On May 16 the Project Connect planning team released two shorter route alternatives that could lower the overall cost to build Austin's initial urban rail route.

On May 2, Project Connect planners—comprising city and Capital Metro staff—unveiled a 9.5-mile urban rail route that would cost $1.38 billion and serve East Riverside Drive from its intersection with Grove Boulevard to Austin Community College's Highland campus as well as the Capitol Complex, The University of Texas and the future Dell Medical School. Daily ridership is expected to be between 16,000–20,000.

Project Lead Kyle Keahey said the planning team's recommendation is to move forward with the full project. If the appetite is not there to support the $1.38 billion project, he said Central Corridor Advisory Group—the group advising Mayor Lee Leffingwell on the project—members could decide on two other options.

The first alternative is a 7.3-mile project along Riverside from Grove to the Hancock Center near 41st Street and I-35. That option would cost $990 million—closer to Leffingwell's goal of a $1 billion project—to build and cost $17.3 million annually in operations and maintenance, or O&M. It would serve 13,000–17,000 riders daily.

The second alternative would run 5.7 miles from Grove to Dean Keeton Street along Riverside for a cost of $820 million and serve 10,000–14,000 riders daily. Annual O&M costs would be $13.5 million.

By reducing the route, Keahey said ridership is not the only loss. The second option would lose economic development potential because there is little opportunity for new development around Dean Keeton, he said.

Implementing the full project could bring in between $6.3 billion–$9.1 billion in new development that would occur by 2030 in response to building the rail line, Keahey said. It could also bring between $37.5 million–$55.2 million in new tax revenue by 2030 and draw 14,400–17,700 residents and 14,700–26,800 employees within a half-mile radius of the route.

Keahey said the population and employment increases would not be a new gain but would result from people moving from throughout the region closer to the route. He said the economic analysis that The University of Texas is creating for the project will be vital to pitching the project to the Federal Transit Administration for federal funding.

"We know FTA is looking really strongly now at economic development," he said.

Planners do not expect to fund the entire $1.38 billion project in one phase. At least half of the final rail project could be funded locally by selling bonds while the other half would come from federal grants.

The city of Austin would act as the owner of the rail project and be responsible for funding the capital costs. Capital Metro would act as the operator and handle financing the operations and maintenance of the route.

Capital Metro is analyzing how to cover O&M costs in its budget. By 2022, when the project would begin operation, it would cost $22.1 million annually to operate the full proposed rail line. Other funding sources for O&M could come from city of Austin parking fees and private funding from advertising or naming rights.

Members of the CCAG will vote on the recommendation for the first phase of urban rail June 13. City Council is scheduled to have a special meeting on the urban rail project with the Capital Metro board of directors June 17. The Capital Metro board will take action June 23, while City Council votes June 26. Council has until mid-August to call a bond election for Nov. 4.