy. The rule is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law and Rider 5 to the board's current appropriations, HB1, 75th Legislature. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1997. TRD-9715689 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: December 11, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 305-7800 TITLE 25. HEALTH SERVICES PART I. Texas Department of Health CHAPTER 31.Nutrition Services 25 TAC sec.31.1 The Texas Department of Health (department), by majority vote of the Texas Board of Health (board) on November 21, 1997, enters this order finally adopting under federal mandate an amendment to sec.31.1, concerning the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Section 31.1(b) adopts by reference the Fiscal Year 1998 WIC State Plan of Operations. Section 31.1(c) adopts by reference the WIC Policy and Procedure Manual. Federal regulations at 7 CFR, Part 246, require the United States Department of Agriculture (USDA) to approve an annual update of the WIC State Plan of Operations. The amendment to sec.31.1(b) covers the annual update for the fiscal year 1998, which was approved by the USDA effective October 1, 1997. The 1998 update covers the state agency's goals and objectives for improving program operations; the affirmative action plan; and local agency identification - WIC project information. The amendments to the WIC Policy and Procedure Manual cover new and revised USDA policies, which became effective when the federal regulations and federal circulars became effective, and are incorporated into policies that were approved by USDA. The latest federal requirements which are being incorporated into the WIC Policy and Procedure Manual by the amendments to sec.31.1(c) cover residency as a certification requirement; disposition of "voided" and "destroyed" food vouchers; vendor abuse; and access to appointments. The amendment is adopted under federal mandate for the following reasons. Under federal and state law (the Child Nutrition Act of 1966, as amended, 42 U.S.C.A. sec.1786, and the Omnibus Hunger Act of 1985, Acts 1985, 69th Legislature, Chapter 150, Title II), the WIC Program is 99% federally funded and governed by federal regulations. Funds are made available to the department by a federal grant. The federal statute (42 U.S.C.A. sec.1786), federal regulations (7 CFR, Part 246), and the federal grant (Federal-State Special Supplemental Food Program Agreement) authorize the USDA to make the funds available to the department to administer the WIC Program in the State of Texas, provided that the department administers the program in accordance with the federal regulations. The amendment is adopted under Health and Safety Code, sec.12.001(b), which provides the Texas Board of Health (board) with authority to adopt rules for the performance of every duty imposed by law upon the board, the department, and the commissioner of health. sec.31.1.Special Supplemental Food Program for Women, Infants, and Children (WIC). (a) (No change.) (b) WIC State Plan of Operations. (1) The department adopts by reference the publication titled "WIC State Plan of Operations", as amended effective October 1, 1997. This plan has been developed by the department's WIC Program and approved by the United States Department of Agriculture. (2) (No change.) (c) WIC Policy and Procedure Manual. (1) The department adopts by reference the publication titled "WIC Policy and Procedure Manual," which the department developed, as amended effective October 1, 1997. This policy and procedure manual has been developed by the department's WIC Program and approved by the United States Department of Agriculture. (2) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715753 Susan K. Steeg General Counsel Texas Department of Health Effective date: October 1, 1997 Proposal publication date: N/A For further information, please call: (512) 458-7236 CHAPTER 97.Communicable Diseases Tuberculosis Screening for Jails and Other Correctional Facilities 25 TAC sec.sec.97.171, 97.173, 97.177, 97.178, 97.190, 97.191 The Texas Department of Health (department), by majority vote of the Texas Board of Health (board) on November 21, 1997 enters this order finally adopting amendments to sec.sec.97.171, 97.173, 97.177, 97.178, 97.190, and new sec.97.191 concerning the screening and treatment for tuberculosis (TB) in jails and other correctional facilities without changes to the proposed text as published in the September 26, 1997, issue of the Texas Register (22 TexReg 9598). Specifically, these amendments and new section are required by Chapter 89, Texas Health and Safety Code, which was revised by Chapter 348 (Senate Bill 939) 75th Legislature, Regular Session, and to clarify and improve reporting of treatment of TB in these facilities. An amendment to sec.97.171 reflects the enlarged scope of the law and coverage of additional correctional facilities. An amendment to sec.97.173 reflects the decreased length of confinement before the law requires screening. An amendment to sec.97.177 requires the isolation of symptomatic inmates in TB respiratory isolation facilities. An amendment to sec.97.178 reflects the use of a more detailed reporting form for reporting TB to the department. An amendment to sec.97.190 reflects the effective date of the new law. New sec.97.191 restates the requirement of Texas Health and Safety Code, sec.89.102, that the department be notified when an inmate who is receiving treatment for TB is released. No comments were received regarding adoption of the amendments and new section. The amendments and new section are proposed under Texas Health and Safety Code, sec.89.073 which require the Board of Health to adopt substantive rules to govern the submission of facility standards. Rules on communicable disease are also authorized by the Texas Health and Safety Code, sec.81.004; and sec.12.001, which provides the Texas Board of Health (board) with the authority to adopt rules for the performance of every duty imposed by law on the board, the department, and the commissioner of health. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715754 Susan K. Steeg General Counsel Texas Department of Health Effective date: December 15, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 458-7236 CHAPTER 143.Medical Radiologic Technologists 25 TAC sec.143.19 The Texas Department of Health (department), by majority vote of the Texas Board of Health (board) on November 21, 1997, enters this order finally adopting an amendment to sec.143.19, concerning the regulation of persons performing radiological procedures, with changes to the proposed text as published in the September 26, 1997, issue of the Texas Register (22 TexReg 9605), as a result of comments received during the 30-day comment period. The amendment will implement Chapter 613 (House Bill 1200), 74th Legislature, 1995, which amended the Medical Radiologic Technologists Certification Act, Texas Civil Statutes, Article 4512m. BACKGROUND. The amendments to Article 4512m created by House Bill 1200 are relevant in three ways. First, a class of registrants was created which, though having less training or education than "certified" radiologic technologists, are nonetheless authorized to perform certain radiologic procedures deemed not dangerous or hazardous. The department was charged with determining the mandatory training a registrant is required to have to perform a particular radiologic procedure, and it has done so with the help of a nine-member Medical Radiologic Technologist Advisory Committee (Advisory Committee). Second, however, several hardship exemptions were created by which practitioners, hospitals, and certain qualified health centers may avoid having to hire trained registrants or certified technologists. One hardship exemption, for example, exempts a practitioner, hospital or health center that "reports an inability to attract and retain medical radiologic technologists." Another exemption is available if schools of radiologic technology "produce an insufficient number of graduates in medical radiologic technology to meet the needs" of the practitioner, hospital or health center. There is an inherent tension in Article 4512m. To the extent the amount of training required by the department is perceived by practitioners, hospitals, or health centers as excessive, hardship exemptions may be sought. To the extent hardship exemptions are sought and obtained, persons may perform radiologic procedures without any training. Third, the effective date at issue is January 1, 1998. Prior to January 1, 1998, a person is not required to have the training approved by the department in order to perform a radiologic procedure. Conversely, as of January 1, 1998, a person may not perform a radiologic procedure without having completed the department approved training for that procedure. The last scheduled opportunity for action by the department, which adopts rules through its board, is November 21, 1997. PROPOSED AMENDMENTS AND MEDICAL RADIOLOGIC TECHNOLOGIST AD HOC COMMITTEE ON TRAINING (AD HOC COMMITTEE). In this context, the Advisory Committee met in August 1997. It appeared that very few of the non-certified persons currently performing radiologic procedures for practitioners, hospitals, or health centers had received the department approved training or were enrolled in approved training programs. Indeed, one estimate is that only 125 of approximately 2500 non-certified persons currently performing radiologic procedures for practitioners, hospitals, or health centers had received department approved training. The Advisory Committee took two major actions in August. First, it recommended a new hardship exemption (as is authorized by Article 4512m, sec.2.05(j)(5)) by which practitioners, hospitals, and health centers could employ non-trained persons to perform radiologic procedures so long as that person was enrolled in a department approved training program by December 31, 1997, and completed the training program by December 31, 1998. This hardship exemption was approved by the department for proposal and was published in the Texas Register in September. It is necessary to allow the estimated 2500 non-certified and non- trained persons currently performing radiologic procedures for practitioners, hospitals, and health centers to continue their work while completing their training over the next year, without the necessity of the practitioner, hospital, or health center applying for a blanket hardship exemption that would allow untrained persons to continue performing radiologic procedures without enrolling in a training program. (In addition, a training course including four hours of radiation safety and protection provided by the International Society for Clinical Densitometry (ISCD) was recommended and approved as training for an existing hardship exemption limited to persons performing bone densitometry, as were minor rule changes to correct cross-references and for clarification). Second, the Ad Hoc Committee, composed of Susan Scott, representing the Texas Academy of Physician Assistants; Susan Jones, representing the Texas Hospital Association; Stephanie Tabone, representing the Texas Nurses Association, Alfred Gilchrist representing the Texas Medical Association; Teresa Rice, representing the Texas Society of Radiologic Technologists; Marilyn Sackett, representing training programs, Troy Alexander representing the Texas Academy of Family Physicians, Joe Martin, representing the Texas Podiatric Medical Association; N. Dombrowsky, representing Chiropractors, and Marie Racine, representing the Advisory Committee, was formed. The Ad Hoc Committee met August 16, 1997, September 3, and 30, 1997, and October 13, 1997, to reach consensus on recommendations to the Advisory Committee regarding the training approved by the department for non-certified technicians, and to address the approaching January 1, 1998, deadline. COMMENTS. No comments were received concerning the new hardship exemption by which an applicant may employ a non-trained person enrolled in a department approved training program on or before December 31, 1997. This exemption is necessary for the orderly transition from the current situation (training not required), to the new situation (training required). It will avoid undue numbers of "general" hardship exemptions being filed by practitioners, hospitals, and health centers and by which untrained persons would be allowed to continue performing radiologic procedures. Three favorable comments were received concerning the ISCD approved training relating to the existing hardship exemption limited to those persons performing bone densitometry. The training course provided by the ISCD is sufficient training for the hardship exemption limited to bone densitometry. In sum, the goal of protecting Texans from the harmful effects of excessive radiation in medical procedures is best met by adopting this new exemption and amending the bone densitometry exemption. Written and oral comments relating to a new hardship exemption were submitted by the Ad Hoc Committee to the Rules Subcommittee of the Advisory Committee (Rules Subcommittee), at its meeting held on October 17, 1997, and to the Advisory Committee as a whole at its meeting on October 18, 1997. In summary, the comments were (1) that over 2500 non-certified and non-trained persons currently perform radiologic procedures under the direction of practitioners, hospitals, or health centers; (2) that only approximately 125 persons have completed the department approved training to date; (3) that such non-certified and non- trained persons safely and competently perform radiologic procedures and have done so for the many years radiologic procedures have existed without certification or department approved training; (4) that many states which do require certification or training provide a method of registration or approval to perform radiologic procedures for persons who pass an examination; and (5) that for a person with one year experience and four hours of study in radiation safety, an unscaled score of 55 on the core section of the limited certification examination covering radiation protection, radiographic equipment operating and maintenance, image production and evaluation, and patient care and management is sufficient to warrant registration of that person as if having completed the department approved training. Some commenters believed the passing score should be set at 60, while some commenters were entirely opposed to testing as a substitute for training. The Rules Subcommittee and the Advisory Committee agreed with the comments of the Ad Hoc Committee, and many of the comments made by those in opposition. On balance, the comments calling for an additional hardship exemption by which testing substitutes for training appears warranted, as set forth below. ADDITIONAL HARDSHIP EXEMPTION. The Ad Hoc Committee requested that an additional hardship exemption be adopted to act in conjunction with the hardship exemption originally proposed. This exemption allows a practitioner, hospital, or health center to file for a hardship exemption by which they may employ persons who (1) have one year experience performing radiologic procedures between January 1, 1993, and July 1, 1998; (2) have completed or will complete prior to examination application four hours of study in radiation safety; and (3) will, in lieu of training, pass the core section of the limited certification examination with an unscaled score of 55, on or before July 22, 1999. A person will be allowed to take the examination no more than three times. A person passing the examination will be placed on the registry of the department as if trained. A person failing the examination a third time will no longer be able to perform radiologic procedures without completing a department approved training program or coming within another exemption. RESPONSE. The Rules Subcommittee considered and approved the recommendation of this exemption on October 17, 1997. The Advisory Committee considered and approved the recommendation of this exemption at its meeting on October 18, 1997. Given the comments received regarding the experience of other states with competency tests, it appears that a competency test is a viable alternative to training. Again, given the existence of general hardship exemptions, and the probability that such exemptions may be sought by practitioners, hospitals, and health centers, adopting this hardship exemption is warranted. Under this exemption, persons performing radiologic procedures will have (1) one year experience performing radiologic procedures; (2) will have completed or will complete prior to examination application four hours of radiation safety; and (3) will be in the process of preparing for and taking the limited certification examination. Under a general exemption, an unexperienced, non-trained person, unconcerned about preparing to pass an examination, may continue to perform radiologic procedures. The purpose of protecting Texans from the harmful effects of excessive radiation in medical procedures is served by adoption of the hardship exemption proposed by the Ad Hoc Committee and recommended by the Advisory Committee. The department agrees and subparagraph L has been added to sec.143.19(c)(4) to include this hardship exemption. ADDITIONAL COMMENTS AND RESPONSE: Additional comments were received after October 18, 1997, from the Texas Hospital Association and Texas Medical Association relating to when the four hour radiation safety course must be completed. The department agrees that a person may complete the four hour course of study in radiation safety and protection at anytime prior to July 31, 1999 and pass the core section of the limited certificate examination prior to placement on the department's registry of NCTs. Appropriate language has been added to sec.143.19(c)(4)(L). The amendment is adopted under the Medical Radiologic Technologist Certification Act, Texas Civil Statutes, Article 4512m, sec.2.05(e) which provide the Texas Board of Health (board) with the authority to adopt rules necessary to implement the Act; sec.2.05(a)(4) concerning establishment of a registry; sec.2.05(b) concerning establishment of different classes of certificates to include all radiologic procedures, sec.2.05(j) concerning hardship criteria determined by department rules; and the Texas Health and Safety Code sec.12.001, which provides the board with the authority to adopt rules for the performance of every duty imposed by law on the board, the department, and the commissioner of health. sec.143.19.Hardship Exemptions. (a) - (b) (No change.) (c) Required application materials. (1) - (3) (No change.) (4) The application shall be accompanied by one or more of the following: (A) - (F) (No change.) (G) if the equipment operated is a bone densitometry unit(s) which utilizes x- radiation, a sworn affidavit from the applicant indicating the name of the person operating the equipment and proof that the person is a certified densitometry technologist in good standing with the International Society for Clinical Densitometry (ISCD) or has completed at least 20 hours of training as follows: (i) - (ii) (No change.) (H) (No change.) (I) if the applicant employs, for the purpose of performing radiologic procedures, a person registered in accordance with rules adopted under sec.2.08 of the Act on or before January 1, 1998, a sworn affidavit indicating the name(s) of the person(s) and proof that the person(s) was registered on or before January 1, 1998. Such affidavit shall be on a form attesting that the training under sec.143.17 of this title (relating to Mandatory Training Programs for Non-Certified Technicians) or sec.143.20 of this title (relating to Alternate Training Requirements) causes a fiscal hardship for the applicant. The affidavit shall include a statement that the person(s) performing radiologic procedures is adequately supervised and trained for the procedures being performed. If the applicant is a practitioner or FQHC, the person who will perform radiologic procedures must be registered in accordance with rules adopted under sec.2.08 of the Act at the time of application for the hardship exemption. If the person who will perform radiologic procedures is not an RN, the name of the practitioner for whom the radiologic procedures are performed, as named on the current registration permit, shall match the name or location of the applicant for whom the hardship is granted; (J) if the applicant is a hospital accredited by the Joint Commission on the Accreditation of Health Care Organizations or which participates in the federal Medicare cost reimbursement program, an original letter on hospital letterhead stating the name(s) of the person(s) performing radiologic procedures in compliance with sec.2.07(d) of the Act on or before January 1, 1998. The letter shall be accompanied by a sworn affidavit from the applicant attesting that the training under sec.143.17 or sec.143.20 of this title causes a fiscal hardship for the applicant. The affidavit shall include a statement that the person(s) performing radiologic procedures is adequately supervised and trained for the procedures being performed; (K) if the applicant employs for the purpose of performing radiologic procedures, a person enrolled on or before December 31, 1997, in a training program approved by the department under sec.143.17 of this title or sec.143.20 of this title. Applications under this hardship postmarked after October 31, 1998, will not be processed. This subparagraph and all letters of exemption issued under this subparagraph shall expire on December 31, 1998. The following items must be submitted: (i) a sworn affidavit indicating the name(s) of the person(s) enrolled in training on or before December 31, 1997, and attending classes at the time of application; (ii) an original verification statement from a department approved training program indicating that the person(s) named in the hardship application was enrolled on or before December 31, 1997, and was currently attending classes. The enrollment and attendance verification must be dated within 15 days of the date of application under this section to the department; and (iii) proof that the person(s) was registered in accordance with rules adopted under sec.2.08 of the Act at the time of enrollment or at the time of application under this section, if the applicant is a practitioner or FQHC; or (L) if the applicant employs for the purpose of performing radiologic procedures, a person who had at least one year of experience performing radiologic procedures and who, by July 31, 1999, has completed four hours of study in radiation safety and protection in a program approved by the department under sec.143.9 of this title, sec.143.11 of this title (relating to Continuing Education Requirements), sec.143.17 of this title, or sec.143.20 of this title, or provided by a person who meets the requirements of sec.143.9(h)(1)-(2) of this title, excluding the phrase, "the subjects assigned". This subparagraph shall expire October 1, 1999. The following items must be submitted: (i) a sworn affidavit indicating the name(s) of the person(s) who will perform radiologic procedures pursuant to this hardship exemption; (ii) a sworn affidavit or other documentation stating the person(s) had at least one year of experience performing radiologic procedures between January 1, 1993 and July 1, 1998; (iii) an original verification statement, certificate of completion or transcript indicating that the person(s) named in the hardship exemption application has completed or will complete by July 31, 1999, a four hour course of study in radiation safety and protection. Documentation of completion of the four hour course of study in radiation safety and protection shall be submitted prior to placement on the department's registry under sec.143.18 of this title (relating to the Registry of Non-Certified Technicians); (iv) if the applicant is a practitioner or FQHC, proof that the person(s) was registered in accordance with rules adopted under sec.2.08 of the Act at the time of application under this section; (v) an acknowledgment that the persons performing radiologic procedures, as an alternative to training, will take and pass the core section of the limited certificate examination, as described in sec.143.8 of this title (relating to Examinations) covering radiation protection, radiographic equipment operation and maintenance, image production and evaluation, and patient care and management. An examination candidate must pass the examination on or before July 1999. A person who passes the examination described in this clause shall be included on the department's registry under sec.143.18 of this title. A person listed on the registry is not required to complete the training described in sec.143.17 of this title or sec.143.20 of this title. A person who does not pass the examination by the third attempt will be notified by the department that the person may no longer perform radiologic procedures under this hardship exemption. The following shall apply to this hardship exemption and the special examination administered under this clause: (I) the passing score shall be an unscaled 55; (II) a schedule of examinations indicating the dates, locations, fees, examination application procedures, and application deadlines will be provided to the person(s) named on the hardship exemption application as person(s) performing radiologic procedures; (III) a maximum of three examination attempts shall be allowed for each person covered by the hardship exemption; (IV) all examination application fees are non-refundable and must be paid by the examination application deadlines established by the department. A person who applied for a specific examination and who failed to appear for the examination shall forfeit the examination fee, even if notification is made prior to the examination that the person will be unable to take the examination; (V) applications under this hardship exemption may be postmarked up to and including October 31, 1998; and (VI) in no event shall any letters of exemption issued under this subparagraph extend beyond the expiration date of October 1, 1999. If the person(s) performing radiologic procedures does not apply for the examination to be administered on July 1999, the hardship exemption will expire on the examination application deadline which is two months prior to that examination. (5) - (6) (No change.) (d) - (g) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715737 Susan K. Steeg General Counsel Texas Department of Health Effective date: December 11,1997 Proposal publication date: September 26,1997 For further information, please call: (512) 458-7236 TITLE 30. ENVIRONMENTAL QUALITY PART I. Texas Natural Resource Conservation Commission CHAPTER 331. Underground Injection Control SUBCHAPTER D. Standards for Class I Wells Other than Salt Cavern Solid Waste Disposal Wells 30 TAC sec.331.63 The Texas Natural Resource Conservation Commission (commission) adopts amendment to sec.331.63, concerning operating requirements, without changes to the proposed text as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9227) and will not be republished. EXPLANATION OF ADOPTED RULES. The purpose of this rule amendment is to make the commission's underground injection control rules consistent with federal regulations, with regard to a certain notification requirement. While state requirements must be at least as stringent as the corresponding federal requirement, states authorized to implement the federal Underground Injection Control (UIC) program are not required to adopt the federal requirements verbatim (see 40 CFR sec.145.11(b)(1)). Therefore, this amendment adopts language that is identical to the federal regulations, but also incorporates the phrase "in writing," and a reference to another portion of the state regulations for clarity. Adopted sec.331.63 is being amended by adding new subsection (l), which reflects the federal regulation at 40 CFR 146.71(a)(7). In addition to the language which is identical to the federal regulation, language is added under sec.331.63(l) to require that the notification be done in writing, and to reference 30 TAC sec.305.154(a)(7) concerning notification to the executive director. Section 305.154(a)(7) includes the requirement for closure of an injection well that has not operated for two years, unless notice is provided to the executive director and certain other actions and procedures are described. Adopted sec.331.63 requires the owner or operator of an injection well that has ceased operations for more than two years and is subject to 30 TAC sec.305.154(a)(7) to notify the executive director in writing 30 days prior to resuming operation of the well. REGULATORY IMPACT ANALYSIS. The commission has reviewed the rulemaking in light of the regulatory analysis requirements of Texas Government Code sec.2001.0225 and has determined that the rulemaking is not subject to sec.2001.0225 because it does not meet the definition of a "major environmental rule" as defined in the act, and it does not meet any of the four applicability requirements listed in sec.2001.0225(a). TAKINGS IMPACT ASSESSMENT. The commission has prepared a Takings Impact Assessment for these rules pursuant to Texas Government Code Annotated sec.2007.043. The following is a summary of that assessment. The specific purpose of the rules is to incorporate federal language into current state regulations so that the UIC Program can maintain compliance with the federal program. The rules will significantly advance this specific purpose by allowing the commission to maintain primacy, and thus state control, for the UIC Program without making the existing rules any less stringent. Promulgation and enforcement of this rule amendment will not create a burden on private real property. This rule amendment is minor in nature and does not impose any additional or substantial burden on private real property. Authorized UIC facilities are already subject to this federal requirement, and this amendment merely incorporates the federal requirement into the state UIC program. Also, because this rulemaking is reasonably taken to fulfill an obligation mandated by federal law, this rule amendment is excepted from the Private Real Property Preservation Act pursuant to sec.2007.3(b)(4) of the Texas Government Code. COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW. The commission has determined that this rulemaking action is not subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources Code, sec.sec.33.201 et. seq.), the rules of the Coastal Coordination Council (31 TAC Chapters 501-506), and the commission's rules in 30 TAC Chapter 281, Subchapter B, concerning Consistency with the Texas Coastal Management. HEARING AND COMMENTERS. A public hearing was not held for this rulemaking. The comment period closed on October 13, 1997. There were no comments submitted. STATUTORY AUTHORITY. The amended section is proposed under the authority of Texas Water Code sec.sec.5.103, 5.105, and 27.019, which provide the commission with the authority to adopt rules reasonably required for the performance of its powers and duties under the Texas Water Code and other laws of the state; and under the Texas Health and Safety Code, sec.361.017 and sec.361.024, which further authorize the Texas Natural Resource Conservation Commission to promulgate rules necessary to manage industrial solid and municipal hazardous wastes. These amendments implement Texas Water Code Chapter 27. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 24, 1997. TRD-9715782 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 15, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 239-6087 CHAPTER 335. Industrial Solid Waste and Municipal Hazardous Waste SUBCHAPTER A. Industrial Solid Waste and Municipal Hazardous Waste in General 30 TAC sec.sec.335.6, 335.9, 335.15 The Texas Natural Resource Conservation Commission (commission) adopts amendments to sec.335.6, concerning Notification Requirements, sec.335.9, concerning Recordkeeping and Annual Reporting Procedures Applicable to Generators, and sec.335.15, concerning Recordkeeping and Reporting Requirements Applicable to Owners or Operators of Storage, Processing, or Disposal Facilities. Section 335.9 is adopted with changes to the proposed text as published in the July 22, 1997, issue of the Texas Register (22 TexReg 6839). Sections 335.6 and 335.15 are adopted without changes and will not be republished. EXPLANATION OF ADOPTED RULES. The adopted changes mandate that Large Quantity Generators and Receivers use electronic software provided by the executive director for the submittal of notification and reporting data, unless the executive director has granted a written request to use paper forms or an alternative method. The rule modifications do not substantively change the notification or reporting requirements for Large Quantity Generators or Receivers, but streamline notification and reporting procedures, increasing the accuracy and timeliness of the Annual Waste Summary, Monthly Waste Receipt Summary, and Notice of Registration data through built-in checks in the electronic software. These changes also result in savings from data entry outsourcing of the reporting data. The amendments to sec.335.6(a)-(c) add language to require that registered Large Quantity Generators use electronic notification software provided by the executive director. Subsections (a), (b), and (g) delete language which requires information to be submitted to the executive director in duplicate form. The rule also corrects grammatical errors within this section. The amendments to sec.335.6(a) and (h) allow recyclers of industrial and hazardous waste to commence new recycling operations as soon as they receive confirmation from the agency, without having to wait the full 90 days, as it is currently stated in these subsections. The agency recommends this change in order to allow the regulated community to benefit from the agency's streamlined review process. The amendments to sec.335.9(a)(2) add language to mandate that the Large Quantity Generators submit the Annual Waste Summary report by using software provided by the executive director. To help define reporting requirements, sec.335.9(b) is amended to add a cross-reference to sec.335.154, concerning Reporting Requirements for Owners and Operators. This amendment also clarifies historical agency interpretation of the rule and corrects grammatical errors within this section. The amendments to sec.335.15(2) also add language to mandate that Receivers submit the Monthly Waste Receipt Summary report by using software provided by the executive director. To conform with federal regulations, sec.335.15(3) is amended to change the requirements in this section to pertain only to unmanifested hazardous waste. The amendment to this section also corrects grammatical errors. TAKINGS IMPACT ASSESSMENT. The commission has prepared a Takings Impact Assessment for these rules under Texas Government Code, sec.2007.043. The following is a summary of that assessment. The adoption of the rule amendments will modify reporting procedures for the Large Quantity Generators and Receivers, will conform unmanifested hazardous waste reporting requirements to federal regulations, and will shorten the waiting period between notification of intent to recycle and commencement of recycling activities. Promulgation and enforcement of the rule amendments will not affect private real property. COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW. The commission has reviewed this rulemaking for consistency with the Coastal Management Program (CMP) goals and policies in accordance with the regulations of the Coastal Coordination Council, and has determined that the rulemaking will not have direct or significant adverse effect on any Coastal Natural Resource Areas, nor will the rulemaking have a substantive effect on commission actions subject to the CMP. HEARING AND COMMENTERS. A public hearing was not held for this rulemaking. The comment period closed on August 21, 1997. The following commenters submitted written comments on the proposed rules: Boeing Defense & Space-Corinth Co., Union Carbide Corporation, and Kaspar Wire Works, Inc. Boeing commented that the current software for this activity is not compatible with the current standard for operating systems: Windows 95 and NT. At such time as the electronic reporting program is shown to be compatible with these operating systems, then it may be appropriate to require such reporting. The commission disagrees with this comment. The current software is compatible with the current standard for operating Windows 95 and NT. The commission has made no change in response to this comment. Union Carbide Corporation commented that it would support mandatory electronic reporting of such data as required by these hazardous waste reporting requirements if the proposal were amended to also allow the option of submitting a report in a commission-specified magnetic media format. At one time, the commission allowed facilities to submit their data on diskette or magnetic media. The program was discontinued due to format inconsistencies and virus risk to the agency with no improvement in reducing errors. This type of submission did not streamline the notification and reporting procedures. The commission has made no change in response to this comment. Union Carbide Corporation commented that this proposal would require that it manually reenter data about its wastes into a proprietary package. The commenter believes that this data reentry is guaranteed to cause the same kind of data entry quality concerns that the commission has raised with its own keyboarding, and will unnecessarily raise Union Carbide's data collection and storage costs. The commission disagrees with this comment. The Windows 95 version of electronic reporting software will allow facilities to import data from company-wide software as well as from the DOS version of the electronic reporting software. Very little, if any, reentry of information will be required. The commission has made no change in response to this comment. Kaspar Wire Works, Inc. commented that the electronic reporting program selected should not be the current electronic reporting program unless its shortcomings are corrected. The utility of the current electronic reporting program and its accuracy suffer because the up-to-date Notice of Registration (NOR) cannot be viewed within the program. The commission agrees that the DOS version of the electronic reporting program does not allow an on-screen view of the NOR. The planned release of the Windows 95 version will feature a skeleton NOR of basic facility, waste, and waste management information. Therefore, the commission has made no change in response to this comment. Kaspar Wire Works, Inc. mentioned that the proposed rules will require facilities to maintain extensive logs or paper duplicates of transactions for future reference, if the current electronic reporting program is used. The commission disagrees with this comment. The Windows 95 version of the electronic reporting program uses a file name method that will not require the facility to keep an extensive log or paper duplicates of transactions. The commission has made no change in response to this comment. Kaspar Wire Works, Inc. also commented that all screens related to a waste should show both the waste number and the waste name. The commission agrees with this comment. The Annual Waste Summary section of the Windows 95 version of the electronic reporting program will have the first portion of the waste description along with the waste number displayed on the screen. The commission has made no change in response to this comment. Kaspar Wire Works, Inc. commented that requiring the public to purchase computer equipment and to lease telephone lines for reporting information to the government may not be constitutional, and may not be within the legislated authority of the commission. The commission disagrees with this comment. The commission recognizes that most large quantity generators have a computer and telephone line that meet the equipment specifications. A facility that is not able to obtain adequate equipment to report electronically may request the use of paper forms or an alternative method. The commission has made no change in response to this comment. Kaspar Wire Works, Inc. commented that the requirement for electronic reporting should be accompanied by a decrease in fees charged to the reporter. The commission believes this comment is beyond the scope of this rulemaking because the sections being proposed for adoption are related to recordkeeping and are not associated with the fees assessed to the Large Quantity Generators and Receivers. STATUTORY AUTHORITY. The amendments are adopted under the Texas Health and Safety Code, Solid Waste Disposal Act (the Act), sec.361.017 and sec.361.024, which authorizes the commission to adopt rules consistent with the general intent and purposes of the Act, and to establish minimum standards of operation for all aspects of the management and control of municipal hazardous waste and industrial solid waste. sec.335.9. Recordkeeping and Annual Reporting Procedures Applicable to Generators. (a) Except with regard to nonhazardous recyclable materials regulated pursuant to sec.335.24(h) of this title (relating to Requirements for Recyclable Materials and Nonhazardous Recyclable Materials), each generator of hazardous or industrial solid waste shall comply with the following. (1) The generator shall keep records of all hazardous and industrial solid waste activities regarding the quantities generated, stored, processed, and disposed of on-site or shipped off-site for storage, processing, or disposal and which, at a minimum, includes the information described in subparagraphs (A)-(G) of this paragraph. These records may be maintained in any format, provided they are retrievable and easy to copy. The required records must be sufficiently detailed and complete to support any contentions or claims made by the generator with respect to: (A)-(G) (No change.) (2) The generator shall submit to the executive director a complete and correct Annual Waste Summary detailing the management of each hazardous and Class 1 waste generated on-site during the reporting calendar year. The Annual Waste Summary shall also include the management of any hazardous or Class 1 waste generated in a year previous to the reporting year, but managed in the reporting calendar year. The Annual Waste Summary shall be submitted using electronic software or paper forms provided or approved by the executive director. Any registered generator who generates 1,000 kilograms or more of hazardous waste in any calendar month, must submit the Annual Waste Summary using software provided by the executive director unless the executive director has granted a written request to use paper forms or an alternative reporting method. Generators shall report as follows. (A) Generators submitting their Annual Waste Summary on paper forms must do so on or before January 25 of the year following the reporting calendar year. (B) Generators submitting their Annual Waste Summary electronically for the 1997 reporting year must do so on or before January 25, 1998. (C) Generators submitting their Annual Waste Summary electronically for calendar years after 1997 must do so on or before March 1 of the year following the reporting calendar year. Upon written request by the generator, the executive director may authorize an extension to the report due date. (3) Generators are not required to submit the information required in paragraph (1) of this subsection if they certify on the annual summary that all of the following conditions have been met: (A)-(B) (No change.) (C) a total of less than 1,200 kilograms of hazardous waste, and a total of less than 1,200 kilograms of Class 1 waste (2,400 kilograms or less of hazardous waste plus Class 1 waste combined) was generated during the year. (4) (No change.) (b) A generator who ships his hazardous waste off-site must also report the information specified in sec.335.71 of this title (relating to Biennial Reporting). Any generator who stores, processes, or disposes of hazardous waste on-site shall also submit an annual report in accordance with the requirements of sec.335.114 of this title (relating to Reporting Requirements), or as provided in sec.335.154 of this title (relating to Reporting Requirements for Owners and Operators). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 19, 1997. TRD-9715787 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 15, 1997 Proposal publication date: July 22, 1997 For further information, please call: (512) 239-1966 TITLE 31. NATURAL RESOURCES AND CONSERVATION PART X. Texas Water Development Board CHAPTER 356. Groundwater Management Plan Certification 31 TAC sec.sec.356.1-356.9 The Texas Water Development Board (board) adopts new sec.sec.356.1 - 356.9, concerning procedures for board certification of the administrative completeness of groundwater management plans. The board adopts sec.sec.356.1-356.7 and sec.sec.356.9 with changes to the text as published in the September 5, 1997, Texas Register (22 TexReg 8921). Section 356.8 is adopted without changes and will not be republished. New Chapter 356, relating to groundwater management plan certification, is adopted to implement the process by which the board certifies as administratively complete groundwater management plans prepared by groundwater conservation districts. In its enactment of Senate Bill 1, the 75th Texas Legislature amended the Texas Water Code to require all groundwater conservation districts to prepare a management plan, which is certified as administratively complete by the board. Section 356.1 defines the chapter's scope as governing the board's procedures for reviewing and certifying as administratively complete the groundwater management plans. Section 356.2 provides definitions of terms in the chapter. "Amount of groundwater being used" is defined as that quantity of groundwater being withdrawn or flowing from an aquifer naturally or artificially on an annual basis. The term reflects both withdrawals effected by man, and that which might occur naturally, such as spring flow or uncapped artesian wells, since the total use is important in understanding how water withdrawals affect the amount of water in the aquifer. "Approved regional water plan" is defined as a water plan developed pursuant to the new regional planning process under Texas Water Code, sec.sec.16.053, and approved by the board under that section. The term is used to discuss the consistency requirements between the management plans and the regional planning process. "Artificial recharge" is defined as the increased recharge accomplished by modifications to the land surface, streams or lakes to increase seepage or infiltration rates or by the direct injection of water into the subsurface through wells. Section 356.5(a)(4)(C) requires the districts, in their management plans, to provide estimates of the annual amount of recharge to groundwater and possible methods for increasing the natural and artificial recharge. The definition sets the parameters on what the districts must review in assessing artificial recharge, and in making suggestions for future artificial recharge into groundwater resources within the district. The definition attempts to be inclusive of all known methods of artificial recharge of groundwater resources, in order that districts provide a comprehensive look at existing recharge and have the broadest possible latitude in determining in the management plan which methods of artificial recharge might be useful. "Board" is defined as "Texas Water Development Board." "Conjunctive surface water management issues" is defined as issues relating to the active use of both surface water and groundwater to achieve increased water supply or enhanced water quality. The term is used in sec.sec.356.5(a)(1)(D), which requires district management plans to include management goals, as applicable, addressing conjunctive surface water management issues. The definition recognizes the importance of the interaction of groundwater and surface water in both water supply and water quality issues, and also recognizes that groundwater districts may manage in a way that could enhance or harm supply or quality of both resources. The definition recognizes the enhanced integration of groundwater and surface water management planning resulting from Senate Bill 1 through the coordination of groundwater and surface water planning in both the local and regional planning processes. The definition of "district" is taken from the Texas Water Code, sec.sec.36.001 as any district or authority created pursuant to the Texas Constitution, Article III, sec.sec.52, or Article. XVI, sec.sec.59 that has authority to regulate the spacing of water wells, the production from water wells, or both. "Estimates" is defined to be calculations using best available data and methodologies specified in the management plan such that quantifications can be tracked over time. The definition is used in sec.sec.356.5(a)(4), (4)(E), and (b), which require district management plans to include estimates of various elements of water supply and demand within the district. Based upon comments received, the board adopted changes to the section to remove the term "reasonable" from before "calculations" and to add elsewhere to the definition the phrase "will be reasonable for use by the district." This change will make it clear that the district determines the reasonableness of the calculations, depending on the district's use of the estimates. The definition is further limited by the term "using best available data and methodologies specified in the management plan," to reflect that the management plan must itself identify the data and methodologies to allow the quantifications to be tracked over time. This will allow those utilizing the plan to better understand the nature of the data and to make comparisons of trends over time. It is anticipated that the plan may be used by others including the regional water planning groups and the board, since the management plans must be considered in the regional plans and also will be used by the board in its duties regarding compilation of data under Texas Water Code, Chapter 16. "Executive Administrator" refers to the board's executive administrator. "Management goals" is defined as the qualitative and quantitative ends toward which a district directs its efforts. The term is used in sec.sec.356.5(a)(1), (2) and (5). These provisions require the district's management plan to contain management goals, to contain performance standards and management objectives that will be used to achieve the management goals, and to contain methodologies by which the district will annually track its progress toward achieving management goals. The definition recognizes that a district's goals should be reflected both in terms of the qualitative such as a better understanding of the groundwater resources and also quantitative such as the number of wells that are constructed to proper standards. "Management objectives" is defined as specific, quantifiable and time based statements of desired future accomplishments or outcomes, each linked to a management goal, which set the individual priority for district strategies. The term is used in sec.sec.356.5(a)(2), and (b), which require the district's management plan to list management objectives, and which define the district's discretion in determining these. The definition explains that the objectives form the individual priority for district strategies. It requires that these objectives be specific, quantifiable and time based in order that the accomplishment of the objectives can be measured. It requires that the management objectives be linked to management goals, in order that priorities are set for actions within each management goal, and in order that the achievement of the goals can be measured. "Management plan" refers to the groundwater management plan. "Most efficient use of groundwater" is defined as those practices, techniques and technologies that the district determines will provide the least consumption of groundwater for each type of use balanced with the benefits of using groundwater. It is used in sec.sec.356.5(a)(1)(A), which requires district management plans, if applicable, to contain management goals providing the most efficient use of groundwater. The definition explains that the district makes the determination as to which effort to use to achieve groundwater efficiency. It references practices, techniques and technologies to recognize that actions (such as timing of irrigation, choosing not to use water, etc) can achieve efficiency as can techniques (such as surge irrigation) and technologies (such as soil moisture measuring devices to determine crops needs for water). The board adopted the definition with changes in response to comments to clarify that the definition does not require a comparison between different types of use to determine efficiency, but measures efficiency within each category of use. The term is not meant to be used to determine what category of use should be ranked as most efficient, but to determine how water can be used most efficiently for each type of use. "Performance standards" is defined as indicators or measures, each of which is linked to a management objective, used to evaluate effectiveness and efficiency of district activities by quantifying the results of actions and the impact of the results of activities. The definition is used in sec.sec.356.5(a)(2) and sec.sec.356.5(b), which require the district management plan to include performance standards that the district will use to achieve its management goals, and which provide the district is to establish these performance standards based on their needs. "Projected water demand" is defined as the quantity of water needed per annum for beneficial use during the period covered by the management plan. The definition is used in sec.sec.356.5(a)(4)(D) and (E) which requires the management plan to contain estimates of the projected water supply and demand within the district. The calculation is required on an annual basis, as that is an accepted standard for supply and demand projections since it reflects one complete seasonal climatic pattern and the attendant changes in water usage. Based upon comments received, the definition is adopted with change, to require projections of demand be made for categories by use included in the state water plan. This will promote consistency and the evaluation of consistency between groundwater management plans, regional water plans, and the state water plan. "Projected water supply" is defined as the usable amount of groundwater available per annum under the district's management plan and the quantity of surface water available per annum during the period covered by the management plan. The definition is used in sec.sec.356.5(a)(4)(D)and(E) which require the management plan to contain estimates of the projected water supply and demand within the district. The definition requires the groundwater supply to be usable. The board provides this limit in order to allow the districts to use their judgement on the availability of a supply based on reasons of quality, legal limits on use, economics or other factors. Surface water is included because it will allow the districts to examine whether groundwater usage will increase or decrease because of changes in surface water resources and demands thereon. "Recharge" is defined as the addition of water from precipitation or runoff by seepage or infiltration to an aquifer from the land surface, streams, or lakes directly into a formation or indirectly by way of leakage from another formation. "Regional water plan" references the regional water plan developed by each regional water planning area under Texas Water Code, sec.sec.16.053. "Surface water management entities" is defined as those political subdivisions granted authority to store, take, divert or supply surface water directly or by contract for use within the boundaries of the groundwater districts. The board has adopted changes to the definition to make it clear that the districts may rely on Texas Natural Resource Conservation Commission records to determine the list of such entities and to clarify that the coordination is limited to political subdivisions in response to comments concerning a need to better define such entities. The term is used in sec.sec.356.6 relating to the need to coordinate on management of surface water, and is not intended to reflect all water users in the district. Political subdivisions are most likely to be the major water users and purveyors. "Usable amount of groundwater" is defined as the quantity of groundwater of acceptable quality that is contained within the portion of an aquifer covered by a district's management plan and which is economically and legally retrievable for beneficial use. It is used in sec.sec.356.5(a)(4)(A), which requires districts to provide an estimate of the existing total usable amount of groundwater. The term reflects that districts need only list groundwater that is of a usable quantity, and which is economically retrievable, both within the district's judgment, as the term is meant to reflect that water which could be used as opposed to all groundwater that may occur in the aquifers within the districts. Changes have been adopted based on comments received which specify that water must be legally retrievable also. This reflects the fact that legal limits, such as court order, may limit the use of groundwater. Section 356.3 repeats the requirement of the Texas Water Code that districts submit their management plans to the board within the deadlines established in the Code. The board has adopted changes in response to comments received that reflect that the plan, which may be reviewed annually, must be readopted with or without revisions at least once every five years, as required by the Texas Water Code. Section 356.4 reflects the requirement of Texas Water Code, sec.sec.36.1072(b) that the management plan or amendments thereto must be consistent with approved regional water plans for regions in which the district is located. The board has adopted changes to the section in response to public comments to reflect that this requirement applies only to groundwater management plans developed after the board approves a regional water plan. This change is necessary because statutory deadlines require the groundwater management plans to be completed for existing districts by September 1, 1998, two years before the deadline for submission of regional water plans to the board. Also in response to comments received, the board adopted changes that specify that the groundwater management plans need not be revised immediately upon passage of a regional water plan that is not consistent with the groundwater management plan. Rather, the groundwater district may revise its plan at any time within the statutorily mandated five- year rotation. This will allow the groundwater districts adequate time to assess the changes without imposing additional work on the districts. Because regional water plans are to consider groundwater plans, it is expected that there will be minimal inconsistency, thereby justifying the time delay. Section 356.5 addresses the required content of the management plan. The bulk of the subsection (a) is taken directly from Texas Water Code, sec.sec.36.1071(a) and (e). Subsection (a) requires the planning period to cover at least 10 years, a period the board considers the smallest possible increment for future planning of a comprehensive nature. The section requires, tracking the statute, that the management plans contain management goals in five areas specified by statute. The board has adopted subsection (a) with changes to state more positively when a plan will be certified, rather than when it will not be certified. The board has adopted subsection (a) (1)(E), which requires the plan to include management goals addressing natural resources, with changes to reflect comments. The changes specify that the natural resources goals should be those which impact the use and availability of groundwater, and which are impacted by the use of groundwater. The limitation is included because the plans are not comprehensive natural resource plans, but plans relating to groundwater, and therefore should only address natural resource issues which impact or which are impacted by groundwater. An example would be endangered species impacted by springflow. Subsections (a)(2) and (3) require performance standards and management objectives the district will use to achieve management goals, and specified detailed actions, procedures, performance and avoidance, including specifications and proposed rules, needed to effectuate the management plan, both requirements from Texas Water Code, sec.sec.36.1071(e)(1) and (2). Subsection (a)(3) is adopted with changes to more closely track statutory language. Subsection (a)(4) contains the statutory requirements for making estimates of existing total usable amount of groundwater, the amount of groundwater being used, the annual recharge and potentials for additional recharge, and projected water supply and demand. The board has adopted subsection (a)(4)(C) on annual amount of recharge with changes to clarify that the estimates of potential increases to recharge shall be calculated on an annual basis. Section 356.5(a)(5) requires the plan to include details of how the district will manage groundwater supplies in the district, including a methodology by which a district will tract its progress on an annual basis in achieving its management goals. This provides greater explanation on the requirements of sec.sec.356.5(a)(3), including the requirement for annual progress review. This time frame is chosen because it allows continued tracking for the districts to utilize for future planning purposes. The section emphasizes the districts' responsibilities under statute to manage surface water supplies. A new sec.sec.356.5(b) has been added based upon comments received, to indicate that the district customizes the plan to its own needs: it establishes the goals, objectives, and standards of subsection (a) based on its needs. Also, the subsection clarifies that the district may use any information it has available to it to make estimates, including information from sources outside the district if it determines the information is sufficient to make acceptable estimates. In response to comments relating to the level of detail necessary for aquifers the districts do not regulate, or which may be of less importance, the subsection provides the districts with discretion to gather different levels of data. The board considers that the districts are in the best position to know what types of data, and what types of management techniques, are best suited to use by the district relating to its resource. Renumbered sec.sec.356.5(c) requires the management plan to address water supply needs in a manner that is not in conflict with an approved regional plan for each region in which part of the district is located, consistent with statutory requirements for Texas Water Code, sec.sec.36.1071(e)(4). Based on comments received, the board has adopted changes to this section to make the language relating to consistency parallel to that in sec.sec.356.4. Renumbered sec.sec.356.5(d) allows the board to waive the provisions relating to consistency in subsection (c) if the executive administrator determines that conditions justify such waiver, a provision found in Texas Water Code, sec.sec.36.1072(b). The subsection requires the waiver to be requested in writing by the district, and requires the district to provide evidence of conditions that justify such waiver. This requires districts to assume the burden of providing information by which the executive administrator can make a decisions relating to waiver, since the districts are the most likely entity to hold such information. Section 356.6 provides for plan submittal. Subsection (a) provides a list of items required to be submitted: the plan, a certified copy of the district's resolution adopting the plan, evidence the plan was adopted after notice and hearing, evidence the district coordinated development of the management plan with surface water management entities, and evidence of consistency with and any conflict between the management plan and an approved regional water plan for regions in which the district is located in whole or part. The submittal of this information will provide the board with the information necessary to make the certification that the plan is administratively complete: Texas Water Code, sec.sec.36.1072 requires the executive administrator to make the certification of administrative completeness if the plan contains the information required to be submitted under Texas Water Code, sec.sec.36.1071. The section was adopted with changes to subsection (a) to reflect the certification is for administrative completeness, and to (a)(4) to reflect the statutory requirement for the district to provide notice and hearing for development of the management plan. Changes also were adopted to subsection (a)(5) to address questions about how districts provide evidence of the management plans's consistency and/or conflict with an approved regional plan, and to answer the questions of who determines this consistency/conflict question. The changes indicate that if a regional water plan has been approved for an area that includes the district, the district is required to send to that region's chair a request that the regional water planning group review the plan for consistency, and specify areas of conflict between the two plans. These comments will then be provided to the executive administrator, who makes any determination of conflict between the plans. The executive administrator's role to determine conflict is derived from the requirement that the executive administrator has the ability to determine if conditions warrant waiver of the consistency requirement, and because the executive administrator may certify plans only if they meet the consistency requirement. Section 356.6(b) provides for a plan to be considered submitted when it is received in the Austin offices of the board. Receipt of the plan begins the time within which the board must certify the administrative completeness of the plan. Section 356.7 provides the procedure for the executive administrator to certify whether a plan is administratively complete. The section is adopted with changes that reflect that the executive administrator certifies a plan if it is "administratively complete," the language used in Texas Water Code sec.sec.36.1072(b). The section provides for the executive administrator's review to be complete within 60 days, as required by statute. The section provides procedures for the executive administrator to notify the district in writing within five days of making the certification decision, and requires such notice to include reasons for any denial of certification. The section tracks the statute in providing for the district to submit a revised plan for review and certification within 180 days of receipt of notice that certification has been denied, and states the review and certification is made under the same requirements as the original certification. Section 356.8 is adopted without change. It provides the method to appeal a denial of certification of a management plan to the board. The section provides for a notice of intent to appeal not later than 60 days after receipt of notice of denial, and points of appeal to be filed 30 days thereafter. The notice and points of appeal are received when received in the board's Austin office. The section allows the executive administrator to file responses to the points of appeal. Subsection (b) provides for the procedure to present the appeal to the board, limiting the district and executive administrator to 20 minutes of oral presentation, with five minutes of rebuttal for the district. The section tracks the statute in providing that the board's decision on certification is final and nonappealable. This section is designed to provide clear notice of time limits and their calculation in the appeal process, and is designed to allow the board to receive information for consideration in a form that will allow full examination of the issues. Section 356.9 is adopted with change to reflect that the executive administrator certifies a plan if it is "administratively complete," the language used in Texas Water Code, sec.sec.36.1072(b), and tracks the statute in requiring the districts to submit any amendments of their management plans to the board for certification within 60 days of adoption. The section allows the executive administrator to notify the district if the amendments do not substantially affect the plan, in which case certification in not necessary, or to certify or deny certification of the plan within 60 days. The section incorporates the same standards and methods for review as for the original plan, as required by Texas Water Code, sec.sec.36.1073. The board conducted a hearing on the proposed rules October 31, 1997, in Room 118, Stephen F. Austin Building, 1700 N. Congress Ave., Austin, Texas. The following attended the public hearing and/or made comments at the public hearing, in writing, or orally to the board staff: Harris Galveston Coastal Subsidence District expressed some general support for the rules. McCulloch County Property Owners Association submitted comments against the rule adoption. The following entities, submitted comments not generally supporting or opposing adoption, but recommending changes or seeking clarification: Barton Springs/Edwards Aquifer Conservation District, Central Power and Light, Fort Bend Subsidence District, El Paso Water Utility, Emerald Underground Water Conservation District (UWCD), Glasscock County UWCD, Gonzales UWCD, Harris Galveston Coastal Subsidence District, Headwater UWCD, Irion County Water Conservation District (WCD), Lipan-Kickapoo WCD, Mesa UWCD, Panhandle Groundwater Conservation District Number 3, Plateau Underground Water Conservation and Supply District, the Ranch at Blanco, Hickory UWCD Number 1, Sandy Land UWCD, Sutton County UWCD, Santa Rita UWCD, Sterling County UWCD, Texas Water Conservation Association, Texas Alliance of Groundwater Districts, Upper Guadalupe River Authority, and West Texas Regional Groundwater Alliance. Emerald UWCD, Hickory UWCD Number 1, Sutton County UWCD, Santa Rita UWCD, Glasscock County UWCD, Irion County WCD, Plateau Underground Water Conservation & Supply District, McCulloch County Property Owners Association, Panhandle Groundwater Conservation District Number 3, Barton Springs/Edwards Aquifer Conservation District all filed comments either asserting there are fiscal impacts for local government and small businesses, and economic costs to persons required to comply with the rules, or questioning how the board made such determination. It is the board's assessment that the rules have no fiscal impact beyond that created by Senate Bill 1, and therefore no fiscal impact was shown in the preamble for the proposed rule. However, the board does agree that the development of the management plans as required by statute can have a fiscal impact, and indicated such to the legislative committees which considered Senate Bill 1. It was the Board's assessment that the development of plans may cost the districts collectively up to $712,400 per year through the year 2002. The board may provide loans for this purpose as appropriated by the 75th Texas Legislature, and also may provide technical assistance to district which may reduce the fiscal impacts. Some commenters expressed opinions of impact on individuals or business because of the potential for the districts to have to levy taxes to cover their expenses. The board can not assess whether the districts will have to impose additional taxes in order to develop these plans. Hickory UWCD Number 1 commented that in sec.sec.356.2, the definition of "estimates" does not coincide with any definition it has been able to locate. The board cannot discern the commenter's concern about the definition, and made no change to the rule as a result of the comment. The definition contains several elements: (1) calculations, using best available data and methodologies; (2) which must be specified in the management plan; (3) such that quantifications will be reasonable for use by the district; and (4) can be tracked over time. These terms were used to allow the district to provide estimate that are reasonable, in the district's judgement, to be used in the district's activities to manage the groundwater resources of the district. New data are not required when making the estimates if the district determines that existing data are sufficient for its purposes. The plan is to specify the method by which the estimates are made to enhance the ability to monitor the effectiveness of the district's management of the groundwater resources as management plans are reviewed and readopted. Irion County WCD commented that in sec.sec.356.2, the definition of "estimates" should be clarified to assure districts and the board interpret it the same. The district noted that many variables may affect the "reasonable calculations using best available data and methodologies," including type and amount of vegetation, and gives as example that mesquite and juniper use an enormous amount of groundwater and restrict rainfall from reaching ground and being available for recharge. The district asks where it can find such data. The Plateau Underground Water Conservation and Supply District asks what is meant by "reasonable calculation" in making estimates and what methodologies are acceptable to the board when making estimates? Panhandle Groundwater Conservation District Number 3 comments that the term "estimates" is vague, which is not necessarily bad, and requests the board to show some examples. The board agrees that the definition can be clarified, and has made changes by removing "reasonable" from "reasonable calculations," and adding the term "will be reasonable for use by the district" into the definition to clarify that the reasonableness is to be weighed by the district based upon its needs. A new sec.sec.356.5(b) is also added to clarify the district's discretion in determining if data used for the estimates is sufficient for its use. The definition is designed to allow a district to calculate the value of the parameters using procedures that are considered reasonable by persons familiar with hydrology and the importance of the parameter to the district's management program. Some parameters for which values must be provided are not directly measurable, such as amount of groundwater in the district, and must be calculated. For this term, for example, it could be calculated by multiplying the area of the aquifer containing fresh water (the district having determined that fresh water was necessary for beneficial use) times the saturated thickness, less 50 feet (the district having determined that 50 feet of saturated thickness being necessary for economic recovery of groundwater) times the specific yield of the aquifer. Panhandle Groundwater Conservation District Number 3 commented that in sec.sec.356.2, the definition of "most efficient use of groundwater" should reflect efficiency for each water use category, and that districts should not be forced to choose one category of use over another. The board agrees that the rule should be changed to reflect the comments, and has inserted into the definition the words "for each type of use." The definition is not meant to require a comparison between different categories of use (such as municipal versus irrigation) to determine efficiency, but to require measures of efficiency within each category of use. The definition explains that the district makes the determination as to which effort to use to achieve groundwater efficiency. Plateau Underground Water Conservation and Supply District asked for definitions and examples of practices, techniques and technologies used in the definition in sec.sec.356.2 of "most efficient use of groundwater." The comment does not ask for rule change. To the extent it is asking for change in the rule to provide clarity to answer the question, the board disagrees with the need for the change. As specified in the definition, the district must make this determination. There are a wide array of tools that vary by type of water use that could provide for efficient use. The definition explains that the district makes the determination as to which effort to use to achieve groundwater efficiency. The reference to practices, techniques and technologies recognizes that actions (such as timing of irrigation, choosing not to use water, etc) can achieve efficiency as can techniques (such as surge irrigation) and technologies (such as soil moisture measuring devices to determine crops needs for water). Harris Galveston Coastal Subsidence District and Fort Bend Subsidence District comment that, in sec.sec.356.2, they are not sure what "most efficient use of groundwater" means, and the board should provide a neutral definition. The board has not adopted changes as a result of the comment, as it is unclear what is being requested. The McCulloch County Property Owners Association requests that in sec.sec.356.2, the definition of "most efficient use of groundwater," the following be inserted at the end of the definition: "allowing for the rights of the surface landowner," to recognize that landowners still have the right of capture for livestock and domestic purposes. The board does not agree that the change needs to be made. The districts must always operate within the parameters of the law. The suggested placement of this language does not add to the definition of "most efficient use of groundwater." Plateau Underground Water Conservation and Supply District asks, in the sec.sec.356.2 definition of "performance standards," what the terms "effectiveness" and "efficiency" mean. The board has made changes to the definition to better define effectiveness and efficiency. The effectiveness of district activities can be evaluated by measuring the accomplishments of the district. For example, if an objective is to measure water levels in a specified number of wells annually, an effectiveness standard could be "The number of wells in which water levels were measured during the last year." The efficiency of district activities can be evaluated by measuring the amount of resources devoted per unit of accomplishment. For example, if an objective is to spend no more than $100 per water level measured, an efficiency standard could be "Cost per water level measured during the last year." Plateau Underground Water Conservation and Supply District asks whether the sec.sec.356.2 definition of "projected water demand" should include demand by user, type or priority? The board agrees the rule can be improved to provide that the projection by type of use will be the same as used in the state water plan. The board routinely provides projections for the following types of use: municipal, manufacturing, irrigation, mining, steam-power generation, and livestock watering. The rule also is amended to provide that the district may subdivide any type of use as the district deems appropriate. Plateau Underground Water Conservation and Supply District asks if the definition of "recharge" in sec.sec.356.2 and its use in sec.sec.356.5(a)(4)(c) requires districts to measure precipitation events and locations to calculate recharge? Are soil types and condition to be considered for recharge? What type of data is required to give a definite answer for recharge? Are range conditions considered such as amount of turf and what type of measures need to be implemented? How to evaluate sinkholes, fissures and playa lakes in recharge equation? How to account for variation from year to year of precipitation? How are measurements obtained and what kind of measurements are needed from leakage of another formation into the aquifer? It is unclear if the commenter is requesting changes to the definition. The board does not agree that changes are needed. The district is given discretion to determine how to make estimates of the amount of recharge and interformational flow. It may rely on existing data from the district, the board, or other entities. The board will provide technical assistance to the districts if requested to help them determine how best to make this estimate for the district. The board has made changes by providing a new sec.sec.356.5(b) to explain the district's discretion. Plateau Underground Water Conservation and Supply District asks in relation to sec.sec.356.2 what parameters are to be used in determining the "amount of groundwater being used"? The rules give the district discretion to determine how to make estimates of the amount of groundwater being used. Districts may rely on existing data from the district, the board, or other entities. The board will provide technical assistance to the districts if requested to help them determine how best to make this estimate for the district. The board has made changes by providing a new sec.sec.356.5(b) to explain the district's discretion. Plateau Underground Water Conservation and Supply District asks if, in sec.sec.356.2, "artificial recharge" is to be calculated on an annual basis by assumption of possible future recharge projects? The board has adopted rule change to clarify this issue. The district is to include in its plan possible methods for increasing recharge with estimates of annual amounts of recharge, natural and artificial, that could result from implementation of the methods. Glasscock County UWCD and Hickory UWCD Number 1 commented that, in sec.sec.356.3, the bill's time frame for information is unreasonable. Modification of this time frame is beyond the scope of this rulemaking, since it is established by Senate Bill 1, sec.sec.4.49. Edwards Aquifer Authority requests that the definition of "usable amount of groundwater" be amended to include the phrase "and is available under the district's management plan." The board understands that the district is seeking to reflect that there may be limits on the use of water, such as court-ordered pumping limits. The board proposes other changes to address the district's issues, but does not agree that the language recommended by the district is the best approach. The definition is used in sec.sec.356.5(a)(4)(A), which requires the district's management plan to include estimates of the existing total usable amount of groundwater in the district. The district's concerns can be met by adding the phrase "and legally" between "economically" and "retrievable." Sterling County UWCD comments that, in relation to sec.sec.356.3 and 356.5, the district has a management plan that works well and questions why it should have to write a new one. The board agrees with the district's comments, and has provided clarity by adopting new sec.sec.356.5(b). The sections do not require districts to discard all or portions of their existing groundwater management plans that meet the statutory requirements of Senate Bill 1. However, they must evaluate their plans to assure they meet all requirements of the new legislation in order to allow the board to certify the administrative completeness of the plan. Emerald UWCD, Sutton County UWCD, Santa Rita UWCD, Glasscock County UWCD, and Barton Spring/Edwards Aquifer Conservation District commented that in sec.356.4 it is not possible to develop a certified management plan consistent with approved regional plans by September 1, 1998 when there will not be a regional plan in effect. McCulloch County Property Owners Association agrees with this comment, and also requests the rule be amended to provide another year after regions are formed for groundwater district management plans. Panhandle Groundwater Conservation District Number 3 agrees with the comments, and requests the addition of the words "if an approved regional water plan exists" at the end of the section. The board agrees with the comments, and has amended sec.356.4 to require this consistency only for groundwater management plans and amendments to groundwater management plans that are developed after the board approval of a regional water plan. Senate Bill 1, sec.4.49 requires the submittal of plans by September 1, 1998, and cannot be modified. While the board did not use the exact language requested by Panhandle Groundwater District Number 3, its amendment should meet the same objectives. Barton Springs/Edwards Aquifer Conservation District asks what happens if a later approved regional water plan makes a groundwater plan noncompliant? Does district revise its plan immediately, or follow a five-year rotation? What happens if regional groups say to use surface water when entities in the district want to stay on groundwater? The board agrees that the rule should be changed to clarify the issue of timing of revision of the groundwater plan based on later adoption of a regional plan that makes the groundwater management plan noncompliant. The adopted rule specifies that a management plan developed after a regional water plan is approved is required to be consistent with the regional water plan within the normal five-year rotation of amendments. Sutton County UWCD comments that sec.sec.356.4 does not provide a ground-up plan since groundwater districts must comply with a regional plan. Gonzales UWCD expressed concern that a regional water plan could allow greater use of groundwater than the district plan might. The board disagrees that rule change is needed based on the comments. The requirement that the management plans of groundwater districts be consistent with approved regional water plans is mandated by Texas Water Code, sec.36.1071(b). However, the regional plans are required to consider certified groundwater management plans. Texas Water Code, sec.16.053(e)(4)(B). Under the timetable of Senate Bill 1, the groundwater management plans for existing districts will be completed September 1, 1998, before the regional water plans are due to be provided to the board (September 1, 2000). These will provide a baseline groundwater plan for the regional water planning groups to consider in their plan development. The board also expects groundwater districts to be involved in developing the regional water plans. Harris/Galveston Coastal Subsidence District stated that it is better for districts to develop a good management plan because of its affect on regional plans. No change in rules is necessary based upon this comment. Barton Spring/Edwards Aquifer Conservation District asks, in relation to sec.356.4, what the process is to resolve conflicts between regions if district boundaries extend into multiple regions. The district notes this could result in inconsistency with one or more regional water plans. It asks: "Will a variance have to be requested for each area that is separated by the regional boundary for areas that have marginal direct impact on the groundwater in the district or areas that otherwise fall into the service areas of public water supply corporations within the groundwater district's jurisdiction?" The board acknowledges that interregional conflicts could occur in the development of regional water plans. Texas Water Code, sec.16.053(h)(6) provides that it is the responsibility of the board to resolve disputes between regions. All aspects of adopted regional water plans that impose conflicting requirements upon a groundwater management district will be dealt with by the board as a dispute. The board's rules on resolution of interregional conflict in development of regional management plans will be addressed in another chapter of the board's rules to be published in the near future. Barton Spring/Edwards Aquifer Conservation District comments regarding sec.356.5(a) that the board should clarify that goals, objectives and performance standards are to be established by each individual district based on the specific management needs of that district. The board agrees with the comments and has inserted language into a new sec.sec.356.5(b) to reflect the change. Sterling UWCD comments regarding sec.356.5(a)(1)(A), efficient use of groundwater, that the current management plan of the district provides management goals for efficient use of water. The board has adopted a new sec.sec.356.5(b) to reflect that the management goals of a district are to be established by each district based on the needs of that district. Districts are not required to abandon elements of their existing water management plans that they consider to be acceptable under the new statutory standards and rules. McCulloch County Property Owners Association inquires, relating to sec.356.5(a)(1), who determines the most efficient use and waste since the landowner, district and board may perceive these differently, creating conflict with the development of the plan. The board has inserted a new sec.356.5(b) to reflect that the management goals of the district are decided by the district. The statutes and rules governing the district's operation would govern any conflict between property owners and the district. Emerald UWCD, Santa Rita UWCD, Plateau Underground Water Conservation and Supply District, and Hickory UWCD Number 1 question, relating to sec.sec.356.5(a)(1)(D), 356.5(a)(4), and 356.2, how management plans can address conjunctive surface water management issues if a district's enabling legislation does not provide authority to manage surface water? The board has not made changes to its rules as a result of the comment. Districts are not being required to manage or regulate surface water, but are required by both Senate Bill 1 and these rules to coordinate their groundwater plans with the surface water entities. Groundwater and surface water may be interconnected in the hydrologic cycle, therefore, groundwater districts should be interested in how surface water and its use influence local groundwater resources. Adequate planning for either resource is not possible without consideration of the other. McCulloch County Property Owners Association, comments on sec.sec.356.5(a)(1)(D) by stating that the Hickory UWCD cannot develop data and plans for management goals that address conjunctive surface water management issues within the time frame and within the funds of the Hickory district. The board disagrees that rule changes are necessary to meet this comment. The time frame and requirement are set out by statute. The district will decide how to best accomplish this requirement within the time frame and resources it has. The district may identify areas that will need more detailed work in later revisions of the management plan. The board will be able to provide technical assistance and loans. Santa Rita UWCD asks, in relation to sec.sec.356.5(a)(1)(E), what type of natural resource issues the management plans will be expected to address? The district cites as possible issues the consumption of groundwater by mesquite trees, land usage in regard to increasing recharge, rainfall runoff from pesticides, and endangered species? McCulloch County Property Owners Association generally agreed with the comments, and also asked who will provide issues that are judged not to be conflicting with local assumptions. Barton Springs/Edwards Aquifer Conservation District generally agrees with the comments, and asks if the district makes the determination of which natural resources warrant specific treatment in the plan. The board has amended the rules to provide additional guidance on this matter. The districts will each have to assess what natural resources issues may impact their water planning and which water uses could be impacted. This will vary by each physical local. The districts will have the responsibility to review local assumptions in this analysis. The board has adopted amendments to sec.sec.356.5(a)(1)(E) to specify that the districts must assess natural resources issues that could be impacted by groundwater use and that themselves impact groundwater use. One example would be endangered species dependent upon spring flow. Santa Rita UWCD comments, in relation to sec.sec.356.5(a)(2), that it already has stringent performance standards, and that such standards are established by each district board of directors, who answer to voters of the district. The board agrees that the districts determine what the performance standards and management objectives must be. The rules do not mandate the district select any particular standards or objectives, but do specify certain tests that these must meet. The statutes require certain management goals be established by the districts, if applicable, and then management objectives and performance standards established by the districts under which the district will operate to achieve the management goals. Management objectives, under the definitions, are to be specific, quantifiable, and time based statements of desired future accomplishments or outcomes, each linked to a management goal, which set the individual priority for district strategies. The board has required the objectives to be specific, quantifiable and time-based so the districts can measure their progress under the objectives, and so they can be measured as required under any future audits. The performance standards are also to be established by the district. The definitions explain that these are to be established to measure the effectiveness (how much was accomplished) and efficiency (how much did it cost) of district actions. The board has adopted a new sec.sec.356.5(b) to reflect that the performance standards of a district are to be established by each district based on the needs of that district. McCulloch County Property Owners Association comments that sec.sec.356.5(a)(3) implies enforcement responsibilities not part of the Hickory District's authority, and states this casts in doubt the cooperative spirit of the entire plan in the opinion of groundwater owners. The board disagrees that rule changes are needed. The language in the question is from Texas Water Code, sec.sec.36.1071(e)(2). The districts will be able to determine how to meet this section, acting within the limits of their authority. The section does not demand that the districts use powers they do not have. McCulloch County Property Owners Association comments that the requirements in sec.sec.356.5(a)(4)(A) to estimate total usable amount of groundwater would be very expensive if not impossible. The association notes this involves the location within an aquifer, artesian pressure, drawdown or artesian pressure with pumpage, amount of pumpage, etc. The board disagrees that rule change is needed. This is a requirement set out in Texas Water Code, sec.sec.36.1071(e)(3). However, the districts may use as much existing information as possible, and may identify gaps in knowledge for future data gathering efforts if time or expense do not provide data which the districts consider reliable in the long term. Hickory UWCD Number 1, asks how, under sec.sec.356.5(a)(4)(D), groundwater districts can be held accountable for providing estimates of projected water supply and demand for surface water when they have no authority over surface water and/or any reliable data on its availability or use. These estimates are generally available for most areas of the state, for example, from the state water plan. Texas Water Code, sec.sec.36.1071(e)(3)(D) requires management plans to project water supply and demand within the district. The language is not limited to groundwater projection, unlike other places in the same subsection, therefore the board has included requirements for making these estimates for both surface water and groundwater. The provisions of Senate Bill 1 clearly anticipate a coordination of planning efforts for both surface water and groundwater. Projections of demands on groundwater supply would not be feasible without a review of surface water demands and availability, since groundwater usage can increase or decrease depending on changes in surface water resources and demands thereon. Sterling UWCD expresses concern regarding sec.sec.356.5(a)(4) that the projections of supply and demand will conflict with regional water plan. It is unclear what the commenter is requesting as to rule change. The board is making changes to sec.sec.356.4 language in the rules relating to the interaction of the regional water plans with the groundwater management plans. Senate Bill 1 establishes the interaction of the groundwater management plans with the regional water management plans. The bill does provide that regional water plans take precedence over groundwater plans, but groundwater districts would be expected to be involved in developing the regional plans which must consider certified groundwater district management plans. Sterling County UWCD comments, relating to sec.sec.356.5(a)(4), that districts should not have to come up with estimates of groundwater when the board either has knowledge or can do this. Emerald UWCD and Sutton County UWCD question why the board is asking for this information from the districts, when the board would have a better grasp of the information, and has such a responsibility. The legislature in Senate Bill 1 has implemented change to focus planning on the local and regional areas, including groundwater districts. Districts are not required to develop new data if existing information is available and is sufficient for the district's needs, but may use any available information, including information available from the board. The board will provide on request to the districts existing information it may have and technical assistance. In addition, the board will continue to perform groundwater surveys within the limits of its available resources, and will share this information with the affected districts. The board has adopted changes to sec.sec.356.5 by adding a new subsection (b) that makes it clear districts may use any information available to them to make the estimates required or to develop the plan required by these rules, including an existing groundwater management plan of the district or information available from other sources including the board, if such information is sufficient in the district's judgment to make acceptable estimates. Central Power and Light Company, Central and South West Corporation and its subsidiaries in Texas, including West Texas Utilities and Southwest Electric Power Company request amendment to sec.sec.356.5(a)(4) to add a new subparagraph (E) to read: "Methodology used to develop estimates for projected water supply and demand within the district as required by subparagraphs (A) through (D) of this paragraph." The board disagrees that changes are necessary because the definition of "estimates" in sec.sec.356.2 specifies the methodologies used are to be included in the management plan. Sterling County Underground Water Conservation District comments on sec.sec.356.5(a)(4), expressing concern over whether a district will be held responsible in drought once estimates are in place "if Austin says that our area is pumping too much water." Irion County WCD comments that the short time frame for submitting a management plan could result in districts being penalized during performance audits if estimates of available groundwater are not adequate. The board does not agree that rules changes are necessary as a result of these comments. The districts should use the best information available to them to make the estimates. The short time frame that the statute provides for completion of the first groundwater management plans may necessitate that districts use information they believe needs to be improved. Both the statute and the rules require districts to reevaluate their management plans at least every five years. Districts should assess, after the first estimates, any additional information they need to obtain to make these estimates better predictors for groundwater management. The districts, under existing state law, are the only entities that have the ability to engage in any restriction of groundwater pumping. The rules do not provide for any repercussions for inaccurate estimates. Senate Bill 1 does provide a mechanism for audit of district activities, but the scope of such audit and its repercussions is beyond the authority of the board in formulating these rules. Sterling UWCD comments regarding sec.sec.356.5(a)(4) that estimates of groundwater being used could be extremely abstract and erroneous given knowledge of existing pumping and given ability of persons and industry to drill and pump without limit. Emerald UWCD expressed concern about being able to quantify production from oil and gas and domestic wells. The board has not adopted rules changes as a result of these comments. It is difficult to see if the commenter is requesting changes, but elaboration on the standard in rule would not appear to satisfy the concerns expressed. Texas Water Code, sec.sec.36.1071 requires these estimates. While the board realizes that there can be no assurance that the estimates will reflect a precise picture of the current usage, the districts can gather the best information available to make estimates, and continue to refine them over time. The board will make all information it has available to the districts, and will provide technical assistance. The board's interpretation of statute is that it is not empowered to dictate standards to be used by the districts. Sterling UWCD comments relating to sec.sec.356.5(a)(4) requirement to make estimates about annual recharge. The district expressed concern about the ability to make accurate estimates and about the impact of estimates during low or high rainfall periods. The district also expressed concern that projections of supply and demand will be inaccurate. No rule change has been made. While it is difficult to see if the commentator is requesting changes, elaboration on the standard in rule would not appear to satisfy the concerns expressed. The board realizes that there can be no assurance that the estimates will reflect a precise picture of the current annual recharge. While projections of supply and demand are just that -- projections -- all entities involved in planning by necessity make these projection. The districts can gather the best information available to make estimates, and continue to refine them over time. The board will make all information it has available to the districts, and will provide technical assistance. The board's interpretationof statute is that it is not empowered to dictate standards to be used by the districts. The statute requires these estimates and projections. Hickory UWCD commented on sec.sec.356.5(a)(4) that short of drilling an expensive field of monitor wells, there probably is no better way to define the Hickory aquifer than from the data they have gathered, spending hundreds of thousands of dollars to develop. The Hickory district does not have any data for the Ellenburger or the Marble Falls aquifers. How do they get the data, what kind of methodology is acceptable, can they just use numbers in TWDB Report 346? The same problem exists with requirement to define all water consumption from all aquifers in the district, even ones the district doesn't control. Is there a practical way to come up with actual consumptions numbers, how was this done in Report 346, and are these numbers reliable? Districts are not required to develop new data if existing information is available, but may use any available information, including information available from the board. There are various methods of determining withdrawals including the data from the Board's annual survey of water users and its periodic reports on irrigation. Pumpage data for report 346 came from board data. The board has estimates for all aquifer pumpage by county, but data might have to be reapportioned for districts. These board figures are the best available in most cases. Because new inventories and/or calculations would be expensive, a district would have to determine the feasibility of collecting additional data. Sterling UWCD comments regarding sec.sec.356.5(a)(4), expressing concern over inability to pay for data to be collected in one year, and ability to get information the board has been unable to get. Irion County Water Conservation District is concerned that the only way to determine the quantification of groundwater is by installing meters. McCulloch County Property Owners Association expressed concern that requirements in the rules that will result in the collection of some very expensive data. The board did not make rule changes based on these comments. The rules are clear that existing data may be used and the statute and the rules do not require collection of additional data beyond what the district believes is necessary to accomplish its management goals. The board will provide technical assistance, and has loan money available for preparation of these plans if needed by the districts. Hickory UWCD Number 1 comments that sec.sec.356.5(a)(4) requires districts to "work up" management plans that cover all sources of water in districts. Hickory does not have authority over the Hickory aquifer outside the district's boundaries, nor over two other aquifers either inside or outside district boundaries. Do they have to include these areas in their plan, if so how, and do their taxpayers pay for this and if so, what is the authority. Barton Spring/Edwards Underground Conservation District commented regarding sec.sec.356.5(a)(4)(A)-(D), questioning the level of study necessary for each aquifer if a district has several aquifers within boundaries. It states that such a requirement would be unrealistic to develop before September 1, 1998. The board has adopted new sec.sec.356.5(b) that states a district may use different levels of data for aquifers or potions of aquifers over which the district has management authority, and over which the district has no management authority, and also may determine different levels of data depending on the importance of the aquifer. The rules follow the statute to require the districts to consider usable amount of groundwater within the district, annual amount of recharge to the groundwater resources within the district and possible methods for increasing the natural or artificial recharge, and projected water supply and demand within the district. While a district may not have authority to regulate all groundwater supplies within the district, the additions to the Texas Water Code in Senate Bill 1 give it the authority to conduct this planning. The rules do not mandate the district itself manage all supplies within the district. The district may determine the level of detail it will include for required estimates of groundwater resources that it does not manage. The board would expect this level of detail to be less than for the portion the district manages. The district may identify areas it wishes to obtain additional data for in later plans. Plateau Underground Conservation and Supply District asks whether the board can effectively provide all technical assistance required to districts to provide such calculations needed in management plan, given time schedule. If not, will management plans not be certified? If so, how accurate will the calculations be? The commenter does not ask for rule change. To the extent it is asking for change in the rule to answer the question, the board disagrees with the need for the change. The board will provide technical assistance within its funding limits. At this time, the board calculates this assistance will be sufficient to provide some assistance to all districts, but the requirement to submit the plan rests with the districts without regard to the level of technical assistance that the board may be able to provide. The statute does not provide exceptions for submitting plans to the board for certification by September 1, 1998. In addition, board loans are available to districts for development of plans. The districts should determine how accurate the calculations will be based upon the data available, and note any need to obtain additional data for future management plan development. Barton Spring/Edwards Aquifer Conservation District questions, regarding sec.sec.356.6(a)(1), how a certified copy of a management plan be submitted for certification? The board agrees with the comment and has removed the term "certified." Central Power and Light Company, Central and South West Corporation and its subsidiaries in Texas, including West Texas Utilities and Southwest Electric Power Company request the addition to sec.sec.356.6 of new subparagraphs (a)(3)(A) and (B) after (a)(3) to read: "(A) Evidence that the district provided notice of its proposed management plan in writing by certified mail to current groundwater users within its boundaries based on information on file at the district or board offices, or on file at other appropriate state agencies; (B) evidence that the district provided at least a 30-day comment period following notice and prior to the adoption of its proposed management plan, in addition to the public hearing." The board does not agree that rule change is necessary as a result of these comments at this time, but that districts should have the ability to address these issues first in their procedures If problems arise, the board will address this issue later. Irion County WCD and Plateau County Underground Water Conservation and Supply District commented that sec.sec.356.6(a)(4)and (5) are vague on the requirement to provide evidence that groundwater districts coordinate with surface management entities, and on what constitutes evidence of consistency with approved regional plans. They also ask for identification of surface water management entities. Edwards Aquifer Authority asks for a better interpretation of "consistency with regional plans." Panhandle Groundwater Conservation District No. 3 agrees with these comments and requests examples of coordinated development with surface water management entities, and examples of requirements for consistency with approved regional water management plans. Barton Spring/Edwards Aquifer Conservation District asks if a soil and water conservation district is a surface water management entity that will need to be consulted. It also asks for a listing of all entities in its area that should be included in review of the plan, notes that a comprehensive map identifying the boundaries of these entities would help alleviate some confusion that may surface, and asks the board to identify entities it should contact on the map. The board has adopted some changes to address the concerns raised in these comments. The definition of surface water management entity is adopted with changes to clarify that the districts may rely on records of the Texas Natural Resource Conservation Commission (TNRCC) to obtain the list of surface water management entities. In sec.sec.346.6(a)(4), the board has clarified that the coordination of development of the management plan with surface water management entities must be done following notice and hearing, as required by Texas Water Code, sec.sec.36.1071(a). The board has not specified in any greater detail the coordination required, as it believes the districts are in the best position to determine this for their particular regions. The board has adopted changes to sec.sec.356.6(a)(5), to clarify that evidence of consistency with and conflict between the management plan and an approved regional plan is to be provided by mailing notice of the plan to the chairman of the regional planning group, and asking such group to specify any areas of conflict between the plans. A copy of any comments received shall be provided to the board. This definition of surface water management entities does not include soil and water conservation districts, unless they are granted authority to store, take, divert or supply surface water. The board will be happy to consult with the district in its technical capacity to assist in identifying the entities it should contact. The Ranch at Blanco asks that sec.sec.356.6(a)(5) specify who makes decisions about whether groundwater management plans are consistent with approved regional water plans. The board agrees that changes to the section should be made, and has specified that the board, with input from the regional planning group, will make this determination. Panhandle GWCD Number 3 and Gonzales UWCD commented on sec.sec.356.7 that the board should track the statutory language about the executive administrator certifying the management plan if it is administratively complete. The board agrees and has made this change both in sec.sec.356.7 and in sec.sec.356.1 and 356.5. Irion County WCD stated the rules did not provide sufficient standards on what is approvable. The board disagrees that rule changes are necessary as a result of the comments. The rules provide an outline of needed information and provide definitions to help explain statutory terms. The board considers that the districts have considerable discretion in what goes into their plans, and has attempted to preserve that discretion. The board is directed by statute to certify as administratively complete all plans that contain the requirements set out by statute. The rules provide sufficient additional detail to provide the districts guidance on what will be considered administratively complete. Sterling County UWCD, Hickory UWCD, Sutton County UWCD, and Santa Rita UWCD ask how counties without groundwater districts will be asked to comply with rules and manage groundwater resources, and how the certification process works. Plateau Underground Water Conservation and Supply District made similar comments and asked how these counties will be consistent with regional water plans? The board has made no rule changes as a result of these comments. The board has no authority to require groundwater management plans from entities other than groundwater districts. If districts do not exist, there is no process to assure groundwater use is consistent with regional water plans. Hickory UWCD Number 1 stated that the comment period on the rules was too short. The board extended the comment period by holding a public hearing on October 31, 1997. Hickory UWCD Number 1 stated that each underground water conservation district should have a representative for preparing the regional water plan. Sutton County UWCD asked if groundwater districts will have "equal" representation as population centers in developing regional plans? Lipan-Kickapoo WCD expressed concern that districts would not be adequately represented on the regional groups. Barton Springs/Edwards Aquifer Conservation District wanted to have full participation in both of the regions in which the district may be located. The board does not adopt changes to these rules based upon these comments. These comments relate to other rules drafted but not yet published for adoption by the board regarding regional water planning, and the composition of the regional water planning groups to develop the plans. The board recognizes the need to have groundwater representation on the regional planning group, and will consider the need to adjust its rules on this subject before publication. The board appoints the representatives of the initial coordinating body for the regional water planning groups, and is committed to assure that groundwater interests are appropriately represented on these bodies. The local regional planning groups under the provisions of Senate Bill 1 have the ultimate responsibility to adjust the levels of representation. Irion County WCD said the rules should acknowledge that in some localities, districts may be doing all that is possible to preserve and protect water resources. It also stated that the rules may be interpreted to be top down and not bottom-up planning. The board has added new sec.sec.356.5(b) to acknowledge that the districts must themselves establish goals etc., a recognition of the local control and also an understanding that the districts best understand what can be done in their areas. Hickory UWCD Number 1 commented that the board has power to mandate information and actions on districts without just financial reimbursement, and the right to attach fees and fines, which is taxation without representation. The requirements are imposed because of statutory changes, and the ability to remedy these concerns is beyond the scope of this rulemaking. Sutton County UWCD commented that eleven groundwater districts have requested guidance and technical assistance from the board under two different formats, but the requests have merited no attention. Rule change is not required from the comment. The board is not aware of what requests are referenced, but will work with the district on the issue. Santa Rita UWCD commented that districts will be unable to provide data without technical or financial assistance. No rule changes are adopted as a result of these comments. The board and TNRCC are directed to provide technical assistance to the districts pursuant to Texas Water Code, sec.sec.36.1071(c). Senate Bill 1 allows the board to make financial assistance to districts for the development of the groundwater management plans and the legislature has appropriated funds to provide this assistance in the form of loans this biennium. Texas Water Code, sec.sec.36.159. Hickory UWCD Number 1 comments that the rules put the board in a position of authority over elected officials in districts. It states this is neither proper nor authorized and that citizens should vote on this type of procedural change. No rule changes are adopted as a result of these comments. The rules do not mandate the decisions the districts must make in their management plans nor in their management of resources. They require, consistent with statute, that the districts consider certain things in their planning and address certain items in their plans. Sterling County UWCD commented that citizens, not the TNRCC, should have the power to dissolve district boards, remove their taxing authority or dissolve the districts for failure to submit a plan. Hickory UWCD Number 1 questions whether TNRCC can dissolve a board elected by citizens, and how will arbitrary and punitive actions be prevented. Santa Rita UWCD stated it was unconstitutional for the board to dissolve elected boards of directors of groundwater district. McCulloch County Property Owner's Association questions authority of an appointed board to dissolve an elected district's board. The board has made no rule changes as a result of these comments. The board is given no authority to adopt rules that address these issues. The rules do not address the issue of actions against the districts for failure to submit a plan, or to otherwise take actions to dissolve the district boards, dissolve the districts, or remove their taxing authority. The Texas Water Code does provide for TNRCC to take certain actions against a district for failure to adopt a plan or to actively follow its plan. The issue of the constitutionality of such provision is beyond the scope of this rulemaking proceeding. Irion County Water Conservation District requested the board remove language in the rules relating to audits. The board has made no change as a result of the comments. The board has not included a section relating to audits, as the board has no authority over the audits of the districts' compliance with management plans. Irion County Water Conservation District requested the board specify the rules are not intended to regulate wells not in the management process. The board disagrees that rule change is necessary as a result of this comment. The rules do not require regulation, and specifically leave management goals to the districts. Mesa County UWCD stated that there should be local control, and the rules proposed by the board are how the district's management plan has been addressed in the past. Barton Springs/Edwards Aquifer Conservation District asks that the rules be clarified to explain the districts decide how much detail to include in plans and where to put the emphasis. The board disagrees that rule change is necessary as a result of this comment. The rules clearly specify the local control of the districts, and acknowledge that the districts may use existing data, estimates and plans they may have developed if they meet the requirements of statute and the rules. New sec.sec.356.5(b) was added to address this issue. Hickory UWCD Number 1 and McCulloch County Property Owners Association commented that Senate Bill 1 and the rules will infringe on the right of capture. The board disagrees that changes are needed to the rules based on these comments. Districts historically have been established under constitutional and statutory authority to best manage groundwater as they see fit for their particular unique problems. Neither these rules nor Senate Bill 1 require additional regulation of groundwater, but rather allow the districts to establish a better understanding of the resource in order to enhance their management under existing law. Districts still set their own goals, and determine the level of management they wish to accomplish. McCulloch County Property Owners Association commented that the rules put strong demands on districts and make them try to please the board while continuing to get along with owners of groundwater. Abuse of landowners rights while trying to please board will result in legal complaints. The board does not agree that any changes are needed to the rules as a result of the comments. The rules do not require additional regulation of groundwater, but rather allow the districts to establish a better understanding of the resource in order to enhance their management under existing law. Districts still set their own goals, and determine the level of management they wish to accomplish. El Paso Water Utilities commented that water users need input into groundwater management plans. The board has not adopted changes based on this comment. The statutes and rules require notice and hearing on development of the plans, but the board will allow districts to develop the methodology for public input. The new sections are adopted under the authority of the Texas Water Code, sec.sec.6.101 which provides the Texas Water Development Board with the authority to adopt rules necessary to carry out the powers and duties in the Texas Water Code and other laws of the state, including the requirement in Texas Water Code, sec.sec.36.1072 for the Board to certify the administrative completeness of groundwater management plans. sec.356.1. Scope of Chapter. This chapter shall govern the board's procedures for reviewing and certifying management plans as administratively complete. sec.356.2. Definitions of Terms. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. Words defined in Texas Water Code, Chapter 36 and not defined here shall have the meanings provided in Chapter 36. Amount of groundwater being used - The quantity of groundwater withdrawn or flowing from an aquifer naturally or artificially on an annual basis. Approved regional water plan - A water plan developed pursuant to Texas Water Code, sec.16.053 and which has been approved by the board. Artificial recharge - Increased recharge accomplished by the modification of the land surface, streams, or lakes to increase seepage or infiltration rates or by the direct injection of water into the subsurface through wells. Board - Texas Water Development Board. Conjunctive surface water management issues - Issues relating to the active use of both surface water and groundwater to achieve increased water supply or enhanced water quality. District - Any district or authority created under Texas Constitution, Article III, sec.sec.52 or Article XVI, sec.sec.59 that has the authority to regulate the spacing of water wells, the production from water wells, or both. Estimates - Calculations using best available data and methodologies specified in the management plan such that the quantifications will be reasonable for use by the district and can be tracked over time. Executive administrator - The executive administrator of the board. Management goals - The qualitative and quantitative ends toward which a district directs its efforts. Management objectives - Specific, quantifiable, and time-based statements of desired future accomplishments or outcomes, each linked to a management goal, which set the individual priority for district strategies. Management plan - The groundwater management plan required pursuant to Texas Water Code, sec.36.1071. Most efficient use of groundwater - Those practices, techniques and technologies that the district determines will provide the least consumption of groundwater for each type of use balanced with the benefits of using groundwater. Performance standards - Indicators or measures, each of which is linked to a management objective, used to evaluate effectiveness and efficiency of district activities by quantifying the results of actions and the impact of the results of activities. Evaluation of the effectiveness of district activities measures the accomplishments of the district. Evaluation of the efficiency of district activities measures how well resources are used to produce an output, such as the amount of resources devoted per unit of accomplishment. Projected water demand - The quantity of water needed per annum for beneficial use during the period covered by the management plan. The demands shall be projected for the types of use that are included in the state water plan. Each type of use may be subdivided into sub-types by the district. Projected water supply - The usable amount of groundwater available per annum under the district's management plan and the quantity of surface water available per annum during the period covered by the management plan. Recharge - The addition of water from precipitation or runoff by seepage or infiltration to an aquifer from the land surface, streams, or lakes directly into a formation or indirectly by way of leakage from another formation. Regional water plan - Regional water plan developed by a regional water planning group in each regional water planning area as provided by Texas Water Code, sec.16.053. Surface water management entities - Political subdivisions as defined by Texas Water Code, Chapter 15, and identified from Texas Natural Resource Conservation Commission records which are granted authority to store, take, divert, or supply surface water either directly or by contract under Texas Water Code, Chapter 11, for use within the boundaries of a district. Usable amount of groundwater - The quantity of groundwater of acceptable quality that is contained within the portion of an aquifer covered by a district's management plan and which is economically and legally retrievable for beneficial use. sec.356.3. Required Management Plan. As required by Texas Water Code, sec.36.1071 and sec.36.1072, a district shall submit to the executive administrator a management plan that meets the requirements of sec.356.5 of this title (relating to Required Content of Management Plan). The management plan shall be submitted by existing districts not later than September 1, 1998. For districts created after or which require a confirmation election after September 1, 1997, the management plan shall be submitted not later than two years after the creation of the district or, if the district requires confirmation, not later than two years after the election confirming the district. The district may review the plan annually, and shall readopt the plan with or without revisions at least once every five years. sec.356.4. Consistency with Regional Water Plans. Management plans developed after the board approval of a regional water plan, or amendments to management plans developed after the approval of a regional water plan must be consistent with the approved regional water plan for each region in which any part of the district is located. If approval of a regional water plan makes the management plan inconsistent, the district shall revise its management plan within the five-year rotation specified in sec.356.3 of this title (relating to Required Management Plan). sec.356.5. Required Content of Management Plan. (a) The executive administrator shall certify a management plan as administratively complete if it uses a planning period of at least ten years and contains the following: (1) management goals, as applicable: (A) providing the most efficient use of groundwater; (B) controlling and preventing waste of groundwater; (C) controlling and preventing subsidence; (D) addressing conjunctive surface water management issues; and (E) addressing natural resource issues which impact the use and availability of groundwater, and which are impacted by the use of groundwater; (2) performance standards and management objectives that the district will use to achieve the management goals in paragraph (1) of this subsection; (3) actions, procedures, performance, and avoidance, necessary to effectuate the management plan, including specifications and proposed rules, all specified in as much detail as possible; and (4) estimates of: (A) the existing total usable amount of groundwater in the district; (B) the amount of groundwater being used within the district on an annual basis; (C) the annual amount of recharge to the groundwater resources within the district and annual amount of additional natural or artificial recharge that could result from implementation of feasible methods for increasing the natural or artificial recharge; and (D) the projected water supply and demand within the district; (5) details of how the district will manage groundwater supplies in the district, including a methodology by which a district will track its progress on an annual basis in achieving its management goals. (b) The management goals, performance standards and management objectives required in subsection (a)(1) and (2) of this section and the actions, procedures, performance and avoidance specified in subsection (a)(3) of this section are to be established by each district based on specific needs of that district. Each district may use any information available to it, including an existing groundwater management plan of the district, to make the estimates required in subsection (a) of this section and to develop the plan required by these rules. The district may use information available from other sources, including the board, if such information is sufficient in the district's judgment to make acceptable estimates. The district determines the level of data that is sufficient to satisfy these requirements. The district may require different levels of data for aquifers or for portions of aquifers over which that the district has management authority, compared with aquifers over which the district has no management authority, and also may determine the levels of data necessary based on the level of importance of the aquifer. (c) In addition to the requirements of subsection (a) of this section, the management plan shall address water supply needs in a manner that does not conflict with an approved regional water plan for each region in which any part of the district is located. (d) The requirement of subsection (c) of this section may be waived if the executive administrator determines that conditions justify such waiver. Waiver will only be granted upon the written request of the district accompanied by evidence acceptable to the executive administrator in form and substance of conditions justifying such waiver. sec.356.6. Plan Submittal. (a) A district requesting review and certification of the administrative completeness of its management plan shall submit to the executive administrator the following: (1) a copy of the adopted management plan; (2) a certified copy of the district's resolution adopting the plan; (3) evidence that the plan was adopted after notice and hearing; (4) evidence that, following notice and hearing, the district coordinated in the development of its management plan with surface water management entities; and (5) evidence of consistency with and any conflict between the proposed management plan and an approved regional water plan for each region in which any part of the district is located, if such regional water management plan has been approved by the board. To meet the requirements of this paragraph, the district shall send, by certified mail, return receipt requested, to the chair of each regional water planning group formed under Texas Water Code, sec.16.053(c) for each region in which any part of the district is located, a letter asking the regional water planning group to review the management plan for consistency with the regional water plan, and asking the regional water planning group to specify any areas of conflict between the management plan and the regional water plan. The district shall provide to the board a copy of any comments on the management plan provided by the regional water planning group. The executive administrator, with input from the regional water planning groups, will determine if there are any conflicts between the management plan and the regional water plans. (b) The plan or revised plan under sec.sec.356.7 of this title (relating to Certification) shall be considered submitted to the board when it is received in the Austin offices of the board. sec.356.7. Certification. Within 60 days of receipt of a management plan, the executive administrator shall certify the plan as administratively complete if it complies with the requirements of sec.356.5 of this title (relating to Required Content of Management Plan) or shall deny certification of the plan if it does not comply with such requirements. Within five days of making a certification determination, the executive administrator shall notify the district in writing of the determination. If certification is denied, the executive administrator shall include written reasons for the denial with the notice of denial. If the executive administrator denies certification, the district may submit a revised management plan for review and certification within 180 days from receipt of notice that the executive administrator has denied certification. The review and certification of a revised management plan must comply with all the requirements of this chapter pertaining to the review and certification of originally submitted management plans. sec.356.9. Certification of Amendments. A district shall submit all amendments to the management plan to the board within 60 days of adoption. Within 60 days of receipt of amendments to the management plan, the executive administrator either shall notify the district that the amendments do not substantially affect the management plan, or shall provide the district with written notification of certification or denial of certification of the plan as amended as administratively complete. The requirements of this chapter apply to any amendment to a district's management plan that substantially affects the management plan. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715665 Suzanne Schwartz General Counsel Texas Water Development Board Effective date: December 11, 1997 Proposal publication date: September 5, 1997 For further information, please call: (512) 463-7981 CHAPTER 365. Investment Rules The Texas Water Development Board (the board) adopts amendments to sec.sec.365.2, 365.5, 365.9-365.12, 365.15, and 365.21, concerning Investment Rules, without changes to the proposed text as published in the October 3, 1997, Texas Register (22 TexReg 9860) and will not be republished. The rule is amended to comply with changes made to the Public Funds Investment Act (PFIA) Chapter 2256 of the Government Code by H.B. 2799 effective September 1, 1997. The amendments provide new definitions, note that the board's portfolio will be invested in compliance with federal law, change the investment officer's training requirement, provide for annual review and adoption of the list of authorized dealers, clarify the selection process of authorized dealers, and limit the payment and delivery of securities to a delivery versus payment method. No comments were received on the proposed amendments. General Provisions 31 TAC sec.sec.365.2, 365.5, 365.9, 365.10 The amendments are adopted under the authority of the Texas Water Code, sec.6.101 which provides the Texas Water Development Board 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 the Texas Government Code, Chapter 2256 which requires each State agency to adopt rules regarding the investment of its funds. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715701 Suzanne Schwartz General Counsel Texas Water Development Board Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-7981 Selection of Authorized Dealers 31 TAC sec.sec.365.11, 365.12, 365.15 The amendments are adopted under the authority of the Texas Water Code, sec.6.101 which provides the Texas Water Development Board 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 the Texas Government Code, Chapter 2256 which requires each State agency to adopt rules regarding the investment of its funds. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715702 Suzanne Schwartz General Counsel Texas Water Development Board Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-7981 Investment Procedures 31 TAC sec.365.21 The amendment is adopted under the authority of the Texas Water Code, sec.6.101 which provides the Texas Water Development Board 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 the Texas Government Code, Chapter 2256 which requires each State agency to adopt rules regarding the investment of its funds. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715703 Suzanne Schwartz General Counsel Texas Water Development Board Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-7981 PART XVI. Coastal Coordination Council CHAPTER 501. Coastal Management Program SUBCHAPTER A. General Provisions 31 TAC sec.501.3 The Coastal Coordination Council (Council) adopts an amendment to sec.501.3(b)(5) of the Texas Coastal Management Program (CMP) rules, relating to the definition of "coastal wetlands," without changes to the proposed text as published in the August 26, 1997, issue of the Texas Register (22 TexReg 8532). This amendment is necessitated by the Legislature's change in the statutory definition of "coastal wetlands" under the Coastal Coordination Act. Tex. Nat. Res. Code Ann., Chapter 33, Subchapter F, sec.33.205(7), as amended by Act of May 28, 1997, S.B. 1922, sec.1, 75th Leg., R.S (Senate Bill 1922). The Legislature amended the definition of "coastal wetlands" to exclude all lands within Liberty County from the CMP boundary. Senate Bill 1922 went into effect May 28, 1997, removing Liberty County from the CMP boundary. This amendment aligns the CMP rules with the Coastal Coordination Act, as amended by Senate Bill 1922. The text of the rule will not be republished. The amendment to the definition of "coastal wetland" and the resulting amendment of the CMP boundary constitute amendments of the CMP which require approval by the National Oceanic and Atmospheric Administration's Office of Ocean and Coastal Resource Management. The amendments comply with the federal regulations governing program approval. No comments were received on the proposed amendment. The Council has prepared a takings impact assessment for the adoption of this amendment and determined that adoption of this amendment will not result in a taking of private real property. To receive a copy of the takings impact assessment for this amendment, please send a written request to Ms. Sylvia Sissom, Texas General Land Office, Legal Services Division, 1700 North Congress Avenue, Room 626, Austin, Texas 78701-1495, facsimile number (512) 463-6311. This amendment is adopted under Texas Natural Resources Code sec.33.054, which provides for amendment of the CMP. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 24, 1997. TRD-9715800 Garry Mauro Commissioner General Land Office Effective date: December 15, 1997 Proposal publication date: August 26, 1997 For further information, please call: (512) 305-9129 CHAPTER 503. Coastal Management Program Boundary 31 TAC sec.503.1 The Coastal Coordination Council (Council) adopts an amendment to sec.503.1 of the Texas Coastal Management Program (CMP) rules, relating to the CMP boundary, without changes to the proposed text as published in the August 26, 1997, issue of the Texas Register (22 TexReg 8533). This amendment is necessitated by the Legislature's change in the statutory definition of "coastal wetlands" under the Coastal Coordination Act. Tex. Nat. Res. Code Ann., Chapter 33, Subchapter F, sec.33.205(7), as amended by Act of May 28, 1997, S.B. 1922, sec.1, 75th Leg., R.S (Senate Bill 1922). Section 33.2053(k) of the Coastal Coordination Act specifies that the CMP boundary is the coastal facility designation line as defined by Appendix 1 to 31 TAC sec.19.2 as modified by the definition of "coastal wetlands." The Legislature amended the definition of "coastal wetlands" to exclude all lands and water within Liberty County from the CMP boundary. Senate Bill 1922 went into effect May 28, 1997, removing Liberty County from the CMP boundary. This amendment aligns the CMP rules with the Coastal Coordination Act, as amended by Senate Bill 1922. The text will not be re-published. The amendment to the definition of "coastal wetland" and the resulting amendment of the CMP boundary constitute amendments of the CMP which require approval by the National Oceanic and Atmospheric Administration's Office of Ocean and Coastal Resource Management. The amendments comply with the federal regulations governing program approval. No comments were received on the proposed amendment. The Council has prepared a takings impact assessment for the adoption of this amendment and determined that adoption of this amendment will not result in a taking of private real property. To receive a copy of the takings impact assessment for this amendment, please send a written request to Ms. Sylvia Sissom, Texas General Land Office, Legal Services Division, 1700 North Congress Avenue, Room 626, Austin, Texas 78701-1495, facsimile number (512) 463-6311. This amendment is adopted under Texas Natural Resources Code sec.33.054, which provides for amendment of the CMP. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 24, 1997. TRD-9715799 Garry Mauro Commissioner General Land Office Effective date: December 15, 1997 Proposal publication date: August 26, 1997 For further information, please call: (512) 305-9129 TITLE 37. PUBLIC SAFETY AND CORRECTIONS PART VI. Texas Department of Criminal Justice CHAPTER 152.Institutional Division SUBCHAPTER B.Maximum System Capacity of the Institutional Division 37 TAC sec.152.12 The Texas Department of Criminal Justice provisionally adopts an amendment to sec.152.12, concerning the maximum capacity of certain units of the Institutional Division, with one change to the proposed text as published in the October 3, 1997, issue of the Texas Register (22 TexReg 9863). The new subsection is provisionally adopted to comply with the orderly process under state law, Government Code, sec.sec.499.101 et seq., for increasing prison capacity, a process that requires multiple levels of review and recommendation to ensure that capacity increases will not impede the provision of enumerated services, function, and staffing. Provisional adoption reflects several issues: the lack, to date, of a cost analysis by the Legislative Budget Board under sec.499.102(b); the requirement of review and approval by Governor George W. Bush and Attorney General Dan Morales under sec.499.106 and sec.499.107; and the addition of possible trusty camps at the Hilltop and Luther units as part of the proposal. Those additions trigger, for those units only, the staff review, official review and recommendations, and inmate comment solicitation, as have already occurred for the rest of the units affected by the addition of trusty camps. The effect of the entire amendment adding subsection (j), is to allow the Institutional Division to increase trusty camp capacities by constructing a 214- bed permanent addition to the trusty camp at the Ellis Unit, and 107-bed permanent additions to the trusty camps at 18 of the following 21 prison units (the exact list to be determined at a later date): Beto, Central, Clemens, Coffield, Darrington, Eastham, Ferguson, Gatesville, Goree, Hilltop, Jester III, Luther, Michael, Pack, Powledge, Ramsey I, Ramsey II, Ramsey III, Retrieve, Texas City Women's Shelter, and Wynne. No public comments were received on the proposal. Notice to inmates and opportunity for comment under Government Code, sec.499.103, was initiated on September 9, 1997, and 12 letters by 11 inmates were received from the following prison units: Pack, Ramsey I, Darrington, Ferguson, Powledge, Ellis and Michaels. Some letters did not actually express concerns or make relevant comments, but most of the letters did raise relevant issues. TDCJ functional area staff evaluated the inmates' concerns, which related primarily to staffing, space and supply shortages that the inmates' either already claimed to experience, or felt would be caused by the additions. The following functional area staff noted that the shortage issues have already been accounted for in the proposed expansion, and that they are prepared to effectively administer their areas of oversight: Access to Courts, Chaplaincy, Classification, Commissary, Counsel Substitutes, Disciplinary, Education/Programs, Food Service, Grievance, Internal Affairs, Laundry/Necessities, Maintenance, Recreation, Risk Management, and Staffing. Some complaints in the areas of Food Services, Internal Affairs, and Maintenance, though unrelated to the proposed additions, were also investigated to staff's satisfaction. One functional area, Health Services, indicated that some of the inmates' concerns could have merit, such as lengthy sick call procedures and understaffing. Appropriate medical staff and managed care providers have been tasked with submitting solutions to the concerns. In addition to functional area staff, the wardens of the Darrington, Ellis, Pack, and Ramsey I units responded that the proposed additions would not adversely affect operations or delivery of services at their respective units. Finally, legal counsel considered and rejected complaints that the proposed additions violate the Ruiz Final Judgment and that the agency has failed to comply with the Americans with Disabilities Act. The amendment is adopted under Chapter 499, Subchapter E, Government Code. In conformity with that statute, the amendment cannot take ultimate effect without the acceptance of the recommendations by the governor and the governor and the attorney general, under sec.499.106 and sec.499.107. sec.152.12.Methodology for Changing the Maximum System Population. (a) -(i) (No change.) (j) In this subsection, "trusty camp addition" refers to a 107-bed dormitory facility added to an existing trusty camp at an existing prison unit, except that, in the case of the Ellis Unit, the addition is a 214-bed dormitory facility. The institutional division may increase system capacity by constructing and operating a 214-bed substantially self-contained trusty camp addition to the trusty camp at the Ellis Unit, and by constructing and operating a substantially self-contained trusty camp addition to the trusty camps at 18 of the following 21 units: Beto, Central, Clemens, Coffield, Darrington, Eastham, Ferguson, Gatesville, Goree, Hilltop, Jester III, Luther, Michael, Pack, Powledge, Ramsey I, Ramsey II, Ramsey III, Retrieve, Texas City Women's Shelter, and Wynne. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 24, 1997. TRD-9715750 Carl Reynolds General Counsel Texas Department of Criminal Justice Effective date: December 15, 1997 Proposal publication date: October 3,1997 For further information, please call: (512) 463-9693 TITLE 40. SOCIAL SERVICES AND ASSISTANCE PART XX. Texas Workforce Commission CHAPTER 800.General Administration SUBCHAPTER C.Charges for Copies of Public Records 40 TAC sec.sec.800.71-800.75 The Texas Workforce Commission (Commission) adopts new sec.sec.800.71-800.75 concerning Charges for Copies of Public Records, without changes to the proposed text published in the September 12, 1997 issue of the Texas Register (22 TexReg 9233). The new rules result in the relocation of the rules repealed concurrently into 40 TAC Chapter 800 regarding General Administration. The new rules include all of the language from the rules repealed in sec.sec.821.1-821.5, with the exception of the technical changes of the agency title from "Texas Employment Commission" to "Texas Workforce Commission," and updated references to the applicable statutes governing public records. The rules adopt by reference the definitions, methods, procedures, and charges for copies of public records as set out in General services Commission Rules , as contemplated by the Texas Public Information Act. The new rules provide no substantive changes. No comments were received regarding adoption of new sec.sec.800.71-800.75. The new rules are adopted under Texas Labor Code, Title 4 sec. 301.061, which provides the Texas Workforce Commission with the authority to adopt, amend, or rescind such rules as it deems necessary for the effective administration of the Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715698 J. Randel (Jerry) Hill General Counsel Texas Workforce Commission Effective date: December 11, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 463-8812 CHAPTER 821.Charges for Copies of Public Records SUBCHAPTER C.Charges for Copies of Public Records 40 TAC sec.sec.821.1-821.5 The Texas Workforce Commission (Commission) adopts the repeal of sec.sec.821.1- 821.5 concerning Charges for Copies of Public Records, without changes to the proposed text published in the September 12, 1997 issue of the Texas Register (22 TexReg 9233). The repeals and new rules adopted concurrently with the repeals result in the relocation of the rules into 40 TAC Chapter 800 regarding General Administration. New rules adopted concurrently with this repeal include all of the language from the rules repealed with the exception of the technical changes of the agency title from "Texas Employment Commission" to "Texas Workforce Commission," and updated references to the applicable statutes governing public records. No comments were received regarding repeal of sec.sec.821.1-821.5. The repeals are adopted under Texas Labor Code, Title 4 sec. 301.061, which provides the Texas Workforce Commission with the authority to adopt, amend, or rescind such rules as it deems necessary for the effective administration of the Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-97015699 J. Randel (Jerry) Hill General Counsel Texas Workforce Commission Effective date: December 11, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 463-8812 CHAPTER 835.Self-Sufficiency Fund The Texas Workforce Commission adopts new sec.sec.835.1-835.3, sec.sec.835.11- 835.15, and sec.sec. 835.31-835.33 concerning the establishment and operation of the Self-Sufficiency Fund. Sections 835.1-835.3, sec.sec.835.11-835.15, and sec.sec. 835.31-835.33 are adopted without changes to the proposed text as published in the October 3, 1997, issue of the Texas Register (22 TexReg 9882) and will not be republished. One of the primary goals of the Texas Workforce Commission is to prepare, place and retain individuals in employment. The Commission is also required by Texas Labor Code, sec.301.001(b) to meet the needs of the businesses of this state for the development of a highly skilled and productive workforce as well as meeting the needs of the workers of this state for education and skills. Texas Labor Code, sec.302.021(a) placed under the authority of the Commission employment programs under Texas Human Resources Code, Chapter 31 and the Job Opportunities and Basic Skills program under Social Security Act Part F Subchapter IV (42 U.S.C. sec.682). The Commission is specifically directed to assist individuals in making the transition into the workforce from public assistance. The 75th Legislature in House Bill 1 (1997) directed the Commission to develop a Self- Sufficiency Fund to work with employers and training organizations to provide training for targeted employment for Temporary Assistance for Needy Families (TANF) recipients as a strategy to increase long term success in retention of employment by those TANF recipients. The adopted rules describe the operation of the Self-Sufficiency Fund. The purpose and goal of the Self-Sufficiency Fund is to aid in the transition of TANF recipients to the workforce through the development of customized training plans and necessary support services. The fund will provide training for TANF recipients through programs throughout the state in order to meet required TANF participation rates. The rules describe the procedure to be used in making an application for a Self-Sufficiency Fund award and the procedure to be used by the Commission in evaluating the proposals submitted. The responsibilities of a grant recipient of a Self-Sufficiency Fund award are enumerated and the requirements which must be met in order to obtain payment on a Self-Sufficiency Fund contract are listed. No comments were received concerning the proposed rules. SUBCHAPTER A.General Provisions Regarding the Self-Sufficiency Fund 40 TAC sec.sec.835.1-835.3 The new sections are adopted under Texas Labor Code sec.301.061 which provides the Texas Workforce Commission with the authority to adopt, amend, or rescind such rules as it deems necessary for the effective administration of this Act. The proposed rule affects Chapter 302, Texas Labor Code, particularly sec.302.002 and sec.302.021. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715695 J. Randel (Jerry) Hill General Counsel Texas Workforce Commission Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-8812 SUBCHAPTER B.Project Administration 40 TAC sec.sec.835.11-835.15 The new sections are adopted under Texas Labor Code sec.301.061 which provides the Texas Workforce Commission with the authority to adopt, amend, or rescind such rules as it deems necessary for the effective administration of this Act. The proposed rule affects Chapter 302, Texas Labor Code, particularly sec.302.002 and sec.302.021. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715696 J. Randel (Jerry) Hill General Counsel Texas Workforce Commission Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-8812 SUBCHAPTER C.Project Administration After Award of Contract 40 TAC sec.sec.835.31-835.33 The new sections are adopted under Texas Labor Code sec.301.061 which provides the Texas Workforce Commission with the authority to adopt, amend, or rescind such rules as it deems necessary for the effective administration of this Act. The proposed rule affects Chapter 302, Texas Labor Code, particularly sec.302.002 and sec.302.021. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715697 J. Randel (Jerry) Hill General Counsel Texas Workforce Commission Effective date: December 11, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 463-8812 TITLE 43. TRANSPORTATION PART I. Texas Department of Transportation CHAPTER 4.Employment Practices SUBCHAPTER F.Employee Training and Education 43 TAC sec.sec.4.62-4.64 The Texas Department of Transportation adopts amendments to sec.sec.4.62-4.64, concerning the department's employee training and education program without changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9454). Government Code, sec.656.048 requires state agencies to adopt rules relating to the eligibility of the department's administrators and employees for training and education supported by the state agencies and the obligations assumed by the administrators and employees on receiving the training and education. Section 4.62 is amended to allow an employee to receive training in order to perform prospective job duties as approved by the management team member which will allow management the ability to provide training for future requirements or career development. The amendments also allow training that provides a safe work environment. This provides additional emphasis in an essential aspect of department life. Section 4.63 is amended to define the Education Programs as consisting of three programs, the Education Assistance Program, a full-time Master's Program, and a Non-Degree Program. This is important because of the differences in assistance provided, eligibility requirements, and obligations for each of the three component programs. The amendments also create a procedure to determine if the desired degree program is outside of the employee's current job field. Since there is a difference in obligations based on this determination, this is needed to ensure that this determination is performed similarly throughout the department. The amendments set a time limit of four semesters for the full-time Master's Program unless the time is extended based on the employee's approved degree plan requirements, or based on hardship as approved by the Assistant Executive Director for Human Resources Management. This was needed to clearly define the limits of the program while providing a point at which repayment provisions begin. Amendments require that employees applying for the Master's Program in engineering programs possess a professional engineering license from the State of Texas. This provision creates a more professional employee whose increased knowledge and experience will produce a research project to meet the demands of emerging trends and requirements of the transportation industry. A service requirement of five years with the department is required for the Master's Program for disciplines other than engineering. This provision is required to establish an experiential base for a selected employee that will assist in making the research project more beneficial for the department. An employee in the Education Assistance Program is required to be enrolled at least two of the three semesters during the annual school year. This replaces a provision that required continuous enrollment. This change keeps the employee committed to a degree plan while providing a more reasonable standard for attendance. Employees are required to obtain a passing grade in each course in order to maintain eligibility in all of the programs, instead of an overall passing grade. This requirement enforces a higher standard of employee performance and endures the overall cost of assistance provided. The senior management team member may deny an employee's participation during a particular semester in the Education Assistance Program based on extraordinary work requirements. This is needed to ensure that management has the ability to meet unexpected functions in work while keeping the employee from entering into a repayment situation. An employee who meets one of the requirements to attend a private institution, may only attend a private institution in Texas. An employee attending a private institution in Texas is required to earn as many credits as possible at an available public institution to keep the overall costs as low as possible. A student may take an out-of-state correspondence course if there is no in-state course available. Relocation assistance is permitted for full-time Master's Program employees. This is necessary to provide the department with the ability to relocate selected employees in order for them to obtain a designated degree and create an approved research project available on at location apart from the employee's current domicile. Section 4.64 is amended to require that an employee in the full-time Master's Program who fails to complete the program must repay at least two months of service for each month of study paid for by the department. The rule previously required service only if the employee obtained a master's degree. The amendments establish a service commitment for employees obtaining a degree in their job field under the Education Assistance Program. This revision continues to require service in payment for the education assistance provided to an employee. This recognizes that the employee's continued service is a valid means of repayment. The amendments establish a service obligation for those employees pursuing a field of study outside their current areas of responsibility. This service obligation is two years for a bachelor's degree and three years for a master's degree. This requirement recognizes that the skills and knowledge obtained in getting this degree cannot be used in the current job. Therefore, repayment can only begin after the skills have been obtained, after the degree has been earned. An employee is liable to the department for any reasonable expense incurred in obtaining payment. This provision serves as an added incentive for an employee to avoid repayment obligations. The amendments require an employee in any of the three programs to repay the costs of a failed course. The amendments provide for notification of credit bureaus if an employee fails to repay the department or fails to adhere to the terms of the Education Assistance Agreement. This provision further encourages repayment of state funds provided for education assistance. The amendments permit the executive director to reduce or cancel the debt or service requirement of any employee who departs the department and begins work for another state agency. This recognizes that the expenditure of state employee skill and capability can be repaired in another state of Texas agency. No comments were received regarding adoption of the amendments. The amendments are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation and Government Code, sec.656.048 which requires state agencies to adopt rules relating to the eligibility of the department's administrators and employees for training and education and the obligations assumed by the administrators and employees on receiving the training and education. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715732 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 11, 1997 Proposal publication date: September 19, 1997 For further information, please call: (512) 463-8630 CHAPTER 9.Contract Management SUBCHAPTER B.Highway Improvement Contracts 43 TAC sec.9.19 The Texas Department of Transportation adopts an amendment to sec.9.19, concerning emergency contract procedures for highway improvement projects without changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9459). Transportation Code, Chapter 223, Subchapter C authorizes the department to award a highway improvement contract on an emergency basis, in accordance with rules adopted by the commission, when a determination of a highway emergency is made. A highway emergency is defined in that subchapter as including a situation or condition of a designated state highway that poses an imminent threat to life or property of travelers. The commission, on July 28, 1994, proposed the adoption of new sec.sec.9.10- 9.19, concerning Highway Improvement Contracts and, on October 27, 1994, adopted those sections with changes to the proposed text. Electronic filing of the final rules with the Texas Register inadvertently omitted a portion of sec.9.19 and, as a result, did not accurately reflect the provisions of that section as adopted by the commission. The amendments to sec.9.19 provide that after an emergency is certified, the district engineer will review the department's file of available bidders and, if there is a sufficient number of firms, notify at least three of the proposed emergency contractors of the emergency. The district engineer will also inform each prospective bidder of the nature of the emergency and will furnish specifications for remedying the emergency, including any information needed to prepare a work plan and calculate the cost. The amendments to sec.9.19 also specify the bidding requirements for an emergency contract, including specifying the price for performing the work and a response to each bid item, and the procedures for letting the contract, including a requirement that the contract be awarded to the best bidder. The amendments define the best bidder as the firm best able to respond to the emergency in a timely manner and able to fulfill the state's priority needs. The amendments to sec.9.19 finally specify required terms and conditions of an emergency contract, including requirements that the contracts be made in the name of the State of Texas and contain a certification of emergency, and provide exceptions to contract, bond, and insurance requirements. No comments were received regarding adoption of the amendment. The amendment is adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation and Transportation Code, Chapter 223, Subchapter C, which authorizes the Texas Department of Transportation to award a highway improvement contract on an emergency basis in accordance with rules adopted by the Texas Transportation Commission. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715733 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 11, 1997 Proposal publication date: September 19, 1997 For further information, please call: (512) 463-8630 CHAPTER 15.Transportation Planning and Programming SUBCHAPTER A.Transportation Planning 43 TAC sec.sec.15.1, 15.2, 15.4 The Texas Department of Transportation adopts the repeal of sec.sec.15.1, 15.2 and 15.4, concerning transportation planning without changes to the proposed text as published in the August 12, 1997, issue of the Texas Register (22 TexReg 7467). These sections are no long necessary due to the simultaneously adoption of the re-enacted subject matter in new sec.sec.15.1-15.8, concerning this same subject. No comments were received regarding adoption of the repeals. The repeals are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, Transportation Code, sec.201.103, which requires the Texas Transportation Commission to plan and make policies for the location, construction and maintenance of a comprehensive system of state highways and public roads, and Transportation Code, sec.201.601, which requires the Texas Department of Transportation to develop, in cooperation with other agencies and political subdivisions that have responsibility for transportation, a state transportation plan that contains all modes of transportation. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715896 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: January 1, 1998 Proposal publication date: August 12, 1997 For further information, please call: (512) 463-8630 43 TAC sec.sec.15.1-15.8 The Texas Department of Transportation adopts new sec.sec.15.1-15.8, concerning transportation planning. Sections 15.2, 15.4, 15.5, 15.7, and 15.8 are adopted with changes to the proposed text as published in the August 12, 1997 issue of the Texas Register (22 TexReg 7468). Sections 15.1, 15.3, and 15.6 are adopted without changes and will not be republished. The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) established new requirements related to transportation planning, particularly in regards to metropolitan transportation planning. Title 23, United States Code, sec.134, and Title 49, United States Code, sec.sec.5303-5306, incorporate the ISTEA's planning requirements and require the designation of a metropolitan planning organization (MPO) in each urbanized area as defined by the U.S. Bureau of the Census. These sections also require that each metropolitan area have a continuing, cooperative, and comprehensive planning process that results in transportation plans and programs that consider all transportation modes. Adoption of the new sections is necessary in order to be consistent with the transportation planning requirements promulgated by the ISTEA, as contained in Titles 23 and 49, United States Code, and 23 C.F.R. Part 450, and to prescribe the policies and procedures governing the creation of MPOs and metropolitan planning area boundaries and the responsibilities of MPOs and the state related to the development of transportation planning processes, plans, and programs. Adoption of the new sections is also necessary to replace the existing sec.15.1, sec.15.2, and sec.15.4, concerning transportation planning, which are being contemporaneously repealed. Section 15.1 describes the purpose and scope of the new sections and describes the authority for establishing policies and procedures governing the development of transportation planning processes, plans, and programs in Texas. Section 15.2 defines words and terms used in the subchapter. Section 15.3 prescribes the organization, structure, and responsibilities of metropolitan planning organizations (MPOs), including identifying procedures to designate and redesignate an MPO, prescribes how metropolitan planning area boundaries are determined and amended, describes the membership of MPOs, describes the nature and scope of agreements between MPOs and other agencies, and describes the responsibilities for cooperation and coordination between MPOs and other entities relating to transportation planning. Section 15.4 prescribes a unified planning work program (UPWP), discusses the requirements and roles of MPOs and other organizations in the development and approval of the UPWP, describes how the department will monitor work programs, and describes limitations on the use, expenditure, and distribution of federal planning funds for planning work. Section 15.5 prescribes responsibilities relating to the metropolitan planning process, including identifying the minimum required elements of the planning process, describing how the public will be involved in the planning process, identifying requirements when major metropolitan transportation investments are being considered, and describes how the metropolitan transportation planning process and management systems are related. Section 15.6 prescribes the requirements of the metropolitan transportation plan, including development of the plan and review and updating requirements, public involvement requirements, and conformity requirements in transportation management areas. Section 15.7 prescribes the requirements of the transportation improvement program (TIP), including how the program should be developed, identifying what types of projects are included in the TIP and which projects may be excluded, identifies the requirements for consistency and conformity of the TIP with the metropolitan transportation plan, prescribes the format of the TIP, the required financial plan, and how the TIP may be updated and modified, prescribes the approval procedures and requirements for the TIP, prescribes a public involvement process, prescribes procedures for selecting projects identified in the TIP, and describes the relationship of the TIP to the statewide transportation improvement program. Section 15.8 prescribes the requirements of the statewide transportation improvement program (STIP), including how the program should be developed, identifying what types of projects are included in the STIP, identifies funding for the STIP, prescribes the financial plan required for a STIP and how the STIP may be updated and modified, prescribes the approval procedures for the STIP, prescribes a public involvement process, and prescribes procedures for selecting projects identified in the STIP. On August 26, 1997, a public hearing was held to receive comments, views, or testimony concerning the proposed adoption of sec.sec.15.1-15.8. No comments were received, however, the department received written comments from the Austin Transportation Study (ATS). Regarding sec.15.4(a), ATS stated that since the planning process is a cooperative process between the metropolitan planning organizations (MPOs) and the department, the department should "review, comment and make suggestions" regarding MPO staff performance of activities and expenditure of funds under a Unified Planning Work Program (UPWP) as opposed to "monitoring" an MPO's activities and expenditures. In response, the department agrees with ATS' assertion that the planning process is a cooperative process. However, Title 23, Code of Federal Regulations, sec.420.117 requires the department to ". . . monitor all activities . . . supported by FHWA planning and research funds to assure that the work is being managed and performed satisfactorily and that time schedules are being met." Accordingly, while planning activities using federal planning funds are required to be monitored by the department, there is no such requirement for planning activities using other funds. Therefore, this subsection has been revised to state that the department will monitor an MPO's activities and expenditures when required by federal law or regulation. In other instances, the department will review, comment, and make suggestions regarding MPO staff performance of activities and expenditure of funds under a UPWP. Regarding sec.15.4(b)(2), ATS stated that federal guidelines do not limit MPOs from working on studies of transportation across metropolitan planning area boundaries. ATS contends that the department should not further restrict an MPO's planning activities beyond what federal guidelines require. ATS states that the department should not, for example, prohibit ATS' work on regional studies involving the transport of vehicles, passenger rail, freight, or air pollution, even though that work crosses the boundaries of its planning area. They further state that ATS' participation in regional projects reflects its commitment to providing regional solutions to its area's transportation problems. In response, the department recognizes the need, in limited circumstances, for an MPO to have the latitude to collect and analyze data outside of the metropolitan area boundary (MAB). The department recognizes, however, that the terms "regional projects" and "regional solutions" begin to affect the department's statutory responsibilities in statewide and regional transportation issues. Accordingly, paragraph (2) has been revised to allow federal planning funds to be spent for collecting and analyzing data outside the MAB if the data relate to land use, demographics, or traffic or travel information, and directly affect the transportation system within the MAB, provided those activities are individually identified in an approved UPWP. Regarding sec.15.4(b)(5), ATS states that the proposed language would prevent an MPO from working on task forces that address issues in the project development stage. Furthermore, ATS contends that it is appropriate for an MPO to track and comment on the implementation of projects adopted in its long range plan. In response, the department has conferred with the Federal Highway Administration and the Federal Transit Administration on this issue. Both of the federal agencies agree that the use of planning funds is limited to planning at the subarea and corridor levels or for multimodal or systemwide transit planning studies. Both agencies also agree that this would include the work necessary for environmental studies. As a result, paragraph (5) has been revised to clarify that multimodal or systemwide transit planning studies are also eligible for funding from federal transportation planning funds. Regarding sec.15.7(h), ATS stated that the wording should not be so stringent as to require projects to comply with all of the requirements listed. ATS suggests that a project comply with at least one of the criteria specified by the department in that section. ATS also stated that the criteria are good, but that projects such as ATS's Commuter Solutions Program and Ozone Action Day Program, as well as enhancement projects, may not be considered as meeting the mobility needs of the state. In response, the department notes that this subsection addresses the approval of an MPO's entire Transportation Improvement Program (TIP) and not with the approval of specific projects within a TIP. The department's administrative rules require the executive director to approve metropolitan and rural TIPs if they meet the requirements of this section. The rules do not require each project in a TIP to meet all of the requirements. When determining whether to approve a TIP, the executive director is not required to make a determination on each project in a TIP, but instead determines whether the TIP as a whole meets the requirements of this section. Therefore, the section has not been revised. Regarding sec.15.7(k), ATS stated that it had no objection to the rules relating to when an amendment to a TIP is not required, as long as its May 9, 1994 resolution, which addresses minor project cost overruns for STP 4C projects, remains in place. This resolution prescribes when the department is required to obtain approval from ATS to incur cost overruns in projects involving MPO suballocated STP funds. After projects are under contract, field changes may be necessary which will result in cost overruns for the project. ATS wishes to have the ability to approve cost overruns above certain monetary levels. Any approval would require ATS to amend the TIP. In response, the department notes that a policy adopted by an MPO policy board, that imposes more stringent requirements that are not in conflict with the department's administrative rules, would not be affected by this section. The section has not been changed. The department has also made several modifications to the proposed new sections in order to clarify the intent of those sections, to correct typographical errors, and to include the correct citation or federal requirement. Regarding sec.15.2, the definition of a metropolitan planning organization policy board has been revised to reflect the current citation for the federal transit program. Additionally, the definition of a mobility project has been changed to clarify that the department is interested in the addition of mainlanes, as opposed to auxiliary lanes. Regarding sec.15.4(b), the department has amended this subsection to clarify that the annual work program must be acceptable to the Federal Transit Administration as well as the Federal Highway Administration. Regarding sec.15.5(a), the department has revised the subsection to clarify that the factors themselves, not any particular number of factors, must be explicitly considered by an MPO during the planning process. The department anticipates that the pending federal transportation reauthorization legislation will consolidate the number of planning factors. Regarding sec.15.7(k)(1), the department has changed this paragraph to clarify that there are differences in planning processes in nonattainment areas, as compared to attainment areas, and to clarify that federal law requires an amendment to the TIP when certain federal funding is involved. Regarding sec.15.8(b)(1)(B), the department has revised the subparagraph to clarify that elderly and disabled projects are projects that would not require individual identification in the STIP. The Federal Transit Administration does not require individual identification of those projects. Regarding sec.15.8(e)(2), the department has corrected a typographical error and clarified that a partial STIP may be approved if difficulties are encountered in cooperatively developing the TIP portion for a particular metropolitan or rural area of the state. The department has also specified that the commission, rather than the executive director, must approve a partial STIP. The new sections are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of work of the Texas Department of Transportation, Transportation Code, sec.201.103, which requires the Texas Transportation Commission to plan and make policies for the location, construction, and maintenance of a comprehensive system of state highways and public roads, and Transportation Code, sec.201.601, which requires the Texas Department of Transportation to develop, in cooperation with other agencies and political subdivisions that have responsibility for transportation, a statewide transportation plan that contains all modes of transportation. sec.15.2.Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Clean Air Act Amendments of 1990 (CAAA) - Amendments to the Clean Air Act of 1970 (CAA) (42 U.S.C. sec.sec.7410 et seq.), including procedures that apply to all transportation plans, programs, and projects as they relate to air quality. Commission- The Texas Transportation Commission. Conformity- Clean Air Act requirements that transportation plans and transportation improvement programs in nonattainment or maintenance areas meet the intent of the Texas State Implementation Plan (SIP) and the U.S. Environmental Protection Agency (EPA) conformity regulations contained in 40 C.F.R. Part 51. Emissions caused by transportation plans and programs in these areas must not exceed the level of motor vehicle emissions allowed in Texas' SIP and the EPA regulations. Corridor- A broad geographical band with no predefined size or scale that follows a general directional flow connecting major sources of trips. It involves a nominally linear transportation service area that may contain a number of streets, highways, and transit route alignments. Department - The Texas Department of Transportation. District- One of the 25 geographical areas, managed by a district engineer, in which the department conducts its primary work activities. Environmental Protection Agency (EPA) - The federal agency primarily responsible for environmental protection, including air quality as it relates to this subchapter. Executive Director- The executive director of the Texas Department of Transportation or his or her designee. Federal discretionary program- Special set-aside funds to be included as line item discretionary projects designated by the United States Congress. Federal Highway Administration (FHWA) - The federal agency primarily responsible for highway transportation. Federal Transit Administration (FTA) - The federal agency primarily responsible for public mass transportation. Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) - The transportation act passed by Congress that provides six year authorizations for development of a National Intermodal Transportation System which consists of all forms of transportation in a unified interconnected manner. Major revision - An amendment to the Statewide Transportation Improvement Program involving a reallocation of funds between two or more districts or two or more metropolitan planning organizations or a metropolitan planning organization and a district. Metropolitan planning organization (MPO) - The forum for cooperative transportation decision making for the metropolitan planning area. The MPO is also the organization that is responsible for carrying out the transportation planning process for the metropolitan area. Metropolitan planning organization policy board - The forum and committee structure (e.g., Regional Transportation Council, Steering Committee, Policy Advisory Committee) established under Section 134 of Title 23, U.S. Code, Section 5303 of Title 49, U.S. Code, and the Governor's Designation Agreement as the group responsible for giving an MPO overall transportation policy guidance. Minimum allocation funds- Funds allocated by the U.S. Secretary of Transportation among the states under 23 U.S.C. sec.157(a). Mobility projects - Transportation projects that add additional mainlanes to an existing facility and which have a length of at least one mile. Rural transportation improvement program- A staged, multiyear, intermodal program of transportation projects which is developed by the department, in consultation with local officials, for areas of the state outside of the metropolitan planning area boundaries. The rural TIP includes a financially constrained plan that demonstrates how the program can be implemented. Subarea - An area with no predefined size or scale that focuses on a non-linear part of a metropolitan area, such as an activity center or other geographic portion of a region. Surface Transportation Program (STP) - The block grant type program established by 23 U.S.C. sec.133. Texas Natural Resource Conservation Commission (TNRCC) - The state agency responsible for coordination of natural resources and air quality for the state, including development of the State Implementation Plan. Transportation control measure (TCM) - Any measure used for the purpose of reducing emissions or concentrations of air pollutants from transportation sources by reducing vehicle use or changing traffic flow or congestion conditions. Unified Planning Work Program (UPWP) - The governing planning document, prepared by an MPO on an annual basis, which identifies the transportation planning work to be undertaken within the metropolitan planning area. sec.15.4.Unified Planning Work Program (UPWP). (a) Planning activities. Under 23 C.F.R. sec.450.314, an MPO is required to document planning activities in a UPWP to indicate who will perform the work, the schedule for completing it, and all products that will be produced. The department is responsible for assisting in the development of the UPWP, approving the format of work programs submitted by MPOs, and, where required by federal law or regulation, monitoring an MPO's performance of activities and expenditure of funds under a UPWP. Where monitoring is not required, the department is responsible for reviewing an MPO's activities and expenditure of funds, and will comment on and make suggestions relating to those activities and expenditures. The department will design a uniform format for UPWPs and reports to be submitted by MPOs. This subsection describes how a UPWP is developed, the contents of a UPWP, how it is approved, and how the department will monitor work programs. (1) Requirements. An MPO in cooperation with the department and operators of publicly owned transit systems must annually develop a unified planning work program that meets the requirements of 23 C.F.R. Part 420, Subpart A and 23 C.F.R. sec.450.314. (2) Prospectus allowed. The metropolitan transportation planning process may include the development of a prospectus that establishes a multiyear framework within which the UPWP is accomplished. (3) UPWP development. The department will develop a time line for development of the UPWP by the MPOs. Failure to adhere to the time line may result in a delay in the authorization to the MPOs to proceed in incurring costs. (4) UPWP format. The department, in consultation with the MPOs, shall develop a standard UPWP format to be used by all MPOs. UPWPs submitted in a different format will not be approved. (5) UPWP approval and revisions. The MPO policy board shall not delegate approval authority of, or subsequent revisions to, the UPWP. (6) Annual performance and expenditure report. To allow the department to monitor work programs, the MPOs shall prepare and submit an annual performance and expenditure report of progress no later than December 31 of each year. A uniform format for the annual report will be established by the department, in consultation with the MPOs. (b) Funding. Federal transportation planning funds are available to MPOs to develop the metropolitan transportation plans and transportation improvement programs required by this subchapter. Under 23 C.F.R. sec.420.111, the use of federal planning funds must be documented by the MPO in a work program acceptable to the FHWA setting out proposed work undertaken with federal planning funds and the estimated cost of this work. A work program acceptable to the FTA is required for planning activities involving mass transportation plans and programs. This subsection describes the requirements for a UPWP related to funding, limitations on the use of federal planning funds for planning work, when the travel costs of persons participating in the metropolitan planning process may be authorized and reimbursed, limitations on the expenditure of funds for planning work outlined in a UPWP, and how federal transportation planning funds will be distributed to MPOs. (1) Requirements. The UPWP shall reflect transportation planning work tasks to be funded by federal, state, or local transportation, or transportation related (e.g. air quality), planning funds. (2) Planning work eligibility. The use of federal metropolitan transportation planning funds shall be limited to transportation planning activities affecting the transportation system within the Metropolitan Area Boundary (MAB). If an MPO determines that data collection and analysis activities relating to land use, demographics, or traffic or travel information, conducted outside the MAB, affect the transportation system within the MAB, then those activities may be undertaken using federal planning funds, provided that the activities are specifically identified in an approved UPWP. Any other costs incurred for transportation planning activities outside the MAB will not be eligible for reimbursement. (3) Authorization for travel outside the MAB. Travel outside the Metropolitan Area Boundary by MPO staff and other agencies participating in the MPO planning process shall be approved by the department if funded with federal transportation planning funds. Approval must be received prior to incurring any costs associated with the actual travel (e.g., registration fee). This provision will not apply if the travel was at the request of the department. (4) Reimbursement of travel costs of elected officials. The cost of travel incurred by elected officials will not be eligible for reimbursement with federal transportation planning funds. (5) Funding limitations. The use of federal transportation planning funds shall be limited to corridor/subarea level planning or multimodal or systemwide transit planning studies. Major investment studies and environmental studies are considered corridor level planning. The use of such funds beyond environmental document preparation or for specific project level planning and engineering (efforts directly related to a specific project instead of a corridor) is not allowed. (6) Department approval of costs. The MPO shall not incur any costs for work outlined in the UPWP or any subsequent amendments (i.e., adding new work tasks or changing the scope of existing work tasks) prior to receiving approval from the department. Any costs incurred prior to receiving department approval shall not be eligible for reimbursement from federal transportation planning funds. (7) Expenditure limitations. Costs incurred by the MPO shall not exceed the total budgeted amount of the UPWP without prior approval of the MPO policy board and the department. Costs incurred on individual work tasks shall not exceed that task budget by 25% without prior approval of the MPO policy board and the department. If the costs exceed 25% of the task budget, the UPWP shall be revised, approved by the MPO policy board, and submitted to the department for approval. (8) Distribution of funds. Federal transportation planning funds will be distributed to the MPOs based on a formula mutually agreed to by the department and FHWA/FTA. sec.15.5.Metropolitan Planning Process. (a) Responsibilities. The MPO, in cooperation with the department and operators of publicly owned transit services, is responsible for carrying out the metropolitan planning process. These entities are also responsible for cooperatively determining their mutual responsibilities in the conduct of the planning process. The process includes the cooperative development of a metropolitan transportation plan containing a long range forecast of proposed transportation projects and a transportation improvement program containing a list of projects which have been approved for development in the near term. The department will cooperatively participate in the development of the metropolitan transportation plan, metropolitan transportation improvement program, and any required management and monitoring systems, and will approve, along with the MPO, the metropolitan transportation improvement program. Under 23 U.S.C. sec.134 and 49 U.S.C. sec.5303, and implementing regulations contained in 23 C.F.R. Part 450, Subpart C, all transportation plans and programs developed by MPOs as part of the planning process must explicitly consider the factors specified in those provisions, must provide for public involvement in developing transportation plans and transportation improvement programs, and must be documented in accordance with those provisions. This section describes how the metropolitan planning process will be carried out and how the public will be involved in the process. (b) Elements. Elements required to be explicitly considered, analyzed as appropriate, and reflected in the planning process products are identified in 23 C.F.R. sec.450.316(a). (c) Public involvement process. The metropolitan transportation planning process shall also include a public involvement process which, at a minimum, is in compliance with the requirements of 23 C.F.R. sec.450.316(b). (d) Simplified procedures allowed. In attainment areas not designated as transportation management areas, simplified procedures for the development of plans and programs, if considered appropriate, may be proposed by the MPO in cooperation with the department and transit operators, in accordance with 23 C.F.R. sec.450.316(c). These procedures will be submitted by the department for approval by the FHWA and the FTA. At a minimum, all areas employing a simplified planning process must develop a metropolitan transportation plan and a transportation improvement program. (e) Technical and other reports. The metropolitan transportation planning process shall include preparation of technical and other reports to assure documentation of the development, refinement, and update of the transportation plan. The reports shall be available for review by interested parties. (f) Major investment studies. Major investment studies in accordance with 23 C.F.R. sec.450.318 will be conducted if there is an identified need for a major metropolitan transportation investment and federal funds may be involved. (g) Management and monitoring systems. The metropolitan transportation planning process will also be conducted in compliance with 23 C.F.R. Parts 450 and 500, and 49 C.F.R. Parts 613 and 614 (relating to requirements for management and monitoring systems). Management systems shall be developed cooperatively by the department, MPOs, and transit operators for each metropolitan planning area. In transportation management areas, the congestion management system will be developed as part of the metropolitan transportation planning process. (h) Certification. (1) The department and the MPO shall annually certify to the FHWA and the FTA that the planning process is addressing the major transportation management issues facing the area and is being conducted in accordance with all applicable requirements of 23 C.F.R. sec.450.334. (2) The FHWA and the FTA jointly will review and evaluate the transportation planning process for each TMA (as appropriate but no less than once every three years) to determine if the process meets the requirements of 23 C.F.R. Part 450, Subpart C and this subchapter. (3) In transportation management areas that are nonattainment or maintenance areas for transportation related pollutants, the FHWA and the FTA will also review and evaluate the transportation planning process to assure that the MPO has an adequate process to ensure conformity of plans and programs in accordance with the EPA's conformity regulations contained in 40 C.F.R. Part 51. (4) Upon the review and evaluation conducted under paragraphs (2) and (3) of this subsection, the FHWA and the FTA will jointly make the determinations and certifications provided for in 23 C.F.R. sec.450.334. sec.15.7.Transportation Improvement Program (TIP). (a) Requirements. Title 23, Code of Federal Regulations, sec.450.324, requires the metropolitan transportation planning process to include the development of a transportation improvement program for the metropolitan planning area, containing a list of projects which have been approved for development in the near term. The transportation improvement program is required to be developed in cooperation with the department and public transit operators, and must be approved by the MPO and the department. After approval and any needed conformity findings, a TIP is included without modification in the statewide transportation improvement program. After inclusion, the MPO and the department will select projects for implementation in accordance with 23 C.F.R. sec.450.332. This section describes how a transportation improvement program and its financial plan will be developed, projects required to be included in a TIP, consistency and conformity requirements, the format of a TIP, the TIP approval process, how a TIP is updated and modified, public involvement in TIP development, and project selection procedures. This section also describes the development of rural TIPs by the department. Development of rural TIPs is part of the STIP development process described in sec.15.8 of this title (relating to the Statewide Transportation Improvement Program). (b) Development. (1) Metropolitan TIP. The MPO designated for a metropolitan planning area, in cooperation with the department and publicly owned transit operators, shall develop a transportation improvement program and financial plan in accordance with the requirements of 23 C.F.R. sec.450.324. The department shall provide an MPO estimates of available federal and state funds to be used in developing the financial plan. The TIP shall cover the metropolitan planning area and shall be updated and approved at least every two years by the MPO and the department. The TIP shall include all projects, except those described in subsection (d) of this section, to be funded under Titles 23 and 49 of the U.S. Code, including those projects required to be included by 23 C.F.R. sec.450.324(f). (2) Rural TIP. The department shall develop transportation improvement programs for all areas of the state outside of metropolitan planning areas. These rural TIPs will be developed in accordance with the requirements of 23 C.F.R. sec.450.216 and sec.15.8 of this title (relating to Statewide Transportation Improvement Programs), will exclude the projects required to be excluded by those sections, and will become part of the STIP after approval by the executive director. (c) Grouping of projects. Projects that are not considered by the department and the MPO to be of appropriate scale for individual identification in a given program year may be grouped by function, geographic area, or work type (e.g., rehabilitation, seal coating). In nonattainment and maintenance areas, classification must be consistent with the exempt project classifications contained in the EPA conformity regulations. (d) Projects excluded. The following projects may be excluded from the metropolitan TIP by agreement between the department and the MPO: (1) safety projects funded under 23 U.S.C. sec.402 (highway safety programs), and emergency relief projects, except those involving substantial functional, location, and capacity changes; (2) planning and research activities, except those activities funded with National Highway System, Surface Transportation Program, or Minimum Allocation funds other than those used for major investment studies; and (3) projects under 23 U.S.C. sec.104(b)(1), 23 U.S.C. sec.104(b)(5)(A)-(B), and 23 U.S.C. sec.144 that are for resurfacing, restoration, rehabilitation, reconstruction, or highway safety improvement, and which will not alter the functional traffic capacity or capability of the facility being improved. (e) Consistency and conformity. (1) Metropolitan transportation plan. A project in the metropolitan TIP must be consistent with the metropolitan transportation plan. The unique project identification number for each project that was included in the metropolitan transportation plan will be the same number and will be referenced for each project in the TIP. (2) Statewide transportation plan. A project in the rural TIP must be consistent with the statewide transportation plan developed under 23 C.F.R. sec.450.214. (3) Clean Air Act Amendments and State Implementation Plan. In nonattainment and maintenance areas, a project selected for the TIP must conform with the Clean Air Act Amendments and state implementation plan. (4) Conformity requirements. The MPO in each urbanized nonattainment and maintenance area will be responsible for preparation of the conformity finding requirements of the CAAA and the EPA conformity regulations. The department will be responsible for preparation of the conformity finding requirements in nonattainment and maintenance areas outside of metropolitan planning areas. (f) Format. The department, in consultation with the MPOs, will develop a uniform TIP format to produce a uniform STIP. The department in consultation with the MPOs may make modifications to the format. The MPOs shall submit their TIP to the department in this format. (g) Financial plan. A financial plan that demonstrates consistency with funding reasonably expected to be available during the relevant period shall be developed for metropolitan TIPs by the MPO in cooperation with the department and transit operators. A financial plan does not need to include a project funded under a federal discretionary program. (h) TIP approval. Under 23 U.S.C. sec.134 and 49 U.S.C. sec.5304, the MPO and the executive director shall approve the metropolitan TIP and any amendments found to be in accordance with this section. The executive director will approve metropolitan and rural TIPs if he or she finds the TIP has met all the requirements of this section, sec.15.8 of this title (relating to Statewide Transportation Improvement Programs), 23 U.S.C. sec.134 and sec.135, 49 U.S.C. sec.5304, and that the TIP: (1) develops, operates, and maintains efficient and effective transportation systems and services; (2) improves public safety and security on transportation systems; (3) facilitates economic and social prosperity through the efficient movement of people and goods; (4) protects, where feasible, and enhances the environment, where practicable, in transportation activities; (5) improves and promotes the connectivity of transportation services and systems; and (6) optimizes transportation funding to meet the mobility needs of the state. (i) Management. As a management tool for monitoring progress in implementation of the metropolitan transportation plan, the metropolitan TIP shall identify the criteria and process for prioritizing implementation of transportation plan elements for inclusion in the TIP and any changes in priorities from previous TIPs in accordance with the factors specified in 23 C.F.R. sec.450.324(n). (j) Updating. The frequency and cycle for updating the TIP must be compatible with the STIP development process established by the department and described in sec.15.8(b) of this title (relating to Statewide Transportation Improvement Programs). (k) Modification. (1) Amendments. The TIP may be amended consistent with the procedures established in this section for its development and approval with the following stipulations. (A) An amendment to the TIP is required in attainment areas if there is a change: (i) adding or deleting a federally funded project in the TIP; (ii) in the scope of work of a federally funded project; (iii) in the phase of work (such as the addition of preliminary engineering, construction, or right-of-way) of a federally funded project; (iv) in the TIP year if the MPO's project selection procedure does not provide for selecting projects from the second or third year; or (v) in funding sources that forces the addition or deletion of federally funded projects. (B) An amendment to the TIP is required in nonattainment areas if there is a change: (i) adding or deleting a project in the TIP; (ii) in a project's scope of work; (iii) in the phase of work (such as the addition of preliminary engineering, construction, or right-of-way) of a project; (iv) in the TIP year if the MPO's project selection procedure does not provide for selecting projects from the second or third year; (v) adding Congestion Mitigation and Air Quality funding to a previously approved project; or (vi) in funding from non-federal funding to any combination of federal funding or federal and state funding, or where the change in funding sources forces the addition or deletion of federally funded projects or regionally significant state funded projects. (C) An amendment to the TIP is not required if there is a change: (i) in funding sources, except as provided in this subsection; (ii) in the cost estimate which is not caused by a change in the project work scope or limits; or (iii) in the letting date unless, in nonattainment areas, the change affects conformity. (2) Conformity requirements. In nonattainment and maintenance areas for transportation related pollutants, a conformity determination must be made on any new or amended TIPs (unless the amendment consists entirely of projects exempt under subsection (c) of this section) in accordance with CAAA requirements and the EPA conformity regulations. (l) TIP relationship to STIP. (1) Metropolitan TIP. After approval by the MPO and the executive director, the TIP will be included without modification in the STIP except that in nonattainment and maintenance areas, the FHWA and the FTA must make a conformity finding before inclusion. The department will notify the MPO and appropriate federal agencies when a TIP has been included in the STIP. (2) Rural TIP. After approval by the executive director, rural TIPs will be included in the STIP, except in nonattainment and maintenance areas outside metropolitan planning areas, where federal findings of conformity must be made prior to placing projects in the STIP. (m) TIP public involvement. (1) Metropolitan public involvement process. Each MPO will develop a public involvement process covering the development of a metropolitan TIP in accordance with 23 C.F.R. sec.450.324(c) and sec.15.5(c) of this title (relating to the metropolitan planning process). The MPOs shall also use adopted public involvement procedures in amending the TIP. (2) Rural public involvement process. (A) Initial adoption. Each department district will develop and implement a public involvement process covering the development of a rural TIP that, at a minimum, consists of the following: (i) publication, in a newspaper with general circulation in each county within the district, of a notice informing the public of the availability of the proposed rural TIP and of a 10 day public comment period; (ii) a request, in the published notice, for public comments concerning the proposed rural TIP, to be submitted in writing to the district; and (iii) notification, in the published notice, that a public hearing will be held in order to receive comments on the initial adoption, along with a public comment period of at least 10 days subsequent to the hearing. The notice of public hearing will be published a minimum of 10 days prior to the hearing. (B) Revisions involving mobility projects. Each district will, at a minimum, publish, in a local newspaper of general circulation, a notice informing the public of the availability of these revisions and of a 10 day public comment period. The notice will also request public comments to be submitted, in writing, to the district, and will also notify the public that a public hearing will be conducted to receive comments on the proposed revision. (n) Project selection procedures. Under 23 C.F.R. sec.450.332, project selection from an approved metropolitan transportation improvement program varies depending on whether a project selected for implementation is located in a transportation management area and what type of federal funding is involved. The purpose of this subsection is to prescribe project selection procedures and specify which entity may select a project for implementation. (1) General. Project selection procedures must be developed for each metropolitan area and for state projects that lie outside of metropolitan planning areas. The department will develop and reevaluate annual project selection procedures for state projects which lie outside of metropolitan planning areas in accordance with sec.15.8(g) of this title (relating to Statewide Transportation Improvement Programs). (A) Project agreement. The first year of both the TIP and the STIP constitute an agreed to list of projects for project selection purposes. Project selection may be revised if the apportioned funds, including the highway obligation ceiling and transit appropriations, are significantly less than the authorized funds. In such cases, if requested by the MPO, the department, or the transit operator, a revised agreed to list of projects for project selection purposes may be developed. (B) Eligibility. Only projects included in the federally approved STIP will be eligible for funding with Title 23, U.S. Code, or Federal Transit Act (49 U.S.C. sec.5301 et seq.) funds. (2) Project selection in non-transportation management areas. In an area not designated as a TMA, the department or the transit operator, in cooperation with the MPO, will select projects to be implemented using federal funds from the approved metropolitan TIP. Federal lands highways program projects shall be selected in accordance with 23 U.S.C. sec.204. (3) Project selection in TMAs. (A) Selection by MPO. In an area designated as a TMA, all Title 23, U.S. Code and Federal Transit Act funded projects, except projects on the National Highway System and projects funded under the bridge, interstate maintenance, safety, enhancement, and Federal lands highways programs, shall be selected by the MPO in consultation with the department and transit operators from the approved metropolitan TIP and in accordance with the priorities of the approved metropolitan TIP. (B) Selection by the department. In an area designated as a TMA, the department, in cooperation with the MPO, will select projects on the National Highway System and projects funded under the bridge, interstate maintenance, safety, and enhancement programs from the approved metropolitan TIP. Federal lands highways program projects shall be selected in accordance with 23 U.S.C. sec.204. sec.15.8.Statewide Transportation Improvement Program (STIP). (a) Purpose. Title 23, U.S. Code, sec.135, as implemented by 23 C.F.R. Part 450, Subpart B, requires each state to carry out a continuing, comprehensive, and intermodal statewide transportation planning process, including the development of a statewide transportation plan and transportation improvement program, that facilitates the efficient, economic movement of people and goods in all areas of the state, including those areas subject to the metropolitan planning requirements of 23 U.S.C. sec.134 and 23 C.F.R. Part 450, Subpart C. This section describes the STIP development process, funding for projects included in the STIP, public involvement in STIP development, the STIP approval process, the STIP revision process, and project selection procedures. (b) STIP development. The department will develop a STIP for all areas of the state in cooperation with the MPOs designated for metropolitan areas. (1) Projects included. (A) A highway or transit project funded under Title 23, U.S. Code or the Federal Transit Act (49 U.S.C. sec.5301 et seq.) will be included in a federally approved STIP. A project in the STIP will be consistent with the statewide long- range transportation plan and metropolitan TIPs, and the program will reflect expected funding and priorities for programming. (B) Projects that are not considered by the department and MPO to be of appropriate scale for individual identification in a given program year (e.g., rehabilitation, seal coating, elderly or disabled transit projects) may be grouped by function, geographic area, or work type. (C) In a nonattainment area, only those projects which have been determined to conform with the requirements of the CAAA and which comply with the state implementation plan may be included in the STIP. (D) Regionally significant projects to be funded with non-federal funds will be included in the STIP for planning, coordination, and public disclosure purposes. (2) STIP funding. The federal funding level for each year of the STIP is the annual authorization as outlined in 23 U.S.C. sec.101 et seq. and funds appropriated under 49 U.S.C. sec.5301 et seq., in addition to the appropriate state and local match. (c) STIP financial plan. The STIP will reflect the priorities for programming and expenditure of funds and will: (1) include a financial plan that demonstrates how the transportation improvements can be funded and reasonably implemented; (2) be consistent with funding reasonably expected to be available during the relevant period; and (3) be financially constrained by year. (d) STIP public involvement process. Under 23 U.S.C. sec.135, the governor is responsible for providing for public involvement in the STIP development process. The governor has delegated this responsibility to the commission, which in turn has delegated the responsibility to the executive director. (1) Initial adoption. In developing the STIP, the department will hold at least one statewide public hearing regarding the adoption of the proposed STIP with an available comment period of at least 10 days subsequent to the hearing. (A) The department will publish a notice of the hearing in the Texas Register a minimum of 10 days prior to it being held. (B) A copy of the proposed STIP will be available for review, at the time the notice of hearing is published, at each of the department's district offices and at the department's Transportation Planning and Programming Division offices in Austin. (C) The approved STIP will also be made available at each of the department's district offices and at the Transportation Planning and Programming Division offices in Austin. (2) STIP amendments. (A) General. The executive director will approve amendments according to a published schedule developed in accordance with subsection (f) of this section, which the department will make available at the department's district offices and to the MPOs on an annual basis. (B) Amendments to the STIP involving a major revision. (i) The department will publish in the Texas Register notification of the availability of copies of proposed STIP amendments involving a major revision. Copies of these amendments will be made available at each of the department's district offices and at the Transportation Planning and Programming Division offices in Austin. (ii) The published notice will initiate a 10 day public comment period and will inform the public where to send any written comments. (iii) The department will accept written comments on the proposed STIP amendments during the 10 day public comment period. (e) STIP approval. (1) The commission will approve the STIP if it finds the STIP has met all the requirements of this section and that the STIP: (A) develops, operates, and maintains efficient and effective transportation systems and services; (B) improves public safety and security on transportation systems; (C) facilitates economic and social prosperity through the efficient movement of people and goods; (D) protects, when feasible, and enhances, when practicable, the environment in transportation activities; (E) improves and promotes the connectivity of transportation services and systems; and (F) optimizes transportation funding to meet the mobile needs of the state. (2) The commission may approve a partial STIP if difficulties are encountered in cooperatively developing the TIP portion for a particular metropolitan or rural area. (f) STIP revisions. (1) Schedule of revisions. The department and the MPOs will be required to adhere to a quarterly STIP revision cycle, except as provided in paragraph (2) of this subsection. Project information and MPO approval documentation for the quarterly revisions must be received by the department's Transportation Planning and Programming Division by the close of business on the first working day of the revision month. (2) Exceptions. The executive director may approve an exception to this requirement if: (A) additional funding becomes available; or (B) the revision involves a project which is expected to have a significant effect on capacity, connectivity, or public safety and security on transportation systems. (g) Project selection procedures. Under 23 C.F.R. sec.450.222, project selection from an approved STIP varies depending on whether a project selected for implementation is located in a metropolitan planning area and on what type of federal funding is involved. The purpose of this subsection is to prescribe project selection procedures and specify which entity may select a project for implementation. (1) General. Project selection procedures must be developed for each metropolitan area and for state projects that lie outside of metropolitan planning areas. The department will develop and reevaluate annual project selection procedures for state projects which lie outside of metropolitan planning areas. (A) Project agreement. The first year of both the TIP and the STIP constitute an agreed to list of projects for project selection purposes. Project selection may be revised if the apportioned funds, including the highway obligation ceiling and transit appropriations, are significantly less than the authorized funds. In such cases, if requested by the MPO, the department or the transit operator, a revised agreed-to list of projects for project selection purposes may be developed. (B) Eligibility. Except as provided in 23 C.F.R. sec.450.322(a), only those projects included in the federally approved STIP will be eligible for funding with Title 23, U.S.C., or Federal Transit Act (49 U.S.C. sec.5301 et seq.) funds. (2) Project selection in metropolitan planning areas. In metropolitan planning areas, transportation projects shall be selected in accordance with the project selection procedures established in sec.15.7(n) of this title (relating to Transportation Improvement Programs). (3) Project selection outside metropolitan planning areas. Outside metropolitan planning areas, transportation projects undertaken on the National Highway System with Title 23 funds and under the bridge and interstate maintenance programs shall be selected by the department in consultation with affected local officials. Federal lands highways projects shall be selected in accordance with 23 U.S.C. sec.204. Other transportation projects undertaken with funds administered by the FHWA shall be selected by the department in cooperation with the affected local officials, and projects undertaken with Federal Transit Act funds shall be selected by the department in cooperation with the affected local officials and transit operators. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715734 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: January 1, 1998 Proposal publication date: August 12, 1997 For further information, please call: (512) 463-8630 SUBCHAPTER E.Federal, State, and Local Participation 43 TAC sec.sec.15.51-15.55 The Texas Department of Transportation adopts amendments to sec.sec.15.51-15.55, concerning federal, state, and local cost participation in highway improvement projects. Section 15.55 is adopted with changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9460). Sections 15.51-15.54 are adopted without changes and will not be republished. Senate Bill 370, sec.1.18, 75th Legislature, 1997, amended the Transportation Code by adding sec.222.053, which requires the commission, when evaluating a proposal for a highway improvement project in a local government that consists of all or a portion of an economically disadvantaged county, to adjust the minimum local matching funds requirement after evaluating the local government's effort and ability to meet the requirement. Section 222.053 defines an economically disadvantaged county to mean a county that has, in comparison to other counties in the state, below average per capita property value, below average per capita income, and above average unemployment. Section 15.51 is amended to provide a definition for economically disadvantaged county, and to specify that whether a county is considered economically disadvantaged will be determined from data provided to the department by the Texas Comptroller of Public Accounts at the beginning of each fiscal year. Section 15.52 is amended to specify that the funding share arrangement agreed upon by the department and a local government in a cost participation agreement will include any adjustments required by sec.15.55. Section 15.52 also specifies that, in approving a request for incremental payments, the department will consider whether the project is located in a local government that consists of all or a portion of an economically disadvantaged county. Section 15.53 is amended to specify that any required local participation in preliminary and construction engineering expenses associated with the development of highway improvement projects is subject to adjustment under sec.15.55. Section 15.54 is amended to specify that in the construction of certain additional frontage roads and in the installation, maintenance, and operation of continuous and safety lighting systems, the required local matching funds are subject to being adjusted under sec.15.55. Section 15.55 is amended to clarify that the commission may require, request, or accept from a local government matching or other funds, rights-of-way, utility adjustments, additional participation, planning, documents, or any other local incentives. Section 15.55 also specifies that, in evaluating a proposal for a highway improvement project in a local government that consists of all or a portion of an economically disadvantaged county, the commission shall, for those projects in which the commission is authorized by law to provide state cost participation, adjust the minimum local matching funds requirement after evaluating a local government's effort and ability to meet the requirement. The amendments require the governing body of such a local government to submit a request for adjustment to the local district office of the department, and provides that, in evaluating a request for adjustment and a local government's effort and ability to meet the local matching funds requirement, the commission will consider a local government's population level, bonded indebtedness, tax base, tax rate, extent of in-kind resources available, and economic development sales tax. On September 30, 1997, a public hearing was held for the purpose of receiving comments relating to the proposed amended sections. No oral comments were received at the hearing. However, on October 20, 1997, the department received written comments from Senator Eliot Shapleigh of the Texas Senate. Senator Shapleigh stated that, in general, he supports the proposed rules and was pleased that they give the Texas Transportation Commission (the "commission") the flexibility needed to adjust local cost participation on a case-by-case basis. However, Senator Shapleigh also stated that although they address projects with required local matches, the proposed rules fail to address adjustments to "local incentives" or other benefits received by the state in projects that do not involve a required match. In that regard, Senator Shapleigh referred the department to Transportation Code, sec.222.053(c)(1), which states that the commission, in evaluating a proposal for a highway project in a political subdivision that consists of all or a portion of an economically disadvantaged county, may not consider the absence or value of local incentives beyond the minimum required local matching funds. Senator Shapleigh stated that he trusted that the proposed rules will be further amended during the current rulemaking process, or in a separate rulemaking in the very near future in light of these concerns. In response, the department considers its project selection procedures and its requirement for local cost participation to be separate concepts. The requirement to provide local matching funds is not considered by the commission when ranking projects. A project may not require local matching funds. Additionally, the amended sections address local participation, and do not contain any provisions relating to project selection procedures or local incentives. Accordingly, as Senator Shapleigh's comments address project selection procedures and not local participation, they are outside of the purview of the current rulemaking. The department is unable to revise the amended sections. Senator Shapleigh also stated that the procedures for the proposed rules must address the relationship between the request for federal funding through the local transportation improvement program (TIP) process and the request for an adjustment in the local required share by the commission. Senator Shapleigh contends that, in certain parts of the state, the proposed rules will affect the metropolitan planning organization (MPO) TIP process in a transportation management area (TMA). Senator Shapleigh notes that in a TMA, the MPO has lead programming responsibility for certain federal fund allocations. As a TIP is required by federal law to be financially constrained, in order to rank projects and to select projects for implementation, the MPO must know the local share requirement for a project and whether the local sponsor can meet that requirement. Senator Shapleigh finally states that a time frame for submitting a request for an adjustment to the local matching funds requirement must be established so that the commission can make a decision prior to or at the early stages of the MPO TIP process, when programming and project implementation decisions are made. In response, the department has not established a time frame for requesting an adjustment in the amended sections, as Transportation Code, sec.222.053(c), which requires the commission to evaluate requests for adjustment to the local matching funds requirement, does not establish a time frame. Section 222.053(c) requires the commission to evaluate a request for adjustment when evaluating a proposal for a project. A project may be identified prior to an MPO selecting a project for implementation in the TIP, and a request for adjustment may be submitted anytime prior to a local government entering into an advance funding agreement with the department. Accordingly, the department has determined that the amended sections do not need to be revised. Senator Shapleigh also stated that the procedures implementing the proposed rules should specify the level of project information to be submitted by a local government. In addition, Senator Shapleigh commented that sec.15.55 of the proposed rules does not specify how the factors set out in subsection (b)(2) will be considered by the commission. Senator Shapleigh notes that the reporting requirements contained in Transportation Code, sec.222.053(e) will provide the Texas Legislature with the information needed to evaluate local government applications and the effectiveness of the adjustment process. He also states that the proposed rules do not specify what information a local government should submit to the department with an application for adjustment. Senator Shapleigh contends that there is no information in the proposed rules that specifies what information a local government should submit to the department when applying for an adjustment. Senator Shapleigh finally stated that since the proposed rules provide an opportunity for local governments which have not previously participated in the project selection process to seek funding for eligible projects, it is important that the department provide training and guidance to the local governments to ensure the rules are understood and that the procedures will work for these local governments. In response, the department respectfully disagrees with the characterization of the information required to be submitted with a request for an adjustment, and how the factors set out in sec.15.55(b)(2) will be considered by the commission. The department notes that sec.15.55(b)(1) identifies the information that is required to be submitted by a local government requesting an adjustment to the local matching funds requirement. That section requires information relating to the proposed project scope and the estimated total project cost. The department also notes that sec.15.55(b)(1) specifies the minimum amount of information required to be submitted with a request for an adjustment to the local matching funds requirement. However, to enable local governments to submit other project information they consider pertinent in supporting a request, sec.15.55(b)(1) has been revised to allow local governments to submit any information considered necessary to support a request for adjustment. The department will also establish training for department personnel to enable those personnel to assist local governments in requesting adjustments to the local matching funds requirement. The department finally notes that the factors set out in sec.15.55(b)(2) will be considered by the commission in determining the financial resources available to a local government as part of evaluating a local government's effort and ability to meet the local matching funds requirement. Senator Shapleigh stated that the procedures implementing the rules should allow a local government to discuss and explain its current and future financial situation in conjunction with its request for an adjustment. Senator Shapleigh commented that the evaluation factors set out in the rules may not address local financial planning and the local decision making process, and may not fully present a local government's financial condition. Senator Shapleigh contends that the procedures should allow local governments to submit other pertinent financial or related information to support their requests and to assist the commission in evaluating a request. In response, for the aforementioned reasons, the department has revised sec.15.55(b)(1) to allow local governments to submit any other information considered necessary to support a request and to assist the commission in evaluating a request. The amendments are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and Transportation Code, sec.222.053, which requires the Texas Transportation Commission to adjust the minimum local matching funds requirement after evaluating a local government's effort and ability to meet the requirement. sec.15.55.Construction Cost Participation. (a) Required cost participation. The commission may require, request, or accept from a local government matching or other funds, rights-of-way, utility adjustments, additional participation, planning, documents, or any other local incentives. (b) Exception. In evaluating a proposal for a highway improvement project in a local government that consists of all or a portion of an economically disadvantaged county, the commission shall, for those projects in which the commission is authorized by law to provide state cost participation, adjust the minimum local matching funds requirement after evaluating a local government's effort and ability to meet the requirement. (1) Request for adjustment. The city council, county commissioners court, district board, or similar governing body of a local government that consists of all or a portion of an economically disadvantaged county shall submit a request for adjustment to the local district office of the department. The request will include, at a minimum: (A) the proposed project scope; (B) the estimated total project cost; (C) a breakdown of the anticipated total cost by category (e.g., right-of-way, utility adjustment, plan preparation, construction); (D) the proposed participation rate; (E) the nature of any in-kind resources to be provided by the local government; (F) the rationale for adjusting the minimum local matching funds requirement; and (G) any other information considered necessary to support a request. (2) Evaluation. In evaluating a request for an adjustment to the local matching funds requirement, and a local government's effort and ability to meet the requirement, the commission will consider a local government's: (A) population level; (B) bonded indebtedness; (C) tax base; (D) tax rate; (E) extent of in-kind resources available; and (F) economic development sales tax. (c) The following Appendix A to this section establishes federal, state, and local cost participation ratios for highway improvement projects, subject to the availability of funds to the department. Figure 1: 43 TAC sec.15.55(c). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715735 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: January 1, 1998 Proposal publication date: September 19, 1997 For further information, please call: (512) 463-8630 CHAPTER 31.Public Transportation SUBCHAPTER C.Federal Programs 43 TAC sec.31.36 The Texas Department of Transportation adopts an amendment to sec.31.36, concerning Section 18 Grant Program with changes to the proposed text as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9237). Title 49, United States Code, sec.5311, provides funding for nonurbanized public transportation systems. This program is administered by the Texas Transportation Commission, which has adopted administrative rules in Title 43, Texas Administrative Code, sec.31.36. Section 31.36, subsection (g), is amended to reflect the latest edition of federal program guidance and to change the effective date for the allocation of funds to accommodate the other proposed amendments. Paragraph (2) is revised to add the strategic program priorities category as eligible to receive funds under this paragraph. The commission is given the discretion to waive all or part of the discretionary awards and to apply those funds instead to the formula program described in paragraph (3). The current expansion program is described in amended subsection (g)(2)(A). A new stipulation would remove capital expansion awards from future calculations for formula funding. New subparagraph (B) outlines the parameters for strategic priorities to be determined by the commission. Strategic priority awards would not be credited in future formula calculations under existing sec.31.36(g)(3). A comment deadline of October 14, 1997, was published in the Texas Register and comments were received from the Public Transportation Advisory Committee, Texas Transit Association, and Gulf Coast Center of Galveston Association. Comment: One commenter suggested changes regarding the intercity bus program provisions contained in sec.31.36(g)(1) by questioning whether the 15% set-aside is needed. Response: The text reflects current federal statutes. Any changes in federal law will be incorporated when such changes are made. Comment: All three organizations suggested that the term "strategic program priorities," as used in sec.31.36(g)(2), be modified or deleted. One commenter suggested a better definition was needed. The others recommended that the term be eliminated. Response: The concept of strategic program priorities was added to give the department greater flexibility in addressing funding needs. Currently funding is only available for system expansion. However, there is a need to fund existing systems in other ways in order to maintain and improve their efficiency and effectiveness. Because of the range of requests received and recognition that future funding situations cannot be predicted with particularity, it is not possible to provide a comprehensive list of specific eligible projects. A definition of strategic priorities has been added to sec.31.36(g)(2)(B) to clarify the types of strategic priorities which will be eligible in order to provide the maximum benefit of these funds. The clarification defines strategic priorities as a project the commission has determined will: stabilize funding levels; increase transit operating efficiency or effectiveness as demonstrated by significant cost savings or substantial enhancements to service delivery; or advance the level of coordination among transportation service providers, and among transportation service providers and health and human services agencies. Changes have also been made to sec.31.36(g)(2) to clarify that funds may be distributed for strategic priorities. Comment: Two commenters suggested that sec.31.36(g)(2)(B) should limit awards to stabilizing funding resources available to rural transit systems. One commenter recommended language that would link these awards to state appropriations. It was also suggested that since the department intends to review the formula provisions in sec.31.36(g) that any broadening of the language in subparagraph (B), other than funding stabilization, be deferred until that time. Response: Although funding stabilization is a compelling priority, there are other funding needs expressed by individual transit systems that cannot be considered without these amendments. The public will have the ability to provide comment on staff recommendations when the awards are proposed to the Texas Transportation Commission at its public meetings. The proposal to include language referring to the state appropriations process would further constrain the funding, which the same commenter recognized as the primary factor that necessitated the proposed revisions to address funding stabilization. The Texas Transportation Commission will use its discretion to consider the best interests of public transportation and give all parties a public opportunity to comment on proposed awards. Regarding the proposed review of the formula provisions in sec.31.36(g), the commenter is correct in noting that this task is underway. However, the timetable for the completion of that review, and any rulemaking activities that may result, cannot be predicted with certainty. As noted by the commenters, the department needs to move quickly on funding stabilization questions. The need for flexibility is expected to continue regardless of the formula provisions in this subsection. Therefore, the department is not deferring action on all or part of these revisions. The amendment is adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and more specifically Transportation Code, sec.455.001 which requires the commission to encourage, foster, and assist in developing intracity and intercity public mass transportation. sec.31.36.Section 18 Grant Program. (a) Purpose. The Federal Transit Act of 1964, Section 18 as amended (49 United States Code sec.5311, authorizes the Secretary of the United States Department of Transportation to make grants for public transportation projects in nonurbanized areas. The department has been designated by the governor to administer the Section 18 program. (b) Goal and objectives. The Department's goal in administering the Section 18 program is to promote the availability of professional, cost-effective, efficient, and coordinated passenger transportation services to the general public in nonurbanized areas using the most efficient combination of financial and other resources. To achieve this goal, the objectives of the department are to: (1) promote the development and maintenance of a network of general public transportation services in nonurbanized areas throughout the state, in partnership with local officials; (2) fully integrate the Section 18 program with other federal, state, and local resources that are designed to serve nonurbanized populations; (3) improve the efficiency, effectiveness, and safety of Section 18 systems through the provision of technical assistance and the establishment of performance goals and management objectives; and (4) include private sector operators in the overall plan to provide public transportation services. (c) Department role. The department acts as the designated recipient for all Section 18 funds appropriated to the state and has an oversight responsibility for all nonurbanized transit services within the state. The department, however, recognizes the contractors as partners who shall retain control of daily operations. As the administering agency, the department will: (1) develop application materials and disseminate information to prospective applicants and other interested parties; (2) allocate the available program funds in a fair and equitable manner as described in subsection (g) of this section (the department will not provide Section 18 funds to more than one transit system in a geographical area); (3) develop evaluation criteria and select projects for funding; (4) prepare the state's annual program of projects and funding application and submit that material to the Federal Transit Administration for approval; (5) negotiate and execute contracts with local Section 18 recipients; (6) prepare requests for federal reimbursement, and process payment requests from Section 18 recipients; (7) monitor and evaluate the progress of ongoing transportation operations, including compliance with federal regulations; and (8) provide technical assistance to Section 18 recipients to aid them in improving transit services. (d) Eligible recipients. State agencies, local public bodies, private nonprofit organizations, Indian tribes and groups, and operators of public transportation services are eligible to receive Section 18 funds through the department. Private for-profit operators of public transportation services may participate in the program through contracts with eligible recipients. An entity must be a rural transit district as defined in sec.31.3 of this title (relating to Definitions) to receive Section 18 funds. (e) Eligible assistance categories. The following categories of expenses are eligible for federal reimbursement under the Section 18 program. (1) State administrative expenses. The department will use up to 15% of the annual federal apportionment to defray its expenses incurred for the administration of Section 18 program. Such funds may also be used to provide technical assistance to contractors. Technical assistance may include project planning, program development, management development, coordination of public transportation projects, and related research. Projects are solicited from contractors and other interested parties. State administrative and technical assistance expenses do not require a non-federal match. (2) Capital expenses. (A) Eligible items include, but are not limited to: (i) buses; (ii) vans or other paratransit vehicles; (iii) radios and communications equipment; (iv) passenger shelters, bus stop signs, and similar passenger amenities; (v) wheelchair lifts and restraints; (vi) vehicle rehabilitation; (vii) operational support such as computer hardware/software; (viii) other durable goods such as spare components or parts with a unit cost over $300 and a useful life of more than one year; (ix) installation costs; (x) vehicle procurement, testing, inspection, and acceptance costs; (xi) construction or rehabilitation of transit facilities including design, engineering, and land acquisition; (xii) facilities to provide access for bicycles to mass transit facilities or equipment for transporting bicycles on mass transit vehicles; (xiii) the lease of equipment or facilities, provided the local recipient, with the concurrence of the department, determines a lease is more cost effective than the purchase of equipment or facilities after considering management efficiency, availability of equipment, staffing capabilities and guidelines on capital leases as contained in 49 CFR Part 639; and (xiv) the capital cost of contracting as defined in FTA Circular 7010.1. (B) Based on funding availability, federal funds may be used to reimburse up to 80% of eligible capital expenditures. The federal share may increase to up to 90% for bicycle facilities projects or for incremental costs related to compliance with the Clean Air Act or the Americans with Disabilities Act of 1990. Eligibility standards for the higher federal share are defined in FTA Circular 9040.1C. The local contractor must provide a 20% or 10% cash match at the time the equipment is delivered or the services are received. (3) Project administrative expenses. Costs not directly tied, but essential, to the operations of passenger transportation systems may be reimbursed at up to 80% with federal funds. The local contractor must provide a 20% match, either in cash or with in-kind donations. (4) Operating expenses. Those costs directly tied to systems operations, such as fuel, oil, drivers', mechanics' and dispatchers' salaries, and replacement parts may be reimbursed at 50% of net operating costs. The local contractor must provide a 50% match, either in cash or with in-kind donations. (f) Local share requirements. Federal Transit Administration program funds cannot be used as the local share required for Section 18 grants. Eligible match sources include local or state programs, or unrestricted federal funds. At least half of the local share for both net operating and non-operating expenses must be cash or cash equivalent from sources other than unrestricted federal funds. In-kind contributions, volunteer services, and donations are eligible as local share if the value is documented. (g) Allocation of funds. As part of its administration of the Section 18 program, the department is charged with ensuring that there is a fair and equitable distribution of program funds within the state (FTA Circular 9040.1D, Chapter 1, Section 4). Effective January 1, 1998, the department will allocate Section 18 funds to local contractors in the following manner. (1) Unless the governor certifies to the Secretary of the United States Department of Transportation that the intercity bus service needs of the state are being adequately met, the department will reserve not less than 5% of the fiscal year 1992 Section 18 federal apportionment for the development and support of intercity bus transportation. The percentage to be reserved for intercity bus transportation will rise to 10% in fiscal year 1993 and 15% in fiscal year 1994 and beyond unless the governor certifies that such expenditures are not necessary. If it is determined that all or a portion of the set-aside monies are not required for intercity bus service, those funds shall be applied to the formula apportionment process described in paragraph (3) of this subsection. Procedures for determining if a certification of adequacy is warranted are as follows. (A) The department will review all data on intercity bus service availability, including outstanding requests from intercity operators, and levels of service. (B) The department will consult with other state agencies that have jurisdiction with respect to intercity bus regulation and seek their recommendations as to the adequacy of current service. (C) Based on the findings of subparagraphs (A) and (B) of this paragraph, the commission will recommend that the governor certify to the adequacy of intercity bus service. (2) An amount not to exceed 10% of the balance of the annual Section 18 federal apportionment, after the set-aside for intercity bus service described in paragraph (1) of this subsection and department administrative expenses are deducted, and 10% of the remaining balance of previous Section 18 federal apportionments shall be reserved for the expansion of nonurbanized public transportation services or other strategic program priorities established by the commission. If the commission determines that state program needs and priorities would be better served by awarding these funds to existing nonurbanized systems for ongoing public transportation services as provided in paragraph (3) of this subsection, then all or a portion of the funds made available under this paragraph, as determined by the commission, shall be distributed in accordance with the provisions of paragraph (3) of this subsection. (A) No later than January 15 of each year, all applicants requesting funding for service expansions shall file a notice of their intentions to expand services. All service expansions shall be initiated on September 1 following the filing of the notice of intent unless otherwise authorized by the department. The amounts to be awarded for each service expansion shall be determined by the commission. After receiving an award under this subparagraph, service expansions, with the exception of capital awards, shall become subject to the funding allocation process described in paragraph (3) of this subsection in succeeding fiscal years. (B) The commission may also elect to use all or a portion of the funds made available under this paragraph to address strategic priorities for the nonurbanized public transportation program. The amounts to be awarded for each strategic priority shall be determined by the commission and awards made under this subparagraph are not subject to the funding allocation process described in paragraph (3) in succeeding fiscal years. For the purposes of this subparagraph, strategic program priorities are defined as projects which the commission has determined will: (i) stabilize funding levels; (ii) increase transit operating efficiency or effectiveness as demonstrated by significant cost savings or substantial enhancements to service delivery; or (iii) advance the level of coordination among transportation service providers, and among transportation service providers and health and human services agencies. (3) Except as provided in paragraphs (1) and (2) of this subsection, the balance of the annual Section 18 federal apportionment, plus the remaining balance of previous Section 18 federal apportionments, and any state funds appropriated specifically for the purpose of funding nonurbanized public transportation services will be allocated to existing RPT contractors as described in this paragraph. No later than June 1 of each calendar year, the department will announce the allocations for the fiscal year beginning on September 1 of the same year. (A) Subject to the following limitations and adjustments, each RPT contractor shall receive the same percentage of funds as were awarded to that contractor by the commission for fiscal year 1994. (i) The percentage awards to each RPT contractor will be adjusted annually to include any projects funded under paragraph (2) of this subsection during the previous fiscal year. (ii) If a portion of an RPT contractor's service area is declared an urbanized area by the United States Census Bureau or the service area is otherwise reduced, the department and that contractor shall negotiate an appropriate adjustment in the award of nonurbanized public transportation funding to that contractor. (iii) If a previously designated urbanized area is declared nonurbanized by the United States Census Bureau, a public transportation contractor serving that area shall apply for funds in accordance with paragraph (2) of this subsection. (B) Prior to receiving funds a contractor must complete and comply with all application requirements, rules and regulations applicable to the Section 18 program, and must negotiate a contract with the department pursuant to paragraph (4) of this subsection. (4) A contract for the allocation of funds pursuant to paragraph (3) of this subsection shall have an effective date of September 1, shall be for a 12-month period unless otherwise authorized by the department, and shall provide for performance goals and management objectives for the RPT contractor that are acceptable to the commission. (A) Performance goals for each fiscal year shall at a minimum include at least one measure deemed appropriate by that RPT contractor and the department after consultation with the affected RPT contractor from each of the categories listed in clauses (i)-(iii) of this subparagraph and may include at least one measure as provided in clause (iv) of this subparagraph. (i) Cost efficiency. Examples include, but are not limited to, specific performance targets related to revenue recovery ratio, cost per vehicle mile, or cost per service hour. (ii) Cost effectiveness. Examples include, but are not limited to, specific performance targets related to cost per passenger trip or cost per passenger mile. (iii) Service utilization. Examples include, but are not limited to, specific performance targets related to passenger trips per capita, passenger trips per mile, or passenger trips per hour. (iv) Other measures. The department and the RPT contractor may also adopt other performance goals that are deemed appropriate by the department and that RPT contractor to address particular operational issues. For example, if an RPT contractor has experienced a number of vehicular accidents during the preceding year, the department and that RPT contractor might agree to institution of a safety program with the goal of reducing the number of accidents by a specified percentage. (B) Management objectives for each fiscal year shall at a minimum include at least one measure deemed appropriate by that RPT contractor and the department after consultation with the affected RPT contractor from each of the following categories. (i) Training. Examples include, but are not limited to, a target for hours of training to be provided to drivers, renewal of first aid and related certifications for all drivers and management employees, or completion of a total quality management course by a specified number of supervisory staff members. (ii) Marketing and public involvement. Examples include, but are not limited to, the expenditure of a specified budget percentage or amount on marketing activities, the completion of a specified number of public meetings to obtain comments on system operations, or the administration of a passenger survey on quality of service. (iii) Disadvantaged business enterprise participation. Examples include, but are not limited to, achievement of a specified percentage increase in the use of disadvantaged business enterprises, or recruitment and certification of a specified number of disadvantaged business enterprises. (iv) General management activities. Examples include, but are not limited to, the automation of all financial and personnel records, preparation of a business plan to foster private sector partnerships, or completion of a staffing plan that identifies funding resources for anticipated personnel increases. (C) A contractor's performance goals and management objectives will serve as a basis for the department's annual review of the contractor's efficiency and effectiveness in providing public transportation services. If the contractor fails to meet those goals or objectives, and fails to demonstrate a good faith effort for their accomplishment, the commission may rule the contractor ineligible to receive nonurbanized public transportation funding. However, the department will make all possible efforts to ensure continuity of service in that area to accommodate the needs of public transportation riders. (i) The department will notify the contractor of any deficiencies noted in the annual review, and will allow the contractor a minimum grace period of one calendar year from the date of notification to correct those deficiencies. During the grace period, the department will make every reasonable effort to provide appropriate technical assistance to the RPT contractor. (ii) If at the end of the grace period the deficiencies have not been corrected, the commission may by written order authorize the department to terminate funding to the RPT contractor. The RPT contractor may request a public hearing before the commission to present input on why termination is not warranted in accordance with the provisions of sec.1.5 of this title (relating to Public Hearing). (h) Application requirements. A prospective applicant must submit an application for Section 18 grant funds to the appropriate department district office, on the forms and at the time specified by the department. The application shall document the need and demand for general public passenger transportation services. (i) Program of projects. All existing projects and proposed expansion projects for the following fiscal year will be identified in accordance with the allocation rules included in subsection (g) of this section no later than February of each year. Upon commission approval of the allocation, these projects will be submitted to the Federal Transit Administration as the annual program of projects for the fiscal year beginning the following September 1. (j) Intercity bus. If the governor does not certify to the adequacy of intercity bus transportation within the state, funds will be made available in accordance with subsection (g)(1) of this section. An annual request for proposals will be issued for projects complying with Federal Transit Administration definitions of intercity bus transportation. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 21, 1997. TRD-9715736 Bob Jackson Deputy General Counsel Texas Department of Transportation Effective date: December 11, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 463-8630