Special Session (Joint meeting with G.T. County RE: NRAA Terminal Expansion) (PFM MCPS Cherry Capital Airport NRAA Presentation, 10/14/2024)

The Northwest Regional Airport Authority (NRAA) at Cherry Capital Airport is planning to finance a significant capital project through the issuance of revenue bonds, with an estimated total cost of $112,840,000. The project includes the expansion of the terminal gate hold room and commercial apron, phased over several years from 2025 to 2028. The financing strategy involves issuing bonds in two series, starting in 2026, with a total bond funding requirement of $59,729,823. The bonds will have a 30-year term with a 36-month capitalized interest period. The plan assumes a combination of federal and state grants, local funds, and bond proceeds to cover the costs. The financial advisors, PFM Financial Advisors LLC, and bond counsel, Miller Canfield, will assist the NRAA in structuring the bond issuance, ensuring compliance with legal requirements, and managing the bond sale process.

The legal framework for the bond issuance is provided by the Aeronautics Code of Michigan, which allows the NRAA to issue self-liquidating revenue bonds. The NRAA, established by Grand Traverse and Leelanau Counties, requires approval from both counties for any indebtedness. The bonds will be secured primarily by net revenues from the airport’s operations, with the possibility of a full faith and credit pledge from Grand Traverse County as additional security. This pledge could enhance the bond’s credit rating, potentially lowering the cost of borrowing. The preliminary analysis indicates that the County’s credit rating would remain unchanged with the addition of the airport’s debt, suggesting a strong financial position to support the bond issuance.

The financial benefit of securing the bonds with a county pledge is significant. With the pledge, the bonds are expected to achieve a higher credit rating, leading to more favorable interest rates and investor demand. This could result in annual savings of approximately $634,500 in debt service costs, totaling over $18.23 million over the life of the bonds. The plan of finance includes detailed steps for bond issuance, starting with preliminary approvals by the NRAA and county boards, followed by public hearings and the eventual bond sale in 2026. The NRAA, with the support of its financial and legal advisors, is poised to execute this financing strategy effectively, ensuring the successful completion of the planned airport improvements.