Central Virginia Transportation Authority begins bond-validation process as it prepares regional bond options

The Central Virginia Transportation Authority (CVTA) said it is pursuing a court-led bond-validation process and preparing a plan of finance to evaluate issuing bonds to fund large regional transportation projects.

“CVTA is moving forward with a very deliberate, step by step process to evaluate the issuance of bonds for transportation projects,” said Chuck Parsons, executive director of the Central Virginia Transportation Authority, at the finance directors working group meeting. Parsons told the group the goal is to finish preparatory work so the authority will be able to issue bonds only when projects and timing align.

The validation step will ask a court to review the enabling legislation, the taxes proposed as the repayment source and the trust indenture that would govern the debt. “Bond validations are authorized under state law, under the public finance act,” said Megan Gilliland, bond counsel, who described seeking court sign‑off on the constitutional and statutory construct of the authority and on the structure of the proposed financing.

Working-group members were told the authority was created by the General Assembly in 2020 and that regional tax revenues are currently split three ways: 50% pass through to localities, 15% to GRTC for public transit and 35% retained by the authority for regional projects. Parsons said the authority intends to use some portion of that 35% for debt service as needed; Robin Schubert, finance director and treasurer for the town of Ashland, asked how debt service payments would change the allocation, and Parsons confirmed that any debt service would come from the authority’s 35% share.

Kevin Roddy, financial advisor with PFM, told the group the initial financing is likely to rely on sales tax receipts only and that the authority recently adopted a two-times debt service coverage policy. “We’re thinking, taking the conservative route on the financing part of this as just sales tax only, not pledging the fuels tax,” Roddy said, adding that sales‑tax‑only financing still provides substantial coverage. Roddy also estimated that, on a conservative basis, the sales tax revenue could leverage roughly $300 million of projects, while noting the board can choose how much of that capacity to use in an initial issuance.

Parsons and staff outlined parallel steps: a technical advisory committee (TAC) of transportation staff from the nine jurisdictions will assemble candidate projects (each locality is asked to put forward an initial priority project), while the finance directors working group will produce a plan of finance showing amortization, cost of funds and the effect of a bond issuance on future bonding capacity. Parsons said the authority does not plan to convert its entire annual regional budget to debt; rather, officials intend to preserve some pay‑as‑you‑go funding alongside any bond package.

Timeline and project readiness were recurring themes. Parsons told TAC the next application round for regional projects (round 4) opens in July and will run through roughly March or April 2026. Finance directors were urged to prioritize projects that could reasonably begin spending bond proceeds within about 24 months to avoid arbitrage concerns for tax‑exempt debt. “You want to spend the proceeds within a couple years of issuance,” Roddy said.

No formal bond sale was approved at the working-group meeting. Instead, participants agreed the next steps are for staff, bond counsel and financial advisers to prepare a high‑level set of financing assumptions and a draft plan of finance to share with this group and with TAC ahead of TAC’s June meeting. Parsons said staff will circulate the memo the authority approved on April 25 and follow up by email with the working group.

Next steps: staff will circulate the authority memo, Megan Gilliland and PFM will prepare draft validation and trust documents and a preliminary plan of finance, TAC will assemble priority projects for consideration, and the finance directors working group will refine funding‑need projections and guardrails for an initial bond package to present to the finance committee and full authority.