City Council Has More Time to Decide on Funding for I-35 “Caps”

A rendering of a cap over I-35 at 11th Street (image via TxDot)

City Council now has more time to consider committing taxpayers to paying nearly a billion dollars for infrastructure projects that would improve the Texas Department of Transportation’s plan to expand I-35 through Central Austin.

Initially, TxDOT told Council they would need to commit to paying for “caps” over portions of the expanded highway by Dec. 12, but that deadline was pushed until March due to a delay in TxDOT securing a contract related to the highway expansion project. So, Council – including three new Council members, one of whom (Mike Siegel) has opposed the expansion project entirely – will vote on whether or not the city should pay $896 million to fund the caps.

The caps would essentially cover the new highway lanes built by TxDOT and create publicly owned land that could be used for a limited set of public amenities (like parks and small buildings) that would not be usable until 2031 at the earliest. Staff estimates, in their least expensive scenario, the city would need to find $87 million just to pay for limited amenities – either from the public or private sources.

City transportation and financial staff delivered news of the project delay in a memo to Council, Dec. 5. In that memo, staff also provided new information on the financial implications – again emphasizing that Council committing to paying for the caps will negatively impact the city’s financial standing. Staff created a model to show that impact, which assumes that Council orders a $600 million bond election in 2026 (which Austin voters would have to approve). That would fund five caps across the expanded highway (three of which would be Downtown, what most consider to be the most critical places to cap, if any areas are covered at all).

Paying for the caps, as modeled by staff, would increase the property tax bill of the typical homeowner by $82.71 annually until the bond used to fund the project is repaid. To also pay for limited amenities on the caps, more bond funding would be needed, increasing property tax bills by $137.86 annually.

“Staff projects an overall weakening of the city’s financial rating metrics under the modeled parameters over the next 10 years,” staff wrote in the memo. They also note that other factors – a strong local economy, “stringent” financial policies, and “conservative budgeting practices” – will remain favorable for the city.

Still, all of the added debt (Council members also want to fund a climate change bond/tax increase within the next year or two) could result in a “one-notch downgrade” to the city’s credit rating, staff wrote in the memo. That would increase the cost of borrowing money – i.e., taking on debt to fund the caps projects would be even more costly for the city.

Staff also indicated that they would conduct their own analysis of the cost scenarios prepared by TxDOT. The most recent state estimates showed a 61% increase from their initial estimates. But, staff noted in their memo, “estimates will continue to evolve throughout the design process” and the ultimate final cost will not be known until late 2026 when a contractor is identified. “The contractor will determine the final price,” staff wrote.

And if Council commits to paying for the caps in March, the city will be on the hook for whatever that contractor decides to charge more than a year later.