City finance committee selects bond, airport bond

LACONIA — The city council Finance Committee selected Franklin Savings Bank's bid for recommendation to the city council for the bond the city intends to issue for costs of development projects at Laconia Municipal Airport.

Bids were submitted by Franklin Savings Bank and Bank of New Hampshire for consideration by the committee.

The bid selected by councilors on the finance committee was submitted by Franklin Savings Bank, which offered a 20-year term on the $3.5 million bond at 5.2% interest to fund the development of nine lots located along an abandoned runway and for the construction of an access road on the property.

“Franklin Savings Bank came in at 5.2%, Bank of New Hampshire came in at 6.4%,” Ward 2 Councilor Robert Soucy said. 

“That’s certainly the one that I would recommend,” Finance Director Glen Smith said. 

The Laconia Airport Authority, the body which oversees the operation of the airport, is unable to borrow money according to its charter. In previous meetings of council this summer, representatives of the airport authority asked the city to issue a grant-anticipation bond to fund those development projects. 

The grant-anticipation bond is just like any bond except it is issued in advance of grant monies the airport expects to receive. Funds allocated to airports of various sizes in the Bipartisan Infrastructure Law of 2021, which disseminated about $1.2 trillion, will cover most of the $3.5 million price tag for improvements to the municipal airport.

Nine parcels, located along the abandoned runway at the airport, which cannot be reopened, will be leased to private and commercial entities who plan to construct airplane hangars there. The hangars, which are in high demand, will allow the airport to expand its available space while creating new streams of revenue. 

If accepted by the city council at a future meeting, the Franklin Savings Bank bond will be fixed-interest with an annual payment on the principal and semi-annual payments on interest with no prepayment penalties.

Airport manager Marv Everson, during previous meetings of city council, told councilors he anticipates receiving direct grant funding in installments of about $300,000 each year following an initial installment of about $1.3 million. Those monies are expected to hit the airport’s bank account in 2027 or 2028.

Annual debt service on the bond is expected to be around $100,000, and pursuant to a letter of agreement signed by Everson, Mayor Andrew Hosmer who also sits on the board of the airport authority, and City Manager Kirk Beattie, the airport will make those payments on behalf of the city using land lease fees associated with the nine parcels to be developed plus fuel sales at the airport. The first year of lease fees are estimated to be about the same, allowing the airport to break even initially. Lease fees will increase year-by-year, however, pursuant to increases in the Consumer Price Index.

When all is said and done, the city will not bear any financial burden from the project. Last month, Everson told councilors that all nine parcels to be developed are already committed to by various private and commercial entities, which need more hangar space — a problem apparently common throughout the entirety of the country. 

Soucy asked Smith if the city needed to communicate the details of their agreement with the airport authority to Franklin Savings Bank, and Smith explained that agreement is strictly between the airport and the city. 

“That is really between the city and the airport authority, and as far as the bond itself is concerned, that’s between Franklin Savings Bank and the city,” Smith said. “We might have a side agreement with the airport, and of course we do, but that’s not relevant to the bond itself.”

In a letter attached to the bid, Ken Sawyer, vice president and commercial loan officer of Franklin Savings Bank, wrote he believes airport development is important for the region.

“After meeting with Marv Everson, Manager of the Laconia Airport on several occasions, I have come to understand the importance of this project for the Laconia Airport, the City of Laconia and all of Belknap County,” Sawyer wrote. “Since the project has already started, to keep with the construction schedule and understanding time is of the essence, I have already brought the request to loan committee. I am happy to inform you that Franklin Savings Bank has approved this loan request in anticipation of the City of Laconia’s potential acceptance of our proposal,” the letter continued in part.

Their offer is set to expire on Saturday, Aug. 10, according to bid documents.