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Initial construction of the I-5 Rose Quarter Improvement Project is scheduled to begin next month despite the recent loss of $412.5 million in federal funding.

The Oregon Transportation Commission on Thursday authorized the estimated $75 million phase 1A to proceed. Construction is scheduled to begin on Aug. 25 and continue through fall 2026. That work will primarily be deferred maintenance and stormwater management. It will involve performing bridge rail retrofits, constructing stormwater treatment facilities for highway runoff to the Willamette River, handling roadway asphalt paving and lighting, installing signage and pavement markings, and building the southern portion of the southbound auxiliary lane between Interstate 84 and the Morrison Bridge.

Phase 1 is currently expected to cost around $549.75 million. Last year, the Oregon Department of Transportation (ODOT) received a $450 million Reconnecting Communities and Neighborhoods grant from the Federal Highway Administration. To date, $37.5 million has been obligated for preliminary engineering of phase 1 and relocating utilities. But the remaining $412.5 million was rescinded as part of the One Big Beautiful Bill Act signed into law by President Trump earlier this month.

Approximately $146.8 million has been spent on the project to this point. Currently, there is around $303.1 million available, and that is expected to pay for professional engineering services tied to phase 1 ($51.3 million), property acquisition to gain right-of-way for phase 1 ($30.3 million), utility relocation for phase 1 ($9 million), all work in phase 1A ($75 million), and other phase 1 construction ($137.5 million).

The commission on Thursday authorized ODOT to continue design of phase 1. The work will involve building the southern portion of the highway cover (30 percent of the cover length) and multimodal improvements, completing the southbound auxiliary lane and shoulder from Interstate 405 to the Morrison Bridge exit, extending the northbound auxiliary lane and shoulder under the highway cover, installing signage for highway cover safety and construction, and widening Holladay/Hassalo Bridge, according to the project’s website. Construction is expected to start in early 2027 and finish in 2030.

Travis Brouwer, ODOT assistant director of revenue, finance and compliance, said the agency has enough money to complete phase 1A but not phase 1. There is $137.5 million available for phase 1, but construction of the highway cover is expected to cost from $400 million to $500 million. The $137.5 million will pay for construction of the northbound I-5 auxiliary lane between I-84 and the Weidler Road ramp.

The commission considered the option of pausing construction of phase 1A and seeing if funding will be made available for phase 1 by the Oregon Legislature but ultimately decided to move forward after weighing risks such as cost increases due to delays and possible lost revenue.

As part of Thursday’s action, ODOT will continue assessing cost reduction concepts to bring the total project budget within the $1.5 billion to $1.9 billion range.