Chesapeake Transportation System posts modest revenue gains; bond refinancing lowers near-term debt service

Chesapeake officials and consulting advisers reported on April 8 that the Chesapeake Transportation System (CTS) posted a modest increase in revenue for the fiscal year that ended June 30, 2024, and that a 2024 bond refinancing will lower the system's near-term debt service by roughly $2.5 million per year for three years.

The update, presented to the city council by Sean Eckert, managing director at Raymond James Financial, and Dave Cugno, director of traffic and revenue forecasting, said overall system revenue was up about $1.3 million, or 3.7%, from the prior year, while operating expenses rose 13.8% largely because of contract adjustments for toll collection. "Toll revenue on Dominion Boulevard increased by 7.8%," Eckert said, citing the increase as one of the year's bright spots.

The consultant team stressed two items that improve the system's near-term finances: investment income and a refunding of a portion of toll revenue bonds. Cugno said investment income on CTS reserve funds was about $4.8 million in fiscal 2024. Eckert said CTS issued roughly $78 million in refunding bonds in the summer of 2024 to refinance part of the 2012A bonds; the refinancing reduces future debt service by roughly $7.8 million in present-value terms and yields the system's savings of about $2.5 million per year over the next three fiscal years.

Why it matters: Council members and the consultants said the expressway continues to meet its original purpose: handling the surge of peak-summer weekend traffic that otherwise would congest parallel routes. Cugno's traffic analysis showed a pronounced seasonal pattern on the Chesapeake Expressway and steadier year-round volumes on Dominion Boulevard; the expressway sees a higher share of discounted transactions during peak weekends, which affects summer weekend revenue.

The presenters reviewed how toll revenue is applied each year: required operating expenses, mandatory debt payments, and deposits to a renewal-and-replacement fund. Under the amended bond documents following the refunding, CTS may now place 10% of surplus revenue into general reserves (previously all surplus revenues were directed to extra debt service), with the remaining 90% of surplus still used to accelerate debt repayment. Eckert said the system is projected to remain in compliance with the bond covenants and the consultant noted S&P and Fitch now rate the senior bonds at double-A minus.

Council members asked about expansion and long-term planning. The city manager and consultant said the current CTS plan finances operations, renewal and replacement, and debt service for existing facilities; it does not include a funding path for building a new expressway alignment. The vice mayor and other council members raised the regional legislative context, noting a bill creating additional road-funding avenues was vetoed by the governor after passing the General Assembly.

On the schedule for toll adjustments, the presenters said no change to the council-adopted multi-year toll schedule was recommended. The next scheduled change is a peak-weekend Chesapeake Expressway increase slated for May 2026; Dominion Boulevard tolls continue to follow a 5% annual increase to E-ZPass (EZ-Pay) rates with proportional increases to toll-by-plate rates.

Council reaction was broadly positive: members praised the accuracy of long-term traffic forecasting and the stronger credit ratings, and they thanked CTS managers and consultants for the report. The chair of the Transportation Toll Facility Advisory Committee, Dr. Agusti, told council the committee recommended retaining the current toll rate schedule.

Ending: Staff said they would continue monitoring traffic, revenues, and bond covenant metrics and would return to council if conditions warrant changes to the rate schedule or capital plans.