The Two Harbors City Council has voted to accept a bid for construction of a new seven-unit T-hangar at the Two Harbors Richard B. Helgeson Airport despite increased costs.

Originally estimated to cost $1.08 million, the low bid for the project came in at $1.46 million. Benita Crow, project manager from Short Elliot and Henderson, presented the council with details Monday, June 24.

"We didn’t have any interest," Crow said. "About a week before the bid opening, we had one potential bidder. So we worked with Dan to issue an addendum to delay the bid opening from last Tuesday to Friday. Then we reached out to Kraus-Anderson, Northland Constructors and more to try and generate some interest."

In the end, the project received two bids, both of which were approximately $200,000 more than the final engineer estimate.

"Sounds like things are getting rough in the bidding world," Mayor Chris Swanson.

"It’s a very great environment for contractors right now. What we’re hearing is that the summer is all booked. So it’s the point where we have to reach out to contractors," Crow said. "Ten years ago, we did a similar project at the airport and I went back to look at those files. The low bid was $400,000 for almost the same project as this, which now costs $1.4 million."

The good news is that 90% of the project will be funded by Federal Aviation Administration via grants and 5% of the funding would come from the Minnesota Department of Transportation Office of Aeronautics.

The funds come from entitlement dollars given to cities annually to maintain safe and secure airports. Every year, the city of Two Harbors receives entitlement dollars totaling $150,000. These can be banked for up to four years for a total of $600,000.

The city's current balance is $350,000. Crow reported that by reaching out to other communities to negotiate entitlement transfer agreements, the project was able to generate approximately $750,000. This amount will need to be repaid over the next few years from the city's entitlement funds.

"But we're still short by roughly $180,000 of the total project costs," Crow said. "So what you can do is borrow ahead on the next year's entitlement funds and get the additional funds needed to complete the project."

Because 95% of the project comes from state and federal funds, the city's share of the project costs will end up approximately $71,000.

Another point in favor of the project is that the yet-to-be-built hangar is already full with potential lessees. The airport currently has a waiting list of 16 names.

Construction on the new hangar is expected to begin this fall.