(1) The department, upon request of any interested party or by its own interest, may when it considers necessary assess the physical condition and safety needs of grade crossings of railroad tracks with public streets and highways or with a nonmotorized trail by scheduling a diagnostic study team review at the grade crossing or group of grade crossings. Written notice shall be given to all parties 15 days before the review. Each affected organization shall be represented by a knowledgeable individual prepared to contribute information requested in the notice and empowered to make decisions on behalf of that party. A decision by a diagnostic study team concerning the safety needs of a grade crossing based upon current roadway and railroad traffic levels, speeds and other parameters, funding arrangements, division of responsibility, and scheduling will be mutually decided to accommodate adjustments or improvements, relocations, closures, grade separations, or other changes reasonably required in the interest of public welfare and safety. The department shall issue an order confirming the agreements reached, in writing, to all parties.

    (2) If consensus cannot be reached during the diagnostic study team review, the department, by order to the affected parties, shall require such adjustments or improvements, relocations, closures, or other changes as may be reasonably required in the interest of public welfare and safety. The railroad or railroads having responsibility for the track or tracks in the grade crossing, and the road authority having jurisdiction of the streets or highways shall be given due notice and have the right to a hearing.

    (3) The cost of an adjustment or improvement, relocation, closure, grade separation, or other change determined necessary by a department order shall be funded as provided in this act. Items of work which would usually be at the expense of the railroad or road authority may be funded from the following sources if the work is eligible for such funding and if the funds are available:

    (a) First, from federal funds obtained through the federal aid railroad-highway grade crossing improvement program.

    (b) Second, from state funds obtained through the railroad grade crossing account of the state trunk line fund.

    (4) The department shall administer these funds in an efficient and equitable manner by establishing an annual prioritization of grade crossing safety improvements. Items of work determined to be routine maintenance items shall not be eligible for funding from these funding sources. The department may, at its own discretion, approve or disapprove the use of these funds for items of grade crossing surface and roadway approach work. Federal funds obtained for high speed rail corridor grade crossing improvements, needed to accommodate trains at speeds exceeding 79 miles per hour, shall be expended prior to the use of those federal and state funds of the type referenced in subsection (3)(a) and (b) on a high speed rail corridor. No federal or state funds of the type referenced in subsection (3)(a) and (b) shall be expended for construction of grade separations on federally designated high speed rail corridors.

    (5) The department may, through routine inspections, periodically serve notice to affected parties, that existing devices and conditions exist at public grade crossings need corrective action. The railroads or road authorities, or both, shall, at their cost and according to their respective responsibility, expeditiously correct the deficiency and advise the department in writing when the work is completed.