Austin’s I-35 “Cap-and-Stitch” Project Loses $105M Federal Grant — But It’s Still Moving Forward

Austin’s most ambitious downtown project just hit a major funding snag. The I-35 “cap-and-stitch” plan is a sweeping effort to reconnect East Austin and downtown with a 5.3-acre park deck that lost its $105 million federal grant this summer. But in true Austin fashion, City Hall isn’t backing down.

What Happened to the $105M Grant

The funding came from the Neighborhood Access and Equity program, part of a broader infrastructure push. On July 4, the “One Big Beautiful Bill Act” slashed spending, pulling back the grant entirely.

Why the Project Isn’t Dead

City leaders anticipated the risk and had already committed $104 million locally to start core work: building the support columns and infrastructure needed for a future park. This phase stretches from Cesar Chavez to 12th Street, with additional “stitch” projects improving walkability over the highway.

The Big Picture for Austin

If completed, the cap-and-stitch could transform the city’s relationship with I-35, cutting noise, adding green space, and physically linking two halves of Austin that the highway long divided.

The Funding Challenge Ahead

Without federal help, the city must find new sources: bonds, private partnerships or shifting budget priorities. That means local taxpayers may shoulder more of the cost.

Projects like this shape how Austin grows for decades.

If you’re curious about how it might impact your neighborhood’s property values or commute, I’d love to talk strategy.

I’m Jennifer S. Goodman, local Austin Realtor.

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