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AGENDA RECOMMENDATION |
8.B.
City Council Regular Meeting
- Meeting Date:
- 09/14/2026
Agenda Item:
Resolution authorizing the City Manager to execute the grant agreement for the Airport Traffic Control Tower Construction under the discretionary Airport Improvement Program.
Recommendation/Action(s):
Adoption of the attached resolution.
Summary:
Earlier today, we were notified by the FAA that the City of Mankato has been awarded $11,511,971 in discretionary grant funding towards eligible construction costs of the Air Traffic Control Tower. Today’s FAA appropriation along with the accompanying state and local share, if accepted, would close the federal project funding gap to approximately $3.3 million.
Grants received under the various FAA programs require work to commence within six months from signature and spending complete within four years. The funding received will allow the project to begin in phases and Knutson Construction will be devising “usable units of work” with a guaranteed maximum price (GMP) for each phase. That said, from a financial risk standpoint, if the City Council authorized the City Manager to execute the grant agreement for $11,511,971 in FAA discretionary funding and no additional federal dollars were appropriated, hypothetically, the city of Mankato could be at risk for covering the remaining $3.3 million in project funding shortfall in order to ensure completion by the required tower readiness date of April 2029. To remediate some of the additional financial risk, staff would utilize the $1.265 million of State Project Funding to reduce the overall city risk to $2.03 Million.
The Mankato Regional Airport is a high priority for Minnesota and the national airspace system. It has the attention and support from our federal and state elected officials, and commitments from the FAA Dakota/Minnesota Airport District Manager. That said, Mankato was advised not to expect the full amount requested in 2026 and, alternatively, look to additional FAA funding in 2027 to close the remaining project gap. The earliest the 2027 funding would be available is April 2027, with application due in October 2026. To meet our Air Traffic Control Tower grant agreement commitment of operational readiness by April 2029, groundbreaking would be scheduled to begin in the spring of 2027 with a substantial completion targeted for the summer of 2028.
Alternatively, if the Mankato City Council elected not to proceed with the $11,511,971 grant funding, it would ultimately mean the elimination of the City of Mankato from the FAA Air Traffic Control program at this time. Furthermore, in accordance with previously executed grant agreements, the City of Mankato would ultimately be responsible for repaying approximately $3.1 million to the FAA for design costs incurred related to the Air Traffic Control Tower.
Funding
This table shows the total project estimate of $31,569,146 and an accompanying breakdown of costs by design and construction. The appropriated funding column provides context of funding already received for design costs of $3,230,128 along with the proposed funding for construction of $25,042,614 which leaves a project gap of $3,296,404. It is noted that there is an additional $1.265 million state grant which lowers the City’s risk to $2,031,404.
The expended column provides context into project costs using the $3,099,705 in federal funding received to date. These federally funded expenditures would be subject to repayment to the FAA if the Air Traffic Control Tower was not completed.
Federal Funding Source
Funding for the Airport Improvement Program comes from the Airport & Airway Trust Fund. The authority to collect aviation excise taxes and to spend from the Trust Fund was last reauthorized in the FAA Reauthorization Act of 2024, which expires September 30, 2028. The excise taxes are imposed on domestic passenger tickets, domestic flight segments, and international passenger arrivals and departures, and on purchases of air travel miles for frequent flyer and similar programs. In addition, taxes are imposed on air cargo waybills and aviation fuel purchases. The largest source of excise tax revenues is related to transportation of passengers. The Trust Fund is supplemented by less than 10% from the General Fund.
Given the Airport & Airway Trust Fund revenue collection methodology and existing reserve levels, staff does believe the fund to be a stable funding source now and into the future. This fund does have a reduced risk of a federal government shutdown due to the authorization through fiscal 2028.
City Council Decision
In an effort that commenced with an application to the FAA in 2021 to construct an air traffic control tower, a tremendous effort has been made by all involved to get this $31.5 million project to the point of being 94% funded (to date). The FAA requires the grant to be accepted and an executed grant contract be transmitted by Thursday, September 17, 2026. Tonight, the City Council has the following decision:
Grants received under the various FAA programs require work to commence within six months from signature and spending complete within four years. The funding received will allow the project to begin in phases and Knutson Construction will be devising “usable units of work” with a guaranteed maximum price (GMP) for each phase. That said, from a financial risk standpoint, if the City Council authorized the City Manager to execute the grant agreement for $11,511,971 in FAA discretionary funding and no additional federal dollars were appropriated, hypothetically, the city of Mankato could be at risk for covering the remaining $3.3 million in project funding shortfall in order to ensure completion by the required tower readiness date of April 2029. To remediate some of the additional financial risk, staff would utilize the $1.265 million of State Project Funding to reduce the overall city risk to $2.03 Million.
The Mankato Regional Airport is a high priority for Minnesota and the national airspace system. It has the attention and support from our federal and state elected officials, and commitments from the FAA Dakota/Minnesota Airport District Manager. That said, Mankato was advised not to expect the full amount requested in 2026 and, alternatively, look to additional FAA funding in 2027 to close the remaining project gap. The earliest the 2027 funding would be available is April 2027, with application due in October 2026. To meet our Air Traffic Control Tower grant agreement commitment of operational readiness by April 2029, groundbreaking would be scheduled to begin in the spring of 2027 with a substantial completion targeted for the summer of 2028.
Alternatively, if the Mankato City Council elected not to proceed with the $11,511,971 grant funding, it would ultimately mean the elimination of the City of Mankato from the FAA Air Traffic Control program at this time. Furthermore, in accordance with previously executed grant agreements, the City of Mankato would ultimately be responsible for repaying approximately $3.1 million to the FAA for design costs incurred related to the Air Traffic Control Tower.
Funding
This table shows the total project estimate of $31,569,146 and an accompanying breakdown of costs by design and construction. The appropriated funding column provides context of funding already received for design costs of $3,230,128 along with the proposed funding for construction of $25,042,614 which leaves a project gap of $3,296,404. It is noted that there is an additional $1.265 million state grant which lowers the City’s risk to $2,031,404.
The expended column provides context into project costs using the $3,099,705 in federal funding received to date. These federally funded expenditures would be subject to repayment to the FAA if the Air Traffic Control Tower was not completed.
Federal Funding Source
Funding for the Airport Improvement Program comes from the Airport & Airway Trust Fund. The authority to collect aviation excise taxes and to spend from the Trust Fund was last reauthorized in the FAA Reauthorization Act of 2024, which expires September 30, 2028. The excise taxes are imposed on domestic passenger tickets, domestic flight segments, and international passenger arrivals and departures, and on purchases of air travel miles for frequent flyer and similar programs. In addition, taxes are imposed on air cargo waybills and aviation fuel purchases. The largest source of excise tax revenues is related to transportation of passengers. The Trust Fund is supplemented by less than 10% from the General Fund.
Given the Airport & Airway Trust Fund revenue collection methodology and existing reserve levels, staff does believe the fund to be a stable funding source now and into the future. This fund does have a reduced risk of a federal government shutdown due to the authorization through fiscal 2028.
City Council Decision
In an effort that commenced with an application to the FAA in 2021 to construct an air traffic control tower, a tremendous effort has been made by all involved to get this $31.5 million project to the point of being 94% funded (to date). The FAA requires the grant to be accepted and an executed grant contract be transmitted by Thursday, September 17, 2026. Tonight, the City Council has the following decision:
- Accept the discretionary grant agreement, pursue additional grant funding and move forward with the project with the city assumption of $2.03 Million in unfunded project risk.
- Decline the funding effectively canceling the project and returning $3.1 Million in project costs to the FAA.