PROFILE - cbbt. · PDF fileJOHN F. MALBON Secretary-Treasurer, ... Post Office Box 1475 ......

T o provide the traveling public with a safe, cost effective, and unique

driving experience across the scenic Chesapeake Bay. MISSION

F or fifty-three years, the Chesapeake Bay Bridge-Tunnel has captured worldwide attention as a

modern engineering wonder and an important East Coast travel convenience. Crossing over and under open waters where the Chesapeake Bay meets the Atlantic Ocean, the Bridge-Tunnel provides a direct link between Coastal Virginia and the Delmarva Peninsula (Delaware plus the Eastern Shore counties in Maryland and Virginia), and saves 75 miles from the journey between Virginia Beach and points north of Wilmington, Delaware, as compared to the I-64/I-95 corridor. The Chesapeake Bay Bridge and Tunnel Commission is the governing body of the District. The Commission consists of eleven members who are appointed by the Governor of the Commonwealth of Virginia. One member represents the Commonwealth Transportation Board and the remaining ten members represent the localities within the District. The District is comprised of six cities: Virginia Beach, Norfolk, Portsmouth, Chesapeake, Hampton, Newport News; and the two Eastern Shore counties of Northampton and Accomack.

Following its opening on April 15, 1964, the Bridge-Tunnel was selected “One of the Seven Engineering Wonders of the Modern World” in a worldwide competition that included more than one hundred major projects. In addition, in 1965, it was distinguished as “The Outstanding Civil Engineering Achievement” by the American Society of Civil Engineers. In 2000, the Bridge-Tunnel was recognized by Structural Engineer magazine as one of the “Seven Structural Engineering Wonders of America for the 20th Century.” In 2007, the Chesapeake Bay Bridge-Tunnel was selected as one of Virginia’s “Top Seven Manmade Wonders” in an online poll conducted by the Richmond Times-Dispatch. The scenic Chesapeake Bay Bridge-Tunnel continues to be ranked among the Top 25 Virginia attractions most frequently visited by travelers, not only by those traveling to Coastal Virginia, but throughout the Commonwealth. Most notably, it is ranked #1 for the Eastern Shore region and #3 for the Coastal Virginia and Chesapeake Bay regions.

PROFILE

FREDERICK T. STANT, III Chairman, City of Virginia Beach

THOMAS W. MEEHAN, SR.

Vice Chairman, City of Newport News

JOHN F. MALBON Secretary-Treasurer, Commonwealth

Transportation Board

DEBORAH CHRISTIE Accomack County

PAUL E. BIBBINS, JR, PhD

Northampton County

ROBERT S. BLOXOM, SR. Accomack County

JEFFREY K. WALKER Northampton County

CHRIS SNEAD

City of Hampton

JEFFREY A. ROWLAND City of Chesapeake

KAREN S. JAMES City of Portsmouth

REEVES W. MAHONEY

City of Norfolk

JEFFREY B. HOLLAND Executive Director

The members of the Chesapeake Bay Bridge and Tunnel Commission have worked diligently during 2016 in administering the affairs of the District in the best interest of the bondholders and the traveling public. In May, the Commission approved the operating expense budget for the District for fiscal year 2016-2017, in the amount of $14,607,075, which was a 1.9 % decrease versus the prior year. The Commission, working through the Commission Alumni Society, continues to maximize its communication with former Commission members and to update them on the Commission and the District, as the Commission Alumni continue to serve as ambassadors of the Chesapeake Bay Bridge-Tunnel.

COMMISSION

February 28, 2017 The Honorable Terence R. McAuliffe Governor, Commonwealth of Virginia Office of the Governor Post Office Box 1475 Richmond, Virginia 23218 Dear Governor McAuliffe: We are pleased to submit the Annual Report on the operation of the Chesapeake Bay Bridge and Tunnel District for the year January 1 through December 31, 2016, in accordance with the provisions of Chapter 22, Title 33.2 of the Code of Virginia, formerly Paragraph 16, Chapter 714 of the 1956 Acts of the General Assembly. As you will see, 2016 was an excellent year for the District. The following pages include information on the District’s traffic volumes, revenue bonds, financial status, operations, maintenance, promotional activities and community involvements.

We are excited with the progress that has been made on the Parallel Thimble Shoal Tunnel Project, to be discussed in detail in this Report. Of major significance was the successful award of the Project to Chesapeake Tunnel Joint Venture.

The outstanding performance and loyalty of the District’s employees and staff, under the direction

of Mr. Holland, in the operation, maintenance, capital planning, finance and promotion of the Bridge-Tunnel, and in carrying out the policies set forth by the Commission is recognized and appreciated by the Commission.

If you have any questions concerning this Report or the operation of the Bridge-Tunnel, please let

us know and we would be most happy to discuss them with you. CHESAPEAKE BAY BRIDGE AND TUNNEL COMMISSION Frederick T. Stant, III, Chairman

COMMISSION MEMBERS FREDERICK T. STANT, III CHAIRMAN CITY OF VIRGINIA BEACH THOMAS W. MEEHAN, SR. VICE CHAIRMAN CITY OF NEWPORT NEWS JOHN F. MALBON SECRETARY-TREASURER COMMONWEALTH TRANSPORTATION BOARD DEBORAH CHRISTIE ACCOMACK COUNTY PAUL E. BIBBINS, JR. PhD NORTHAMPTON COUNTY ROBERT S. BLOXOM, SR. ACCOMACK COUNTY

COMMISSION MEMBERS

JEFFREY K. WALKER NORTHAMPTON COUNTY

CHRIS SNEAD

CITY OF HAMPTON

JEFFREY A. ROWLAND CITY OF CHESAPEAKE

KAREN S. JAMES

CITY OF PORTSMOUTH

REEVES W. MAHONEY CITY OF NORFOLK

JEFFREY B. HOLLAND EXECUTIVE DIRECTOR

CHESAPEAKE BAY BRIDGE AND TUNNEL DISTRICT

32386 LANKFORD HIGHWAY

CAPE CHARLES, VIRGINIA 23310

757/331-2960 FAX 757/331-4565

WWW.CBBT.COM

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2013

3 Project acceleration approved 3 Leverage low interest rates 3 Choose Design-Build to lever-

age creativity and innovation

2014

3 District selects: Strategic Advisor Design Manager Municipal Advisor Traffic and Revenue

Advisor 3 District hosts Project Showcase

2015

3 District selects: Project Counsel Bond Counsel Investment Bank

3 Request for Qualifications issued

3 Short Listed Four D-B Teams 3 Issued Request for Proposals

Parallel Thimble Shoal Tunnel Project Timeline

I n 2016, the Chesapeake Bay Bridge and Tunnel District completed the design‐build procurement for the Parallel Thimble Shoal Tunnel Project. The unique procurement allowed for bidders to propose

either an immersed tube tunnel or a bored tunnel solu on. The District received three proposals, all of which selected a bored tunnel design. The bored tunnel will be the first bored roadway tunnel constructed in Virginia, as all other roadway tunnels in Hampton Roads are immersed tube tunnels. The winning proposal of $756 million was awarded to Chesapeake Tunnel Joint Venture (CTJV), a joint venture of Dragados USA and Schiavone Construc on Company. Financial close for the Project was achieved in November 2016, when the District simultaneously closed on a USDOT TIFIA loan in the amount of $338.5 million, a VTIB loan of $50 million and sold revenue bonds totaling $321.5 million. The remaining construc on funds will come from the District’s General Revenue Funds. The Project is currently in the detailed design and permi ng phase and construc on is scheduled to begin

Parallel Thimble Shoal Channel Tunnel

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2016

3 Received proposals 3 Revised Scope of Work 3 Received revised proposals 3 Awarded Contract 3 Secured Project Funding

2017

Closure of Restaurant, Gift Shop and Fishing Pier (est. October 1, 2017)

Construction scheduled to begin

2022

Construction to be complete Fishing Pier to reopen

October 1, 2017. Construc on is scheduled to be complete in 2022. In 2016, the District further expanded its new website with the build‐out for the Parallel Thimble Shoal Tunnel Project. This responsive website con nues to offer informa on to the many varied visitors, including travelers, students and contractors and also provides a library of all per nent documents and informa on as it pertains specifically to the Parallel Thimble Shoal Tunnel Project. Addi onally, the Project Connect e‐Newsle er con nues to provide more than 650 interested par es with up‐to‐date informa on and milestones related to the Parallel Thimble Shoal Tunnel Project.

Parallel Crossing Phase II-A

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TRAFFIC and Revenue

T he Chesapeake Bay Bridge‐Tunnel (the “CBBT”) provides the only direct north/south

route across the lower Chesapeake Bay and completes the coastal transporta on corridor stretching from Maine to Florida. Traffic totaled 3,960,034 vehicles in 2016, an increase of 163,361, or 4.3% over the 3,796,673 vehicles recorded in 2015. Cars and light trucks accounted for 90.7% of the total traffic or 3,589,266 vehicles, an increase of 4.2% versus 2015. Heavy trucks totaled 355,032 vehicles or 8.9% of total traffic, an increase of 5.6% over 2015. Buses totaled 15,736 vehicles or 0.4% of the total traffic, and registered an increase of 9.1% over 2015. A comparison by classes on a monthly and yearly basis can be found on page viii of the a ached financial report. A review of traffic changes since incep on of the facility is indicated in the graph below.

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Gross toll revenue for calendar year 2016 totaled $57,475,733, an increase of $2,023,896 or 3.6% above gross toll revenue received in 2015. The Commission’s toll rate schedule increase commenced January 1, 2014, to proac vely enable the Parallel Thimble Shoal Tunnel Project. The District accepts cash, E‐ZPass, scrip, and credit cards in the toll lanes for customer convenience. E‐ZPass u liza on for 2016 totaled 65.5% of the total revenue for calendar year 2016, as compared to 62% in calendar year 2015. In calendar year 2016, the District incurred total E‐ZPass and credit card fees of $901,923 for processing electronic payments as compared to $759,664 during the previous year. As a result, net toll revenues for 2016 totaled $56,405,705 versus $54,692,173 in the prior year.

Li le Creek Property

The District purchased property at Li le Creek in 1995 to be used as a staging area for the construc on of the Parallel Crossing Project, and Phase I of the Project was completed in 1999. The property on Li le Creek Harbor is now being leased to several tenants and con nues to produce excellent income for the District. In 2016, income from leases of the Li le Creek property totaled $878,340. The four tenants include Marine Spill Response Corpora on ‐ $418,697; PreCon Marine ‐ $303,079; TransAtlan c Lines ‐ $131,233; and Chesapeake Bay Tower Associates ‐ $25,331.

Restaurant and Gi Shop Virginia Originals LLC, operated by Chris and Kellson Savvides of Virginia Beach, successfully completed their sixth full calendar year of the lease for the restaurant and gi shop facili es on the CBBT’s southernmost island, known as One Island on the Bay. The facili es, which were completely renovated and re‐opened in early July 2010, con nue to focus on providing food and retail products that represent the Commonwealth. In 2016, the District received $197,705 from the lease of the establishment. The traveling public will have the opportunity to enjoy this unique stopping point un l October 1, 2017, when it will close to the public in order to allow for construc on of the Parallel Thimble Shoal Tunnel, to be conducted safely without any adverse exposure to the traveling public.

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BONDS

The District had previously incurred its General Resolu on Revenue Bonds, Series 1998, Series 2010A and Series 2011A (collec vely, the “Prior Bonds”) under its General Revenue Bond Resolu on, adopted by the Commission on November 21, 1991, as amended and supplemented (the “1991 Resolu on”). To finance the design and construc on costs of the Parallel Thimble Shoal Tunnel Project, the Commission determined that the Prior Bonds would be redeemed or defeased and the 1991 Resolu on would be terminated so that a new general bond resolu on could be issued. The District redeemed the Series 2010A and Series 2011A Bonds and terminated the interest rate swap associated therewith on November 1, 2016. Concurrently with the issuance of the Series 2016 Bonds, the District contributed addi onal monies in combina on with funds released from the 1991 Resolu on to fund the defeasance of the Series 1998 Bonds, which are non‐callable, on November 10, 2016.

On October 24, 2016, the Commission adopted and approved a new General Revenue Bond Resolu on (the “2016 Resolu on”) along with three Supplemental Resolu ons authorizing the issuance of $321,515,000 First Tier General Resolu on Revenue Bonds, Series 2016 (the “Series 2016 Bonds”), a subordinate loan from the United States Department of Transporta on under the TIFIA program (the “TIFIA Loan”) in the amount of up to $338,528,672, plus capitalized interest and a subordinate loan from the Virginia Transporta on Infrastructure Bank (the “VTIB Loan”) in the amount of up to $50,000,000, plus capitalized interest.

The Series 2016 Bonds are term bonds maturing from July 1, 2041 through July 1, 2055 with coupon

interest rate of 4.0% to 5.0%. The proceeds from the Series 2016 Bonds, along with the proceeds of the TIFIA Loan and VTIB Loan and cash contributed by the District will be u lized to finance the development and construc on of the Parallel Thimble Shoal Tunnel Project. The remaining por on of the proceeds from the Series 2016 Bonds will be u lized to (i) pay capitalized interest on a por on of the Series 2016 Bonds to and including July 1, 2021, (ii) obtain a municipal bond debt service reserve insurance policy for the Series 2016 Bonds, and (iii) pay the related issuance expenses, including bond insurance premiums.

The Series 2016 Bonds were issued while municipal bond yields were at historic lows. The issue was well received by investors and the various maturi es were 6‐8 mes oversubscribed on pricing day. Yield to call for the 2041, 2046, 2051 and 2055 maturi es were 3.16%, 3.33%, 3.46% and 4.00%, respec vely.

The TIFIA Loan and the VTIB Loan are highly sought a er funding sources for major transporta on projects as they offer low long‐term interest rates and flexible repayment schedules. The TIFIA Loan and the VTIB Loan are issued on the Subordinate Lien of the 2016 Resolu on and bear interest rates of 2.88% and 2.90%, respec vely. The loans do not incur interest un l drawn which is an cipated to start in March 2018.

The underlying credit ra ng on the Series 2016 Bonds is Baa2 and BBB by Moody’s Investors Service and S&P Global Ra ngs, respec vely. The TIFIA Loan is also rated Baa2 and BBB by Moody’s Investors Service and S&P Global Ra ngs, respec vely. The VTIB Loan is unrated.

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Customer Service During 2016, the Opera ons Division rendered assistance to 404 customers who experienced some type of difficulty with their vehicles while crossing the facility.

Customer Assistance The CBBT’s Driver Assistance Program con nues to be well received by the traveling public. Opera ons Division employees will drive a customer’s personal vehicle across the facility to pre‐empt an unsafe incident from occurring due to any phobia when driving across the facility. This is a free service for customers who are traveling in a car, van, SUV or pickup truck. In 2016, the Opera ons Division assisted 496 customers with driving over the facility as a result of gephyrophobia, acrophobia, age, etc. during the calendar year. Addi onally, 404 customers were rendered assistance because of vehicle breakdowns, flat res, etc.

VIPR Training The Chesapeake Bay Bridge‐Tunnel Police Department, in coordina on with the Department of Homeland Security, conducted one VIPR (Visible Intermodal Preven on and Response) Opera on to enhance security on and around this facility, which has been labeled by DHS as a Cri cal Infrastructure. Eight other state and federal agencies par cipated in this opera on. There were no explosives found and only minimal delays to the traveling public.

In‐Service School The Chesapeake Bay Bridge‐Tunnel Police Department conducted two Law Enforcement

In‐Service Schools which were a ended by a total of 18 District Police Officers as well as 26 other Police Officers from local departments on the Eastern Shore including Accomack and Northampton County Sheriff’s Offices, Cape Charles, Exmore, Onley, Parksley, Chincoteague, and Tangier.

Personnel Training and Con nuing Educa on The District provides opportunity throughout the year for its employees to par cipate in specialized trainings or con nuing educa on classes. Throughout 2016, our Opera ons personnel a ended the following: LEOKA (Law Enforcement Officers Killed and

Assaulted) School Safety for Faith‐Based Organiza ons training

class FBINAA (FBI Na onal Academy Associates) First

Line Supervisors school Inves ga ng and Prosecu ng DUID Cases class “Diversity Driven Policing” class “GLOCK Professional, Inc. Armorer’s Course” Field Training Officer School “Incident Response to Terrorist Bombings and

Preven on of and Response to Suicide Bombing A acks” training

“Law Enforcement Outreach” Seminar “FBI Joint Terrorism Task Force” Conference “Traffic Records Program for Electronic

Submission of Crash Reports” training class 2016 Virginia Gang Conference related to gang

ac vi es and inves ga ons “Law Enforcement and Community Rela ons

Listening” session “Crisis Interven on” training “Recognizing the Indicators of a Dangerous

Traffic Stop” training VML “Taser Best Prac ces and Cri cal Skills”

training Alcohol Law Enforcement Specialist training DUI class

OPERATIONS

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Customer Service Workshop Motor Vehicle Fraudulent Inspec on S ckers

training

Cer fica on: Virginia Criminal Network (VCIN) Training TASER Instructor training Radar/Lidar Cer fica on Firearms Familiariza on and Qualifica ons

training General Instructor Cer fica on Standardized Field Sobriety Tes ng Instructor

Recer fica on class Breath Alcohol Operators CPR Training

Traffic Summonses and Arrests The Police Department also issued 4,180 traffic summonses, of which 37 were for driving under the influence. Addi onally, the department handled 24 felony arrests during calendar year 2016. Total traffic summonses increased by 4.4% when compared to totals for last year. Of important note, the Chesapeake Bay Bridge‐Tunnel receives no summons proceeds from the Courts. All proceeds are credited to the Commonwealth’s Literary Fund.

Accidents and Safety Benchmarks During 2016, 25 reportable vehicular accidents occurred on the facility, which involved six personal injuries, and represents an increase of two accidents when compared with 23 accidents in 2015. As a result of the 25 accidents, es mated vehicle damage totaled $266,550, and damage to District property totaled $216,000. Since comple on of the Parallel Crossing Project in 1999, the injury rate on the CBBT is 11.61 injuries per 100 million miles traveled, or approximately one‐seventh of the na onal average, which is 78 injuries per 100 million miles traveled. The Na onal Highway Traffic Safety Administra on

gauges the fatali es per 100 million miles driven na onwide as 1.12 in the latest repor ng year of 2015. The fatality rate on the CBBT per 100 million miles driven is .5385, or less than half of na onal average.

Wind Restric ons Occasionally the District will have to restrict certain traffic from crossing the facility as the result of strong winds or storm cells moving across the Bay. In 2016, a total of 180 hours and 29 minutes of restric ons were put in place, with winds ranging from 40 mph to greater than 65 mph. The facility was closed to all traffic for a total of 58 minutes. To decrease delay mes for some travelers, the District offers complimentary wind vans to assist in transpor ng exterior cargo that would otherwise restrict passenger cars and pickup trucks from crossing during the restricted periods. The District con nues to use TWITTER to disseminate any wind restric ons to the traveling public.

Tunnel Lane Closures During 2016, a total of 13 vehicles were disabled in the tunnels, which required traffic control around said vehicles un l District‐provided wrecker service arrived. This resulted in 7 hours and 16 minutes of traffic stoppages. Addi onally, the Opera ons Division/Police Department escorted 489 oversized loads, which required traffic to be stopped at both ends of each tunnel, resul ng in 163 hours of traffic stoppages. There were 13 miscellaneous lane closures, resul ng in 7 hours 16 minutes of traffic stoppages in the tunnels during the year 2016. Nigh me work details in the tunnels during calendar year 2016 totaled 94, resul ng in 705 hours, 03 minutes of traffic stoppages. In summary, during the calendar year 2016, there was a total of 596 lane closures in the tunnels, which resulted in a total of 875 hours and 19 minutes of traffic stoppages.

Annual Inspec on On April 1, 2016, Jacobs Engineering Group (Jacobs), the District’s consul ng engineers, submi ed its Fi y‐Third Annual Report on the annual in‐depth inspec on and review of the District’s opera ons and facili es. This inspec on is conducted annually as required by Sec on 504 of the District’s Revenue Bond Resolu on. The inspec on of the facility was performed using inspec on procedures that followed the general recommended guidelines and regula ons of the Na onal Bridge Inspec on Standards (NBIS) as defined in the Code of Federal Regula ons, the Federal Highway Administra on, and the Virginia Department of Transporta on. In its Annual Report, Jacobs commented that “Despite its loca on with constant exposure to a relentlessly aggressive marine environment throughout its en re life, now exceeding 50 years for the majority of its components, the Chesapeake Bay Bridge and Tunnel facility components generally vary from sa sfactory to excellent condi on, with the overall condi on of the facility determined to be good. Even with recogni on that construc on materials and methods were employed appropriate for this environment, the District’s well‐established and fine‐tuned procedures for recognizing and

repairing defects and repairing or replacing components account for prolonging the lifespan of the structures. The District aggressively con nues to field‐test promising newer products and methods, resul ng in many successful efforts to extend the life of facility components, and has the foresight to u lize Contractors on specific repair projects of substan al size or complexity while using internal staff for the balance of the repair and maintenance needs of the facility. The consistent success of this program over the years highlights the merits and benefits of the District’s proac vely thorough and cost‐effec ve approach to preventa ve maintenance. It also demonstrates the knowledge, value, and steadfast commitment of District personnel.” Condi on level assessments are completed every year by Jacobs Engineering, and the results are an integral part of the District’s Audited Financial Statements, which are enclosed with this report. The Commission con nues to aggressively maintain the Chesapeake Bay Bridge‐Tunnel’s infrastructure in accordance with its infrastructure preserva on policy, which states that at all mes it will maintain 90% of the facility at a “good” condi on level or be er (a ra ng of 7 out of a 9

point scale). No ceable degrada on in any one component area triggers the need for an infrastructure repair, replacement, or renova on.

Underwater Inspec on An underwater inspec on of the en re facility is required every five years and one‐fi h of the structure is inspected each year. The 2016 Under‐water Inspec on of the Trestles B‐SB, D‐NB, E‐SB &

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Engineering, Maintenance AND Management Information Systems

F‐SB, FIB‐SB and NCB‐NB, was awarded to Jacobs at a cost of $557,100 on May 10, 2016. Level 1 and Level 2 of the inspec on is complete. The field work has been finished and the report is expected in March 2017. A total of $274,826.80 has been spent as of December 22, 2016. This project recurs annually to keep the District in compliance with the Commonwealth and FHWA Bridge Inspec on Criteria. In addi on, this recurring project assures the District is mee ng the internal requirements specified in its Infrastructure Preserva on Policy.

Maintenance and Management Informa on Systems The Maintenance and Management Informa on Systems Divisions oversee and maintain the following throughout the year: Approach roads totaling eight lane miles 12 low‐lying concrete bridges totaling 50 lane

miles Four high level steel bridges over naviga on

channels Four manmade islands totaling 20 acres 13 buildings totaling just under 100,000 square

feet Just under 100 fleet vehicles, ranging from

police units to heavy construc on equipment, to underdeck bridge inspec on vehicles with ar cula ng work pla orms

Electrical distribu on system complete with its own Transformer Sta on and four sets of double‐ended switchgear to adequately power every aspect of the facility

Complex Supervisory Control and Data Acquisi on (SCADA) System covering the en re South to North facility

Complex Electronic Toll Collec on System Drinking and domes c use wells, storm water

and sanitary systems

Water and sewer lines from Virginia Beach at South Plaza and Li le Creek

37 acre commercial port, with bulkhead and finger pier, accommoda ng a 20 foot dra

Capital Projects The Commission approved its Capital Projects in the District’s Long‐Term Capital Projects Plan, which extends to 2035. The following lists some of the major projects that were completed or in project construc on in 2016:

Girder Repair Project $2,415,996 by Coastal Gunite Construc on Company.

Underwater Inspec on, Trestles B‐SB, D‐NB, E&F‐SB, FIB‐SB and NCB‐NB $557,100 by Jacobs. Field work is complete and a report is expected in the spring.

Replace Exis ng Trane 80 Ton Chiller, HVAC System Improvements $407,615 by Damuth Trane. Replace a 14‐year‐old chiller with badly degraded coils while making efficiency improvements.

Repair Fender System, North Channel Bridge $393,227 by W. F. Magann. Repairs to damage incurred from a barge strike.

Replace Windows in Administra on Building and North Toll Plaza $273,208 by PNC Corpora on. Construc on is scheduled to begin in the spring to replace windows from the 1960s and 1990s, to allow for a more efficiently condi oned building.

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Replace Welcome Center Sep c System $238,568 by Bundick Well and Pump. This upgraded system will replace a 15‐year old drain field that has reached the end of its life expectancy, while bringing the system up to current VDH specifica ons.

Reroof and Repair North Toll Plaza $197,099 by Roof Engineering Corpora on. Reroof and repair an exis ng 27‐year‐old roof.

Reroof and Repair South Toll Plaza $151,327 by Westar Roofing. Reroof and repair an exis ng 27‐year‐old roof.

Repair Fender System, Fisherman Inlet Bridge $140,204 by Ryan Construc on Co. Repair and replace degraded piles and walers.

Replace Hydrographic Equipment $129,245 by R2Sonic, LLC. Replacement of the early 1990 Single Beam Side Scan with a Wideband Mul ‐Beam Echo Sounder System.

Purchase Survey Boat $99,963. Purchased a 2005 Parker Boat and a 2016 Ford F250 4x4 Super Cab Pickup Truck. This replaces the 1996 Hydrologic Survey Boat.

Con nuing Educa on, Training and Conferences Throughout 2016, our Maintenance personnel a ended the following: A water class en tled “New Revised Total

Coliform Rule Class” A Commercial and Private Pes cide

Recer fica on Class A class conducted by Trane Systems on the

new HVAC System upgrades in the Administra on Building

A Webinar on “OSHA/VOSH Hazcom Standard Updates” held by the Virginia Municipal League Insurance Program

FHWA Design Build Performance Specifica on Roundtable

AASHTO Bridge mee ng European Tunnel Seminar in the United

Kingdom A seminar on “Air Condi oning, Refrigera on

& Boiler Opera on” A water class en tled “How Preventa ve

Maintenance is Asset Management”

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General Adver sing The District con nues to promote the Chesapeake Bay Bridge‐Tunnel with adver sing and public rela ons through coopera ve adver sing and promo onal efforts with surrounding locali es, the Virginia Tourism Corpora on, the Coastal Virginia Tourism Alliance, the Eastern Shore Tourism Commission, and the Virginia Restaurant, Lodging and Travel Associa on, formerly known as the Virginia Hospitality and Travel Associa on. As a result of these efforts, response was made to 7,001 individuals reques ng literature and informa on on the Chesapeake Bay Bridge‐Tunnel and surrounding areas. In addi on to requests made by individuals for literature, more than 116,000 pieces of bulk mail (promo onal brochures and toll schedules) were shipped to individual businesses for display in their brochure racks. Website visits were recorded at 437,259 in 2016, and social media con nues to be a posi ve extension of the CBBT marke ng. Twi er con nues as a pla orm to inform followers of up‐to‐date traffic and weather condi ons on the facility, with 6,116 direct followers to date. Facebook is used to provide general informa on, photography, and history, as well as an addi onal means to disseminate informa on to the public. Our “friends” community con nues to grow with a current following of 12,151. The District develops and publishes informa onal brochures, flyers, and newsle ers for its employees and re rees throughout the year. Annual Tide Tables are also published in‐house for distribu on to anglers on the southernmost island as well as an E‐ZPass brochure, specific to its use on the CBBT, that addresses frequently asked ques ons about the E‐ZPass system, including account replenishment and toll discounts offered by the CBBT. The District con nues to work with local news media and travel writers, as well as Virginia

Tourism Corpora on. FAM (familiariza on) tours were held throughout the year in an effort to publicize and promote the Chesapeake Bay Bridge‐Tunnel and its surrounding regions to various markets.

Tours Throughout the year, presenta ons and “behind‐the‐scenes” tours of the facility were provided to more than 650 people. Tour par cipants included members of the Hampton Roads chapter of the American Society of Highway Engineers; students from regional high schools and colleges including Broadwater Academy, Northampton High School, Norfolk Academy and UVA; Hampton University’s Summer Transporta on Ins tute; Virginia Tourism Corpora on’s Welcome Center Staff and Partnership Development Specialists; delega on from Korea; and other special‐interest groups. The tours provide par cipants with a vast amount of transparent knowledge regarding the District, its history and mission, general opera ons and maintenance, and the Parallel Thimble Shoal Tunnel Project.

Partnerships The CBBT’s partnerships with the Eastern Shore Tourism Commission as well as the City of Virginia Beach con nue to be strong. The Eastern Shore Southern Gateway Welcome Center, located within the North Toll Plaza Rest Area and operated by the Eastern Shore of Virginia Tourism Commission, con nues to thrive. The travel

Marketing & community relations

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ambassadors, comprised largely of volunteer staff led by Welcome Center Manager Mary Lena Mears, ac vely engage the visitors when they

come into the Center in order to determine their vaca on prefer‐ences and to convert them from travelers” to visitors,” as they guide them to the many Eastern Shore a rac ons and ameni es. A total of 104,084 visitors were welcomed during the 2016 calendar year, a 2.2% decrease over visita on in 2015. Since opening its

doors in 2009, this center has welcomed more than 791,000 visitors. The Virginia Beach Visitor Counter, which is located within the footprint of Virginia Originals on the CBBT’s southernmost island and staffed by the City of Virginia Beach, remains popular with our travelers. In 2016, more than 27,000 guests were assisted by Virginia Beach ambassadors, providing informa on to travelers that were headed to Coastal Virginia, which includes not just Virginia Beach but also the ci es of Norfolk, Portsmouth, Hampton, Newport News, Chesapeake, Isle of Wight, Franklin and Williamsburg. Since opening in July of 2010, they have assisted more than 223,500 travelers with direc ons, reserva ons and travel plans.

E‐ZPass E‐ZPass usage on the Chesapeake Bay Bridge‐

Tunnel con nues to grow, with more than 65% of the District’s customers u lizing E‐ZPass in the toll lanes. A full‐service E‐ZPass Customer Service Office con nues to operate at the CBBT’s Administra on Building, providing valuable assistance with account maintenance and updates, payments and sales. In 2016, the District assisted more than 3,600 customers with their Virginia E‐ZPass accounts and sold more than 600 “On‐the‐Go” retail transponders.

Employee Rela ons A healthy and proac ve wellness work environment con nues to be promoted among District employees. A Benefits Fair was hosted and biometric screenings, vascular arterial screenings and a flu shot clinic were offered to all employees and their families. Addi onally, a personal trainer is on‐site twice a week to assist with specialized workouts and meal plans.

Community Rela ons The Commission and District con nue to donate funds to Eastern Shore Rural Health, which in turn are used to purchase scrip toll ckets for local residents who need to travel across the Chesapeake Bay for medical reasons. This Medical Tolls Program has benefited many Eastern Shore residents over the past 24 years. The Educa onal Toll Program was created in 2010, to provide assistance to students commu ng across the Chesapeake Bay Bridge‐Tunnel for the purpose of furthering their post‐secondary educa on. This successful program is a partnership between the Chesapeake Bay Bridge‐Tunnel and the Eastern Shore Community College, who administers the program. The District con nues to par cipate in area Job Fairs, as well as Career Days, that are hosted by local schools and Chambers of Commerce on

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Virginia’s Eastern Shore. Through its partnership with the Coastal Virginia Tourism Alliance and in support of Na onal Tourism Week, the District, as well as the Eastern Shore Tourism Commission, con nues to par cipate in “Thank a Visitor Day” at the Norfolk Interna onal Airport. For 25 years, the Eastern Shore of Virginia Habitat for Humanity has worked in partnership with God and people everywhere to build simple and affordable homes in decent communi es. Through a partner‐ship with CBBT employees and the Tunnel Project Team, the local Sheriff’s Department and the “Shop” students at a local high school, the District pledged to provide 1,000 volunteer hours to assist in the construc on of a Habitat home. Construc on began in the spring of 2016 and to date, more than 750 volunteer hours have been donated to this project. Each year, District employees and Commission members par cipate in the Northampton County Department of Social Services’ “Angel Tree” Christmas program. Through our efforts, 30 angels, from newborns to age 10, were provided with needed clothing items and toys. Assistance was also provided with the delivery of stockings, food, toys and bikes from the Salva on Army in Virginia Beach to more than 450 families on Virginia’s Eastern Shore. In February of each year, a “Super Bowl Food Blitz” to benefit the local Foodbank of Southeastern Virginia, including Virginia’s Eastern Shore, is conducted at the CBBT. In 2016, 245 pounds of food and $127 was collected, which will provide more than 575 meals. District employees con nue to support the Eastern Shore of Virginia’s United Way campaign. Employees pledged $13,223 to this year’s campaign, “Giving Local and Living United,” thus providing valuable support to community organiza ons and non‐profit agencies. The United Way of Virginia’s Eastern Shore recognized the District with a plaque for its employee

contribu on in excess of $10,000 to the campaign.

Birdwatching Tours The CBBT’s habitat of concrete, steel, asphalt and rocks located in open water create an invi ng rest stop for birds during spring and fall migra on. The District con nues to offer birding enthusiasts the opportunity to observe the many birds and waterfowl from its four manmade islands. During the calendar year 2016, there were 14 bird watching tours conducted in addi on to specialized tours during the October Eastern Shore Birding and Wildlife Fes val.

Special Olympics Torch Run Since 1987, the Chesapeake Bay Bridge–Tunnel has par cipated in the Special Olympics Torch Run. Designed to provide Police Officers an opportunity to volunteer with Special Olympics in communi es where they live and work, the Torch Run is their signature event. Each year in June, the Special Olympics’ “Flame of Courage” is carried over more than 2,000 miles of Virginia’s roadways to Richmond to open the largest compe on for athletes with disabili es. On June 8, two District Police Officers represented the CBBT as they par cipated in the final leg of the race down the Eastern Shore of Virginia, running the final mile on the south side of the facility and passing the torch to awai ng officers in Virginia Beach. Efforts for this year’s event involving the Bridge‐Tunnel ne ed over $440 for the Special Olympics and the overall Eastern Shore par cipa on raised over $2,950 for this cause.

CHESAPEAKE BAY BRIDGE AND TUNNEL DISTRICT

FINANCIAL STATEMENTS FOR CALENDAR YEAR 2016

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CHESAPEAKE BAY BRIDGE AND TUNNEL DISTRICT Notes to the Financial Statements & Governor’s Report

As of December 31, 2016

Overview of the Financial Statements

The Chesapeake Bay Bridge and Tunnel District’s (the “District”) financial report for the years ended December 31, 2016 and 2015 provides long-term and short-term information about the District’s overall financial status. This report consists of two parts: management’s discussion and analysis and the basic financial statements, including notes to the basic financial statements. Management’s discussion and analysis introduces the basic financial statements and provides an analytical overview of the District’s financial activities. The basic financial statements are the statements of net position as of December 31, 2016 and 2015 and the related statements of revenues, expenses, and changes in net position. The notes to the basic financial statements consist of information that is essential to a user’s understanding of the basic financial statements.

As it is considered a special-purpose government engaged only in business-type activities, the District follows enterprise fund reporting; accordingly, the basic financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under this basis, revenues are recognized in the period in which they are earned, expenses are recognized in the period in which they are incurred, and depreciation of nonbridge-tunnel infrastructure assets is recognized in the statements of revenues, expenses, and changes in net position. All assets and deferred outflows of resources and liabilities and deferred inflows of resources resulting from the operation of the District are included in the statements of net position.

Financial Highlights for Year ended December 31, 2016

Gross toll revenues before deductions for the year ending 2016 were $57,475,733 and were 3.6% more than toll revenues in the previous year. During 2016, 3,960,034 total revenue vehicles crossed the District’s facility. This represents a 4.3% increase in vehicular traffic over 2015. The slightly disproportional increase in vehicular traffic compared to toll revenues in 2016 is due to the mix in traffic growth as the growth in cars and light trucks traffic outpaced the growth in heavy trucks and buses.

Other revenues in 2016 totaled $1,217,366, which is an increase of 7.1% over other revenues in 2015. The increase in other revenue is due to scheduled increases in lease income from the various tenants at the District’s Little Creek property and the sale of surplus equipment.

Operating expenses in 2016, before District facility expenses, totaled $13,483,368, which is an increase in operating expenses of $167,178, or 1.3% over 2015.

Total net position at December 31, 2016 was $641,247,904, a 2.0% increase over total net position at December 31, 2015.

Significant Events for 2016

On July 15, 2016, the District received revised technical and price proposals from all three teams involved in the procurement for a contract to design and construct a new parallel tunnel at the Thimble Shoal Channel. Based on the lowest price proposal of $755,987,318, the Commission awarded a contract to Chesapeake Tunnel JV, a joint venture of Dragados USA, Inc. and Schiavone Construction Company LLC, on July 27, 2016. Chesapeake Tunnel JV proposed a bored tunnel construction methodology and will begin construction in the Fall of 2017. Total construction of the parallel tunnel is expected to take approximately five years.

The District had previously incurred its General Resolution Revenue Bonds, Series 1998, Series 2010A and Series 2011A (collectively, the “Prior Bonds”) under its General Revenue Bond Resolution, adopted by the Commission on November 21, 1991, as amended and supplemented (the “1991 Resolution”). To finance the costs of the Project, the Commission determined that the Prior Bonds would be redeemed or defeased and the 1991 Resolution would be terminated so that a new general bond resolution could be issued. The District redeemed the Series 2010A and Series 2011A Bonds and terminated the interest rate swap associated therewith on November 1, 2016. Concurrently with the issuance of the Series 2016 Bonds on November 10, 2016, the District contributed additional monies from the General Fund in combination with funds released from the 1991 Resolution to fund the defeasance of the Series 1998 Bonds, which are non-callable.

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On October 24, 2016, the Commission adopted and approved a new General Revenue Bond Resolution (the “2016 Resolution”) along with three Supplemental Resolutions authorizing the issuance of $321,515,000 First Tier General Resolution Revenue Bonds, Series 2016 (the “Series 2016 Bonds”), a loan from the United States Department of Transportation under the TIFIA program (the “TIFIA Loan”) in the amount of up to $338,528,672, plus capitalized interest and a loan from the Virginia Transportation Infrastructure Bank (the “VTIB Loan”) in the amount of up to $50,000,000, plus capitalized interest.

The Series 2016 Bonds are term bonds maturing from July 1, 2041 through July 1, 2055 with coupon interest rates of 4.0% to 5.0%. The proceeds from the Series 2016 Bonds, along with the proceeds of the TIFIA Loan and VTIB Loan and cash contributed by the District will be utilized to finance the development and construction of the Parallel Thimble Shoal Tunnel Project. The remaining portion of the proceeds from the Series 2016 Bonds will be utilized to (i) pay capitalized interest on a portion of the Series 2016 Bonds and including July 1, 2021, (ii) obtain a municipal bond debt service reserve insurance policy for the Series 2016 Bonds, and (iii) pay the related issuance expenses, including bond insurance premiums.

Contacting the District’s Financial Management

This financial report is designed to provide the bondholders, customers, and other interested parties with a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. If you have any questions about this report or need additional financial information, address your request to the Executive Director or the District Deputy Director of Finance and Operations, 32386 Lankford Highway, Cape Charles, Virginia 23310.

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(1) Organization and Summary of Operations

The Chesapeake Bay Bridge and Tunnel District (the “District”) was created as a political subdivision of the Commonwealth of Virginia by Chapter 693 of the Acts of Virginia of 1954. Chapter 693 was subsequently amended by the following Chapters of the Acts of Virginia: Chapters 462 and 714 of the 1956 Session, Chapter 24 of the 1959 Extra Session, Chapters 228 and 605 of the 1962 Session, Chapter 348 of the 1964 Session, Chapter 203 of the 1990 Session, Chapter 548 of the 1998 Session, Chapters 238 and 705 of the 2000 Session, and Chapters 270 and 297 of the 2005 Session, (collectively, the “Acts”). All such Acts have been codified into Title 33.2 Code of Virginia, Chapter 22. The District comprises the area, all within the Commonwealth of Virginia, in Accomack and Northampton Counties, the Cities of Virginia Beach, Hampton, Newport News, Chesapeake, Norfolk, and Portsmouth, and the area of the Chesapeake Bay between these subdivisions.

By the Acts, the Chesapeake Bay Bridge and Tunnel Commission (the “Commission”) was created as the governing body of the District. These Acts authorized the Commission to acquire, establish, construct, maintain, repair, and operate a project comprising public ferry service over and across the waters between any two points within the boundaries of the District, where such public ferry services would form a connecting link in the system of state highways.

Under the Acts, the Commission was also authorized to establish, construct, maintain, repair, and operate a bridge or tunnel or a bridge and tunnel project from any point within the boundaries of the District to a point in the County of Northampton, including such approaches and approach highways as the Commission deemed necessary to facilitate the flow of traffic in the vicinity of such project or to connect such project with the highway system or other facilities in the state.

The Chesapeake Bay Bridge and Tunnel (the “Bridge-Tunnel”) is a 20-mile, four-lane trestle and bridge and two-lane tunnel crossing at the mouth of the Chesapeake Bay between the City of Virginia Beach and Northampton County on the Eastern Shore of Virginia. The Bridge-Tunnel consists principally of low-level trestles, four bridges, two tunnels, approach highways, and an earth-fill causeway. The Bridge-Tunnel is designated as part of U.S. Route 13, the main north-south highway on Virginia’s Eastern Shore and the only direct link between Virginia’s Eastern Shore and the metropolitan area of south Hampton Roads, Virginia.

The District sold a revenue bond issue of $200,000,000 (the “1960 Bonds”) under a Trust Indenture dated July 1, 1960, and constructed the two-lane bridge and tunnel project. The project was opened to traffic on April 15, 1964. The Commission discontinued ferry service following the opening of the two-lane bridge and tunnel project.

On April 15, 1964, the Bridge-Tunnel opened as a two-lane facility. A three-staged parallel crossing project began in 1995. Stage 1 of this project was completed in April 1999. This stage included construction of parallel trestles, bridges, roadways, and rehabilitation of the original two-lane facility. Stage 2 will consist of construction of an additional two-lane tunnel under Thimble Shoal Channel. Stage 3 will complete the parallel crossing with construction of an additional two-lane tunnel under Chesapeake Channel.

(2) Summary of Significant Accounting Policies

The District is accounted for under the economic resources measurement focus and the accrual basis of accounting as a special-purpose government engaged in business-type activities, which follows enterprise fund reporting. Special-purpose governments engaged in business-type activities are used to account for the ongoing activities that are financed and operated similar to those often found in the private sector. Accordingly, revenues are recognized in the period earned and expenses are recognized when they are incurred. The District distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from the District’s ongoing operations. Operating revenues include revenue from toll collection, recognized when travelers cross the bridge and tunnel, and lease income.

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Operating expenses include District facility and administrative expenses. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses.

The statements of net position reports all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and the residual net position of the District. Deferred outflows of resources are defined as a consumption of net position by the District that is applicable to a future reporting period. Similarly, deferred inflows of resources are defined as an acquisition of net position by the District that is applicable to a future reporting period.

(a) Cash and Investments

Cash includes cash on hand and various checking accounts.

In accordance with GAAP, the District reports its investment securities at fair market value. Fair market value is determined as of the statements of net position date. The fair value is based on either quotations obtained from national security exchanges or on the basis of quotations provided by a pricing service, which uses information with respect to transactions on bonds, quotations from bond dealers, market transactions in comparable securities, and various relationships between securities.

(b) Restricted Assets

In accordance with applicable covenants of certain bond issues, cash, investments, and accrued interest receivables have been appropriately restricted. When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, and then unrestricted resources, as they are needed.

(c) Capital Assets

The bridge and tunnel assets are stated at cost and include capitalized interest. No provision for depreciation or obsolescence of the Bridge-Tunnel facilities is provided as the District has adopted the modified approach to account for these assets. Nonbridge and tunnel assets are being depreciated over their estimated useful lives of 3 years up to 50 years.

(d) Restricted Net Position

Restricted net position, as defined by GAAP, is reported when constraints are placed on the use of assets either externally by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislations. At December 31, 2016 and 2015, the District had net position restricted for debt service of $63,603,105 and $24,232,158, respectively.

(e) Management’s Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and deferred outflows and liabilities and deferred inflows and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(f) Revenue Recognition

Toll revenues represent the tolls collected, net of any deductions such as credit card fees, E-ZPass fees and medical and educational toll discounts. Revenues are recognized when earned.

(g) Pensions

In FY 2015, the District adopted GASB Statements No. 68, Accounting and Financial Reporting for Pensions, and No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. For purposes of measuring net pension liability, deferred outflows of resources and deferred

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inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the District’s Retirement Plan and the additions to/deductions from the District’s Retirement Plan’s net fiduciary position have been determined on the same basis as they were reported by the Virginia Retirement System (VRS). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

(h) Fair Value Measurements

In FY2016, the District adopted GASB Statement No. 72, Fair Value Measurement and Application. The objective of GASB Statement No. 72 is to enhance comparability of financial statements among governments by requiring measurement of certain assets and liabilities at fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. This statement will also enhance fair value application guidance and related disclosures in order to provide information to financial statement users about the impact of fair value measurements on a government’s financial position.

This statement requires the District to use valuation techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value. The techniques should be consistent with one or more of the following approaches: the market approach, the cost approach, or the income approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities. The cost approach reflects the amount that would be required to replace the present service capacity of an asset. The income approach converts future amounts (such as cash flows or income and expenses) to a single current (discounted) amount. Valuation techniques should be applied consistently, though a change may be appropriate in certain circumstances. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. More information regarding the fair value of District investments can be found in note 6.

(3) Cash Deposits and Investments

(a) Deposits

The carrying value of the District’s deposits (unrestricted and restricted) was $826,534 and $827,353 at December 31, 2016 and 2015, respectively. The bank balance of these deposits was $633,490 and $455,169 at December 31, 2016 and 2015, respectively. The entire bank balance was covered for both fiscal years by federal depository insurance or collateralized in accordance with the Virginia Security for Public Deposits Act (VSPD Act). In accordance with the VSPD Act, the District’s depository institution pledged collateral in the form of federal agency obligations with a market value equal to 110% of the District’s deposits with a third-party trustee in the name of the Treasurer of the Commonwealth of Virginia. In the event that the banking institution fails, the Treasurer will take possession of the collateral, liquidate it, and reimburse the District up to the value of its deposits. The State Treasury Board is responsible for monitoring compliance with the collateralization and reporting requirements of the VSPD Act and for notifying local governments of compliance by banks.

(b) Investments

The District is authorized to invest in obligations of the United States or agencies thereof; obligations of any state or territory of the United States and any political subdivision thereof; obligations permitted by the laws of the Commonwealth of Virginia; repurchase agreements with respect to the foregoing obligations; certificates of deposit, time deposits, or interest in money market portfolios issued by any bank, banking association, savings and loan association, or trust company insured by the FDIC or Federal Savings and Loan Insurance Corporation; commercial paper, shares in one or more open-ended investment funds provided that the funds are registered under the State Securities Act or the Federal Investment Company Act; bankers’ acceptances; and units representing beneficial

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interests in investment pools created pursuant to the Government Non-Arbitrage Investment Act of the Commonwealth of Virginia.

(c) Credit Risk

Credit risk is defined as the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As required by state statute, the policy requires that commercial paper have a short-term debt rating of no less than “A-1” (or its equivalent) from at least two of the following: Moody’s Investors Service, Standard & Poor’s, Fitch Investors Service, and Duff and Phelps. Corporate notes, negotiable certificates of deposit, and bank deposit, notes maturing in less than one year must have a short-term debt rating of at least “A-1” by Standard & Poor’s and “P-1” by Moody’s Investors Service. Notes having a maturity of greater than one year must be rated “AA” by Standard & Poor’s and “Aa” by Moody’s Investors Service.

The District’s investment securities using the Standard & Poor’s credit quality ratings scale are presented below:

(d) Concentration of Credit Risk

The District’s investment policy establishes guidelines on portfolio composition by investment type in order to control concentration of credit risk. As of December 31, 2016, the District’s portfolio was invested as follows:

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(e) Interest Rate Risk

Interest rate risk is defined as the risk that changes in interest rates will adversely affect the fair value of an investment. The District’s investment policy limits the investment of funds as a means of limiting exposure to fair value losses. Investments in the General Resolution Debt Service Reserve Fund are limited to investments with maturities less than five years. Investments in the General Resolution General Fund are limited to investments with maturities that are consistent with the schedule of planning, development, and construction of parallel tunnels that would complete the parallel crossing. Investments are selected based on the current perception of the direction of interest rates with a greater emphasis on yield and a lesser emphasis on liquidity.

Proceeds from the sale of bonds issued by the District are invested in compliance with the specific requirements of the bond covenants without further restriction as to the maximum term of securities purchased.

As of December 31, 2016, the District had the following investments and maturities:

(4) Capital Assets

Capital assets include bridge and tunnel assets, capitalized interest and financing expenses, and other capital assets. The bridges, trestles, approach roads, Fisherman Island Causeway, tunnels, portal islands with all attached improvements, toll plaza infrastructure and the rest area facility, and site-wide utilities are classified as bridge and tunnel assets. Capitalized interest and financing expenses include the amount of money that was funded from the 1960 Bonds issued for debt service and associated costs of the bonds during construction until the opening of the Bridge-Tunnel in 1964. Miscellaneous capital assets include all other assets that the District has capitalized such as land, buildings, fleet vehicles, and equipment.

The District utilizes the modified approach to infrastructure reporting on bridge and tunnel assets and capitalized interest and financing expenses. In lieu of reporting depreciation on bridge and tunnel assets, the costs incurred for maintaining bridge and tunnel assets at the condition level that is specified by Commission policy are reported as preservation expenses on the accompanying statements of revenues, expenses, and changes in net position.

The District has elected to continue to use the traditional approach or depreciation method for buildings, fleet vehicles, and equipment that are depreciable, as stipulated in the District’s Capital Asset Policy.

U.S. Generally Accepted Accounting Principles (GAAP) requires that governmental entities that utilize the modified approach for infrastructure reporting must have their governing board set a policy for the condition levels at which modified approach assets will be maintained. GAAP also requires that a third party perform

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condition level assessments of the modified approach assets annually and that the condition levels for the current and prior two fiscal years be disclosed in the notes to the financial statements.

The Commission’s preservation policy is to maintain 90% of the bridge and tunnel assets at a maintenance rating program (MRP) condition level of “good” or better.

Jacob’s Engineering, Inc., the District’s consulting engineer, has inspected the District’s bridge and tunnel assets. Jacob’s Engineering, Inc. determines the MRP condition level for the bridge and tunnel assets as a numeric scaled rating. The numeric scaled rating is based on a condition index utilized by the Virginia De-partment of Transportation whereby 0 is a failed condition level and 9 is an excellent condition level. The table below defines the numeric scaled ratings assigned by Jacob’s Engineering, Inc.:

The following two tables derive percentages in different ways. Trestles and bridges that have an MRP nu-meric condition level are described as a percentage of lane miles. All other bridge and tunnel assets that have an MRP numeric condition level are described as a percentage of that specific bridge and tunnel as-set.

The following tables detail the MRP condition level of bridge and tunnel assets for the last three years:

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(5) General Resolution Revenue Bonds

Bond activity for the year ended December 31, 2016 was as follows:

The District had previously incurred its General Resolution Revenue Bonds, Series 1998, Series 2010A and Series 2011A (collectively, the “Prior Bonds”) under its General Revenue Bond Resolution, adopted by the Commission on November 21, 1991, as amended and supplemented (the “1991 Reso-lution”). In July 2016, the Commission awarded a contract to Chesapeake Tunnel Joint Venture to de-sign and build the Parallel Thimble Shoal Tunnel Project (the “Project”); and to finance the costs of the Project, the Commission determined that the Prior Bonds would be redeemed or defeased and the 1991 Resolution would be terminated so that a new general bond resolution could be issued. The Dis-trict redeemed the Series 2010A and Series 2011A Bonds and terminated the interest rate swap asso-ciated therewith on November 1, 2016. Concurrently with the issuance of the Series 2016 Bonds, the District contributed additional monies in combination with funds released from the 1991 Resolution to fund the defeasance of the Series 1998 Bonds, which are non-callable, on November 10, 2016.

On October 24, 2016, the Commission adopted and approved a new General Revenue Bond Resolu-tion (the “2016 Resolution”) along with three Supplemental Resolutions authorizing the issuance of $321,515,000 First Tier General Resolution Revenue Bonds, Series 2016 (the “Series 2016 Bonds”), a loan from the United States Department of Transportation under the TIFIA program (the “TIFIA Loan”) in the amount of up to $338,528,672, plus capitalized interest and a loan from the Virginia Transporta-tion Infrastructure Bank (the “VTIB Loan”) in the amount of up to $50,000,000, plus capitalized interest.

The Series 2016 Bonds are term bonds maturing from July 1, 2041 through July 1, 2055 with coupon interest rate of 4.0% to 5.0%. The proceeds from the Series 2016 Bonds, along with the proceeds of the TIFIA Loan and VTIB Loan and cash contributed by the District will be utilized to finance the develoment and construction of the Parallel Thimble Shoal Tunnel Project. The remaining portion of the proceeds from the Series 2016 Bonds will be utilized to (i) pay capitalized interest on a portion of

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the Series 2016 Bonds to and including July 1, 2021, (ii) to obtain a municipal bond debt service reserve insurance policy for the Series 2016 Bonds, and (iii) to pay the related issuance expenses, including bond insurance premiums. Amortization of original issue premium and deferred costs of insurance related to the Series 2016 Bonds was $237,244 for the year ended December 31, 2016.

The Series 2016 Bonds are subject to optional redemption prior to maturity by the District on or after July 1, 2026, in whole or in part, at par plus accrued interest. The Series 2016 Bonds are subject to mandatory sinking fund redemption in part prior to maturity on July 1 of each year starting in 2035.

The 2041 Term Bond and the 2055 Term Bond are insured by Assured Guaranty Municipal Corporation. The Series 2016 Bonds Debt Service Reserve Fund Requirement of $24,774,566 is secured by a debt service reserve fund policy also issued by Assured Guaranty Municipal Corporation.

The TIFIA Loan and the VTIB Loan are issued on the Subordinate Lein of the 2016 Resolution and bear interest rates of 2.88% and 2.90%, respectively. The loans do not incur interest until drawn which is anticipated to start in March 2018. Both loans have first semi-annual interest repayments commencing January 1, 2021 and first annual principal repayments commencing on July 1, 2025. Final repayment on both loans is July 1, 2054.

The underlying credit rating on the Series 2016 Bonds is Baa2 and BBB by Moody’s Investors Service and S&P Global Ratings respectively. The TIFIA Loan is also rated Baa2 and BBB by Moody’s Investors Service and S&P Global Ratings, respectively, The VTIB Loan is unrated.

The bond premiums for General Resolution Revenue Bonds are being accreted using the straight-line method, which is not materially different from using the effective-interest method, over the period the bonds will be outstanding.

Tolls and other revenues derived from the operation of the Bridge-Tunnel are pledged as security for the General Resolution Revenue Bonds. The General Revenue Bond Resolution includes covenants such as minimum toll rate covenant ratios and minimum debt service reserve requirements.

Maturities of bond principal and interest to be paid in subsequent fiscal years for all bonds outstanding at December 31, 2016 were as follows:

(a) Derivative Instruments

The District accounts for and reports its derivative instruments in accordance with GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. GASB Statement No. 53 requires that the fair value of financial arrangements called “derivatives” or “derivative instruments” be reported in the financial statements of state and local governments. A derivative is a complex financial

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arrangement that is typically entered into with a private sector financial firm in an effort to hedge (or reduce) a specific financial risk. The fair value of a derivative as of the end of the fiscal year is reported in the statements of net position. The annual changes in the fair value of an effective derivative are required to be deferred and reported as Deferred Inflows or Deferred Outflows of Resources. As long as a derivative effectively hedges an identified risk of rising or falling cash flows or fair values, its annual fair value changes are deferred until the hedged transaction ends or the derivative ceases to be effective. If the hedged transaction terminates prior to its expected conclusion or if it ceases to be effective, then the accumulated gains or losses, if any, are reported as investment income or loss. Derivative instruments that are entered into primarily for the purpose of obtaining income, which do not meet the criteria of a hedging derivative instrument or that cease to be an effective hedge, are deemed to be investment derivative instruments for which the changes in fair value of investment derivative instruments are reported as investment income or loss through the statement of revenues, expenses, and changes in net position.

For the fiscal year ended June 30, 2016, the District identified two outstanding interest rate exchange agreements (i.e., interest rate swaps) that qualified as derivative instruments under GAAP. The 2004 Fixed Rate Swap was a “pay-fixed, receive variable” interest rate swap that was entered into as a cash flow hedging derivative instrument with the objective of hedging the District’s exposure to change in the overall cash flows of its’ variable rate debt. The objective of the overall transaction was to lower the District’s borrowing costs by achieving a lower interest rate than could have been obtained by issuing fixed-rate debt. The 2006 Constant Maturity Swap was a “pay-variable, receive-variable” interest rate swap that was entered into as an investment derivative instrument with the expectation that over time the variable receipt based on the long-term rate of 10-year LIBOR would more than offset the short-term rate paid to bondholders of the variable rate debt.

On November 1, 2016, the variable rate debt (the Series 2010A and Series 2011A Bonds) associated with the two interest rate swaps was redeemed and both swaps were terminated. The termination payment made to Deutsche Bank AG was $2,553,000. The net loss on swap termination recognized by the District as a component of investment losses was $1,251,974.

(6) Fair Value Measurements

The District utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The District determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantively the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identified assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).

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The level in the fair value hierarchy within which a fair value measurement, in its entirety falls in, is based on the lowest level input that is significant to the fair value measurement in its entirety.

Portfolio investments are assigned a level based upon the observability of the inputs which are significant to the overall valuation. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

All of the District’s investments in debt securities are in one of the four categories below and therefore the entire portfolio of debt securities is Level 2.

Debt securities classified in Level 2 are valued using the following approaches:

U.S. Treasuries, U.S. Agencies, and Supra-Nationals: quoted prices for similar securities in the market are used to draw appropriate correlations;

Corporate Notes and Municipal Bonds: relevant trade data, benchmark quotes and surveys of the dealer community are incorporated into the evaluation process;

Certificates of Deposit: matrix pricing based on various market makers and dealers;

Federal Agency Mortgage-Backed: solicited prices from market buy and sell side sources, including primary and secondary dealers, portfolio managers and research analysts are used.

The fair value of investments in money market funds is based on the published net asset values per share of those funds.

The District has the following recurring fair value measurements as of December 31, 2016:

T he dream of a structure bridging the lower Chesapeake Bay to connect Virginia’s Eastern Shore with the mainland of Virginia became a reality with the opening of the Bridge-Tunnel on April 15, 1964. This accomplishment can be attributed to the foresight, leadership, and untiring efforts of

Lucius J. Kellam, Jr. of Belle Haven, Virginia. He served continuously from 1954 as Chairman of the Chesapeake Bay Bridge and Tunnel Commission and the former Chesapeake Bay Ferry Commission until 1993, when he was named Chairman Emeritus and continued to serve as an active member of the Commission until September 24, 1995. He was lauded as a diplomat, an executive, a public-spirited citizen, a man of the highest integrity, and a Virginia gentleman.

I n recognition of the outstanding contributions made by Lucius J. Kellam, Jr., and his continued dedication to this major transportation facility, the members of the Chesapeake Bay Bridge and Tunnel Commission, by resolution dated August 11, 1987, named this crossing in his honor. Kellam will be

long remembered for his outstanding contributions to the Chesapeake Bay Bridge and Tunnel Commission and the Commonwealth of Virginia.

PROFILE - cbbt. · PDF fileJOHN F. MALBON Secretary-Treasurer, ... Post Office Box 1475 ......

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Transcript of PROFILE - cbbt. · PDF fileJOHN F. MALBON Secretary-Treasurer, ... Post Office Box 1475 ......