"The fire station is also in a pretty dire state as well."
He said the airport was an important gateway into and out of Rotorua and the project would raise the level of professionalism there.
"Various strengthening options were explored, however the cost was so significant that it made more sense to undertake a full site redevelopment.
"To ensure cost efficiencies, the airport terminal and fire station are being addressed as one project.
"Just as importantly, the necessary upgrades provide us with the opportunity to create an outstanding first impression for visitors to Rotorua and an airport that our community can be proud of."
The new design will have the flexibility to accommodate a Koru Lounge in the future, Mr Stubbs said, adding the project would be funded using "existing financial facilities, while continuing to pay off existing debt".
"I would love to tell you we will get a Koru Lounge, but we are still a little short in passenger numbers, but believe me, we have tried.
"If we can get the numbers up we will have a great case for a Koru Lounge, there is sufficient flexibility with the current design that we could build one.
"But, I think ratepayers will understand the visitor economy is really important for Rotorua, as it has been for 100 years.
"As tourism cements itself as New Zealand's key export earner and Rotorua visitor numbers continue to rise, it is important that Rotorua Airport provides an appropriate and meaningful gateway to the city."
According to a statement, Tim Mein Architects and GHD (architects in association) have been appointed as project architects.
The design of the terminal takes inspiration from Rotorua's landscape, the surrounding lakes and Mokoia Island.
The shape of Mokoia Island will be reflected throughout the design, while large windows will frame Mokoia Island to "make Rotorua the hero, rather than the building itself", the statement said.
Construction is due to begin at the fire station in the first half of 2017, with full completion of all site developments in late 2019.
"During the construction period, the airport will do its best to minimise impact on airport users and staff, and appropriate safety measures will be put in place," Mr Stubbs said.