I-35 Cap & Stitch

[Ryan Alter]

Colleagues,

On May 22, we’ll decide the future of the spine of downtown for the next 60+ years. Our neighbors, children, and grandchildren can either have a superhighway running through the heart of our city or a series of green public spaces where communities can come together instead of letting a concrete barrier keep them apart.

This multi-generational opportunity is why we fully support funding the roadway elements for all potential caps between Cesar Chavez and the Red Line and investing now in the caps between Cesar Chavez and 7th Street. When combined with the caps at the University of Texas, this would result in 24 out of the 43 blocks along this stretch of I-35 to be public green and civic space – an addition of almost 40 acres of real estate in the most expensive part of our city for the public.

But we also recognize the significance of the investment required to realize the potential of this project and the impacts it could have on other needs of the city if fully financed with general obligation debt. We've looked into a range of funds that might be worth prioritizing for this investment. This approach could help avoid any negative effects on our ability to pursue other key investments in the 2026 bond.

All told, these funds total $453.5 million, which is $23.5 million more than is needed to cap Cesar Chavez to 7th Street ($191 million) and build all the roadway elements ($219 million):
• $10M in Street Impact Fees for zones DT, I, and J (approximately 2-3 years’ worth of fees)
• $24.5M in Temporary Right-of-Way fees (TURP) resulting from increasing the TURP fees by 25% and using 7 years’ worth that additional increment on this project
• $100M in dedicating the Car Rental Tax Bonds available from car rental taxes once the remaining debt is retired
• $37M from redirecting bond funds for the Redbud Trail Bridge, which is currently infeasible because it is far over budget, thereby requiring additional funding from the 2026 bond package or a future USDOT bridge grant.
• $171M from including the CC-4th St. cap in the Convention Center expansion project as permissible related infrastructure
• $50M in revenue bonds backed by a portion of the revenues from the Austin Convention Enterprise once its bonds are retired
• $41M State Infrastructure Loan funds already secured

Of important note, these sources of funds do not include the additional tax values that other cities have demonstrated result from making these types of investments in public spaces. This value increase could be captured using a TIRZ and/or dedicated to building additional caps and maintaining the already existing caps. It also does not include the $105M federal Neighborhood Access & Equity Grant, which would supplant some of the funds above, should it ultimately be secured.

We are still working out the details and feasibility of these options but wanted to highlight a framework for realizing this important vision for Austin. We look forward to discussing this further and welcome any thoughts or additional ideas.

CM Jose Velasquez
CM Chito Vela
CM Ryan Alter
CM Zo Qadri

[Mike Siegel]

I appreciate all the work that my colleagues and City staff have put into this proposal. That said, my main concern is that every dollar we commit next Thursday will take a dollar away from the 2026 bond package capacity.

Staff says we have about $750 million in “room” for additional debt, and that this is the sum amount available for both Cap and Stitch and bond priorities. Staff has also confirmed that this “debt ceiling” problem applies not only to potential GO bonds to pay for caps, but also to certificates of obligation and the $41 million State Infrastructure Bank (SIB) loan.

City Council will decide the amount to spend on Cap and Stitch before the Bond Election Advisory Task Force (BEATF) is able to begin deliberating on how to allocate potential 2026 bond dollars. If we commit $55 million on funding foundational roadway elements, as per the May 6 staff recommendation, that means there’s now $695 in room for BEATF to consider allocating towards parks, libraries, affordable housing, climate, transportation, flooding mitigation, and more. And if we commit $410 million next Thursday, as some of my colleagues advocate, the amount left for those other priorities drops to only $340 million.

I appreciate CM Alter’s exploration of alternative funding sources, many of which are creative and may eventually pay down any debt we take out on Cap and Stitch. That said, I’ve spoken to Staff and these funding methods also would not address the debt capacity problem in time for the 2026 bond cycle.

There are also potential legal issues with many of them. For example, under state law, Street Impact Fees are fees charged to new developments and must be spent on recouping transit costs that are “necessitated by and attributable to the new development.” It is unclear how Cap and Stitch could meet that definition, since it does not actually create any new transit connections, but instead creates small parks next to the connections already being built by TxDOT. In addition, this proposal would divert funding for critical road infrastructure needs in Districts 1, 3, 4, 6, 7, 9, and 10, including much-needed projects like traffic light installations, intersection turn lanes, and substandard street reconstruction.

The most that any other city has spent on a cap project is $20 million, and I believe we carefully consider why. That’s especially important now, when nearly every City department is considering cuts; when we’re getting emails about shutting down multiple ambulances every day due to cost concerns; and when we’ve got 102-degree weather in mid-May, highlighting the need for major climate and resiliency investments.

I agree that I-35 terrible scar that has divided our city across racial and economic lines. But I do not believe that building small parks on a handful of highway segments will fix that, and I worry that taking out millions or billions in loans will limit the ability of future Councils to address the needs of our most vulnerable residents for decades to come.

[Ryan Alter]

Thank you, CM Siegel, for sharing your thoughts on this project. I share your desire to maintain the maximum amount of room in our upcoming bond program to prioritize community needs like parks, affordable housing, and the environment, which is why our subquorum has worked diligently to identify funding sources that do not utilize general obligation debt. While the funding sources identified can be used for the caps , most have restrictions that would prevent their use for these other priorities. The community benefits of the I-35 cap project should not be pitted against the community benefits of our bond program. This City can have both.

As our financial staff confirmed in our work session discussions last week, the reason our proposals do not have an impact on our GO bond capacity is because they are revenue bonds that are paid back not by property taxes, but by some other source (i.e. car rental tax, hotel occupancy taxes, or fees). We are proposing completely separate debt instruments that would be wholly serviced outside the potential 2026 bond.

It is our understanding that in the next couple of days we will be getting additional information from staff on these funding proposals and from a study on the economic potential of the project. Our subquorum looks forward to reviewing that feedback and offering a comprehensive package to fund this once-in-a-generation opportunity that will connect communities with greener public spaces for all Austinites to enjoy – together.

Ryan