DALLAS — The Chesapeake Bay Bridge and Tunnel District of Virginia has put a project for a long-planned $800 million, one-mile subsea tunnel beneath the bay on the fast track to take advantage of low interest rates.
The tunnel work had been planned to begin in 2021, but district commissioners decided in May 2013 to move the project up. Construction is now expected to begin on the two-lane Thimble Shoal tunnel in 2016, said Thomas Anderson 3rd, director of finance for the district.
"The commissioners looked at the opportunities presented by the low interest rate environment and the attractive prices other toll entities received for their major capital projects," Anderson said. "It seemed like it would be worthwhile to accelerate the tunnel project."
The district expects to spend between $700 million to $800 million to build the tunnel but won't know the exact cost of the work or the size of the bond issue until construction bids are received early next year, he said.
"We're anticipating a revenue bond issue of about $337 million sometime in June 2016, when we expect to financially close on the project," Anderson said.
An unsolicited proposal to build the tunnel as a public-private partnership was received when the project was accelerated in 2013. However, directors decided on bond financing when no other offers were forthcoming after inviting others to participate, Anderson said.
The district will defease from its cash balance approximately $80 million of outstanding debt when the revenue bonds are sold next year, he said.
Standard & Poor's rates the district's senior lien debt at A with a BBB-plus on the $57.4 million of junior lien debt. Fitch rates the senior lien debt at A-minus.
Nixon Peabody LLP was recently selected to be the bridge district's bond and disclosure counsel. Nixon Peabody partner Kenneth Lind will lead the bond work for the tunnel project and partner Mitch Rapaport will lead the tax work.
Public Financial Management Inc. is the financial advisor.
A federal Transportation Infrastructure Finance and Innovation Act loan of some $334 million is being sought for the project.
In addition to the bond proceeds and the potential TIFIA loan, project financing will include $310 million of toll revenues and a $50 million loan from the Virginia Transportation Infrastructure Bank.
The CBBT system includes a series of four-lane bridges separated by two one-mile, two-lane tunnels beneath the Thimble Shoal and Chesapeake navigation channels that allow ships to pass through. The Thimble Shoal shipping route serves the U.S. Navy base at Norfolk while sea traffic in and out of Baltimore harbor normally uses the Chesapeake route.
Enlarging the Chesapeake tunnel is not anticipated before 2030, Anderson said.
The new Thimble Shoal tunnel will eliminate a bottleneck where the four-lane crossing goes to two lanes beneath the sea, he said.
If a lane is blocked by an accident, vehicle breakdown, or tunnel maintenance, traffic piles up behind the blockage.
"The two additional lanes will make it safer for our customers and our whole system more efficient," Anderson said.
The system stretches17.6-miles from shore to shore, and carries U.S. 13, the main north-south highway between Norfolk, Va., and Wilmington, Del., across the lower Chesapeake Bay. With toll plazas and approaches, it totals 20 miles in length and provides the only direct link between the Eastern Shore and the Hampton Roads area.
Motorists using the crossing avoid a 90-minute trip around the western edge of the bay on Interstate 95.
Cars pay a $15 one-way toll at peak hours and $13 otherwise, but receive a $10 discount on the return leg if the round trip is accomplished within 24 hours. Commercial vehicles pay approximately $39 per passage.
