City seeking $191M state loan to cover costs of caps and stitch for I-35

The city will turn to a state loan program as a major source of the funding for the more than $500 million cost of constructing caps and a stitch over Interstate 35 after it is buried and expanded over the course of the next decade.

At today’s meeting, City Council is expected to approve an application to request up to $191 million from Texas’ State Infrastructure Bank loan fund, which typically helps municipalities by providing amounts far smaller than what the city is seeking.

At Tuesday’s work session, staff from the Financial Services as well as Transportation and Public Works departments discussed the timeline for the cap-and-stitch effort, with a variety of financial commitments required by the end of this year. One of the main points of discussion during the work session was the decision to seek the SIB loan instead of the federal ​​Transportation Infrastructure Finance and Innovation Act loan that had been the main funding source under consideration until very recently.

Kim Olivares, deputy chief financial officer, said the TIFIA loan would require a bond election to secure the needed funding, but the SIB loan would be much easier to secure with no closing costs and an interest rate around 3.5 percent. The $191 million request would be five times larger than SIB’s largest previous loan, but Assistant City Manager Robert Goode said state officials have a positive view of the cap-and-stitch program and “they encouraged us to think beyond that box and push the envelope.”

The caps would be large plazas built over portions of the sunken freeway that can support soil, trees, people and buildings, and the stitch is an east-west roadway crossing.

The presentation included a breakdown of the city’s responsibilities for the the solid cap over the roadway from Cesar Chavez to Fourth Street, a series of three caps from Fourth to Seventh Street, the 11th and 12th streets cap, a mostly solid cap from 38th 1/2 Street to Airport Boulevard and a single enhanced pedestrian stitch at Holly Street.

The construction and engineering costs for those enhancements will total about $525 million, with the city needing to provide the state with the $19 million remaining due to complete design work by this December. A portion of the construction costs – $99 million – will be covered by a federal grant the city received last week, with the portion not covered by SIB loans likely to come from a bond election planned for 2026.

Council Member Ryan Alter said he is concerned about the city relying on the state to provide such a substantial portion of funding for the projects, especially since the amount far exceeds what has typically been approved in the past.

“We’ve got $163 million in the decision by December 2024. … If we either don’t get the (SIB loan) or get a diminished award, do we have a backup plan?” he said. “I’m just trying to think of the options available if we get to August or September – and if the only option at that point available is something that requires voter approval, are we going to run up against timelines to do that?”

Richard Mendoza, director of the Transportation and Public Works Department, said the city is still pursuing other funding options, including more federal grants.

“We’ll have to have additional conversations primarily around where we want to prioritize and move forward with the available funding that we have,” he said. “I also understand that the (Multimodal Project Discretionary Grant) and infrastructure grant programs for highway projects is going, and that calls are going to come sooner than last year and it’s gonna be facilitated fairly quickly. It’s a dynamic situation for us.”

Mayor Kirk Watson said he’d received positive feedback on the cap-and-stitch plan in a call from Transportation Secretary Pete Buttigieg in a phone call received after the award last week of the $105 million Capital Construction Grant for the Chavez/Fourth Street cap, with an indication that federal officials looked very favorably at the goals of reconnecting portions of East Austin that had been cordoned off by the expressway.

Watson also expressed thanks for state officials who have been supportive of the ambitious cap-and-stitch plan over the past year-plus.

“They have signaled to us a willingness to entertain a much bigger opportunity here that is consistent, I think, with having the kind of relationship that we want to have with the state government so that we can partner on projects like this,” Watson said.

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