Traverse City Airport seeks county backing for $59.7M bond to fund $112.8M terminal expansion

Traverse City Airport officials and their financial and legal advisers presented Grand Traverse County commissioners with a plan to add a new concourse (4–5 gates in phase 1) and to finance the roughly $112.84 million project through a mix of federal and state grants, airport cash and bond financing.

Airport consultants said anticipated grant funding will cover about $51.7 million of the project and the airport expects to bond roughly $59.7 million (par amount plus issuance costs and capitalized interest bring total uses close to $70.0 million). Airport financial adviser Sean Wall of PFM said the model assumes a 30‑year bond term, a capitalized-interest period during construction and a debt‑service coverage target of about 2.14 times net revenues.

"What we're looking for in this particular project is an expansion or adding an additional concourse with four to five gates," said Kevin, the airport’s lead presenter. He said the project responds to sustained passenger growth and will "modernize and provide better customer experiences." Christina Woodward of Recondo and Associates outlined the revenue mix the model uses, including airline and non‑airline revenues (concessions, parking and rental car fees) and the passenger facility charge (PFC), which she identified as $4.50 per leg and an eligible capital funding source when approved by the FAA.

Bond counsel Pat McGough explained what the county pledge would mean: the airport is asking the county to provide a limited‑tax full‑faith‑and‑credit pledge as backup security for the revenue bonds, a structure that improves credit and reduces borrowing costs but would obligate the county to cover any shortfall after airport revenues and reserves are exhausted. "If the revenues are not sufficient to make the payment, then the county would be asked to make the payment to cover the shortfall," McGough said, adding that the statutory framework requires reimbursement to the county when net revenues return.

Airport engineer Bob Nelson put the project estimate at about $112.8 million for the concourse and apron. PFM quantified the financing impact: issuing the bonds with the county pledge likely lowers borrowing costs compared with an airport‑only issuance. Airport representatives estimated the interest‑cost difference at roughly $632,000 per year — about $18 million over the life of the bonds — savings they said would be reinvested in airport facilities and services.

Commissioners pressed presenters on multiple risk points. Commissioner Henschel sought clarity on whether "revenue" includes cash reserves; staff replied that the definition includes unrestricted cash and reserves available to the authority, except funds restricted by federal grant terms. Commissioner Andrews and others asked about the reliance on discretionary grants; presenters said about $30 million of the anticipated grant support is discretionary and that the airport will phase projects and seek grants for individual pieces, but acknowledged that some funding depends on future federal or state discretionary awards.

Several commissioners asked how the county’s credit could be affected. Steven Burke, the county’s financial adviser, said adding roughly $50 million of additional county debt over current levels would bring the county to a scorecard range where a rating agency could exercise discretion about a downgrade. "At $50,000,000 more of debt, that's where the score changes," Burke said in describing the quantitative thresholds agencies use. Commissioners asked staff to run scenario analyses that compare the airport’s interest savings against any potential long‑term increase in the county’s borrowing costs.

Other topics included parking revenue assumptions, environmental and noise studies, and local infrastructure impacts. Airport staff said no tree removal is planned for the project and that a noise analysis completed and approved by the FAA is available to the board. On parking, presenters noted recent spikes in demand, described near‑term surface parking and shuttle solutions, and said larger parking decks would be a longer‑term item funded with reserves or other capital sources.

The presentation closed with staff offering to return with final bond‑document covenants that seek to limit county exposure (rate covenants, bond reserve accounts sized at about a year of debt service, and early‑warning notices for any draw on reserves). Commissioners did not vote on any authorizing motion during this session; they requested follow‑up analyses on grant timing, the phasing of bond issues, and scenario modeling that showed the net fiscal tradeoffs for the county.

If the board moves forward with the pledge, the immediate next procedural steps discussed were: (1) finalize project phasing and grant applications, (2) draft a bond ordinance describing the pledge and protective covenants, and (3) return to the board for a formal vote authorizing the bond(s).