Austin staff recommend reduced number of 'caps' over I-35 expansion project

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AUSTIN (KXAN) — City of Austin staff released an updated recommendation for which ‘caps and stitches’ the city may want to commit funding to. Those highway covers will go over the Texas Department of Transportation’s I-35 expansion project near downtown.

While a vision plan placed highway covers with parks and community spaces over the highway in a handful of locations, the city is now recommending only funding the roadway elements for a cap spanning from Cesar Chavez to Fourth Street and another project from 11th to 12th.

The city of Austin only has so much money it can borrow if it doesn’t want to hurt its credit rating. City staff said Tuesday that, assuming there is no change in state law, the city should not exceed $750 million in additional bond debt between caps and stitches and anything the city opts to put into its 2026 comprehensive bond package.

“I’m also looking at November of ’26 with a comprehensive bond package that meets things like parks and affordable housing and other needs that we might have. It reduces, in my head, what I think we can afford,” Austin Mayor Kirk Watson said in a sit-down interview with KXAN Monday.

Analysis: Return on investment

Austin city council members previously asked staff to look at whether the return on investment from the caps — increases in property values nearby, amenities on top of the caps, etc. — would significantly help offset the cost of constructing the structures.

City staff brought Hayat Brown on to help with that analysis. That group found Austin would be well short of offsetting the cost of building all of the caps and stitches in the vision plan.

“Caps will not produce sufficient revenue to fund their construction and operations, but constructing caps will produce unquantifiable social benefits,” Hayat Brown wrote in their presentation to the council.

$105 million federal grant still in limbo

The city of Austin is still waiting to see if it will have $105 million to build one of those key caps, but a recent move by the U.S. House Transportation and Infrastructure Committee makes that likelihood seem smaller.

Austin was previously awarded that grant by the federal government, but with a new administration working through a budget reconciliation process, Austin leaders will have to operate on the notion that the funding will no longer be available for now.

“There’s always hope,” Watson said. “This has a couple of hurdles before it ends up passing. And how they get to reconciliation, they’re gonna have to talk about Medicare, they’re gonna talk about food stamps, they’re gonna have to talk about some of the hard votes. But I think it’s probably smart on our part to be making our decisions with the anticipation that that kind of grant won’t be there.”

What are ‘caps and stitches’?

Caps and stitches would look like deck plazas, parks and community spaces over the Texas Department of Transportation’s (TxDOT’s) I-35 expansion project near downtown. The deadline for Austin to commit funding to TxDOT for the roadway elements of the project is May 31.

In a November 2024 council work session, city staff said they believe building out the full cap and stitch vision plan would cost more than $1.4 billion.

Advocacy groups have pushed the city to fund at least the roadway elements for all of the caps and stitches in Austin’s initial vision plan. Almost everyone who showed up to speak at Tuesday’s work session asked for the same.

“Reconnecting East and West Austin will enhance the city’s economic and cultural vitality by supporting small businesses, creating new community public spaces and new development opportunities… To realize this vision, full funding to future-proof the caps will be essential. This is a pivotal moment to invest in infrastructure that supports Austin’s future,” the Downtown Austin Alliance told KXAN.

One speaker at Tuesday’s work session said that although he would like to see the caps happen, he appreciated the staff’s work to cautiously look at the budget and debt capacity. Another speaker flat out asked the city council to vote ‘no’ on the plan later this month.

“This plan, although beautiful, is extravagant,” that speaker said.

“From my personal perspective, I very much would like to see us be able to cap as much as we’re capable of capping. But there’s real dollars involved, and it impacts our debt capacity and how we go about issuing debt,” Watson said.

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