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Capping I-35 could provide substantial economic benefit for city

Friday, June 6, 2014 by Mark Richardson

A study commissioned by city staff shows that one plan floated recently to cut traffic congestion – taking a portion of Interstate 35 underground through central Austin – could bring the city millions of dollars in new property tax revenues, and should be the subject of further study.


The project, known as Capping I-35 or “cut and cap,” is a Texas Department of Transportation plan designed to improve east-west connectivity through the downtown area by lowering the existing lanes, and constructing a “cap” over those lanes. The city would then create parkland and other amenities on the cap over the freeway lanes.


Many critics of the plan – including a number of members of the Capital Area Metropolitan Planning Organization – say it would be prohibitively expensive and could only be a small part of the solution to Austin’s traffic congestion. However, at the request of the City Council, the city’s Transportation Department recently received an economic analysis from the consulting firm Texas Perspectives, or TXP Inc.


According to the report, lowering the lanes of I-35 between River Street (just north of Lady Bird Lake) and Martin Luther King Jr. Boulevard could result in an increase of almost $1 billion in added property values. That could translate into between $500,000 and $4.7 million in new tax revenue each year, the study said, if property values on the east side of I-35 rise to match those on the west.


The TxDOT cut and cap plan could cost an estimated $600 million, but no one at this time knows when the agency could get its hands on the money for the project. The cut and cap plan is part of a larger, $2 billion plan to expand and upgrade I-35.


The study analyzed the effect such a plan would have on land bordering both east and west of I-35 in eighth-mile and quarter-mile strips of land.


According to Deputy Chief Financial Officer Greg Canally and Transportation Department Director Rob Spillar – who analyzed the report in a memo to the Mayor and Council members last week –the study creates a set of parameters to use to measure the benefits of a “cut and cap” project.


“Generally, increases in land value in the area will be the result of many factors, not just caps,” they wrote. “Specifically, the study assumes a full cap all at once, but may not be feasible due to technical and financial reasons. Also, market conditions will be a major force on land values, regardless of any infrastructure investment.”


Staff also noted that the mobility improvements by themselves, whether or not I-35 is capped, would significantly improve connectivity and increase land values.


The study looked at similar projects in other major cities, such as Boston’s “Big Dig” and the Woodall Rogers freeway in Dallas. The result of the Boston project was an area called the Rose Fitzgerald Kennedy Greenway, a linear series of parks and gardens that re-connect some of Boston’s oldest and most diverse neighborhoods. In Dallas, the city built the 5-acre Klyde Warren Park in the heart of the downtown area, which opened in 2012.


The study looked at how areas adjacent to the I-35 project might be developed. By combining the acreage that is both developed and vacant, almost 55 acres are available for development or redevelopment within an eighth of a mile of I-35, a figure that would rise to 154 acres when the area is expanded to a quarter of a mile.

The study says that if properties to the east within a quarter mile ultimately rise to level of properties to the west within a quarter mile, then the tax base gain would be $929 million, based on the 2013 tax rate.

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