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Full text of "Annual financial report, Chicago O'Hare International Airport"

CHICAGO-O'HARE INTERNATIONAL AIRPORT 
YEARS ENDED DECEMBER 31, 1980 AND IS? 9 



AUG 1991 



LAVENTHOL & HORWATH 

CERTIFIED PUBLIC ACCOUNTANTS 









4™^€> l " 






S1 AN 

9797. 7C4 

C532a 

1981 




City of Chicago 
Jane M. Byrne, Mayor 



Deportment of Aviation 

Thomas Kapsalis 
Commissioner 

City Hall, Room 1111 
121 North LaSolle Street 
Chicago, Illinois 60602 
(312) 744-6892 



June 30, 1981 



Honorable Jane M. Byrne 
Mayor, City of Chicago 
Chicago, Illinois 60602 

Dear Mayor Byrne: 

Submitted with this letter is the Annual Financial Report for the City of 
Chicago O'Hare International Airport for the years ended December 31, 
1930 and 1979. This report has been prepared in conformity with generally 
acceoted accounting orincioles and is presented in a manner to fairly set 
forth the financial position and results of operations of O'Hare International 
Airport. 

This letter is intended to provide background information to those not as 
familiar with the airport and its operations as Your Honor, and to highlight 
certain portions of the attached report, the organization, the accounting 
systems and the debt service administration. 

ORGANIZA TION 

Chicago-O'Hare International Airport, the world's busiest airport since 1961, 
is owned by the City of Chicago and operated by its Department of 
Aviation. The Department of Aviation is headed by the Commissioner of 
Aviation, Thomas Kapsalis, who was appointed by Mayor Jane M. Byrne and 
confirmed by the Chicago City Council in October 1930. 

In late 1980, Commissioner Kapsalis, working together with the City's 
Aviation Consultant, Landrum and Brown, Inc., reorganized the Department. 
Effective January 1, 1981, the Commissioner will be aided by three Deputy 
Commissioners. 

Day-to-day operations at the City's three airports, O'Hare, Midway and 
Meigs, will be the responsibility of the Deputy Commissioner of Airport 
Operations. The 900 personnel based at O'Hare and the 50 persons located 
at Midway and Meigs will be under the supervision of the Deputy Commis- 
sioner of Operations and will work in such units as Field Operations, 
Physical Plant Operation and Maintenance, Parking Management and 
Inventory Control. 



DEPARTMENT OF AVIATION 



The Deputy Commissioner of Aviation Planning will provide long-term 
planning of Aviation projects and supervise ongoing capital programs. The 
one billion dollar retrofit planned for O'Hare will be under the jurisdiction of 
the Deputy Commissioner of Planning who will coordinate activities of the 
Aviation Consultant, the Supervising Architect, the City Department of 
Public Works, numerous outside contractors, and the relevant Federal and 
State aviation agencies. 

The Deputy Commissioner of Finance and Administration will be responsible 
for financial review and activities that include personnel, payrolls, 
budgeting, contracts and leasing, asset control, systems analysis and design, 
and electronic data processing. The Deputy Commissioner of Finance works 
together with the offices of the City Comptroller and City Budget Director 
in keeping the appropriate accounting records and producing the annual 
financial report. Additionally, the Deputy Commissioner of Finance serves 
as the department's link to the financial community. 

The Department of Aviation's operations differ from those of other City 
departments in two significant ways. 

First, in accordance with the original O'Hare Bond Covenants, the Depart- 
ment is required to prepare all budgets, plans and procedures in association 
with an independent Aviation Consultant. 

Secondly, the 15 airlines who were the original signatories to the O'Hare 
Airport Airlines Use Agreement signed in 1958 have the right to approve all 
major capital improvements at the airport. The committee of represen- 
tatives from these airlines is informally known as "The Top Committee." 
Landing fees are reviewed and negotiated with this committee semi- 
annually to adjust revenues to meet expenditures. 

BUDG ET PROCEDURES 

O'Hare operates as a self-sustaining enterprise. Finances are governed by 
the City's Annual Appropriation Ordinance. Each year during the Spring and 
Summer, a budget is prepared for approval by the Mayor and submitted to 
the Budget Director by September 1. The Mayor's Budget is submitted to 
the City Council in November. Upon approval by the Council, the Budget is 
printed by the City Clerk as part of the Annual Appropriation Ordinance and 
goes into effect on January 1 of the following year. 

In 1980, the O'Hare Budget was $84 million, fifth largest of all City 
departments. Midway and Meigs are separately funded. 

ACCOU NTING SYSTEMS A ND_ CONTROLS 

Appropriation accounting records for the Department are maintained by the 
City Comptroller although the Department of Aviation approves and 
processes documents for input to the system. The funds are maintained 
using budgetary control procedures prescribed by the Annual Appropriation 
Ordinance as approved by the City Council and administered by the Mayor's 
Budget Director. In developing and modifying the accounting system for the 
enterprise reporting of airport operations, consideration is given to the 



DEPARTMENT OF AVIATION 



adequacy of internal accounting controls. Internal accounting controls are 
those procedures that are concerned with the reliability of financial records 
and the safeguarding of assets. Consequently, they are designed to provide 
reasonable, but not absolute, assurance that: 

Transactions are recorded in accordance with management's general or 
specific authorization. 

Transactions are recorded as necessary (a) to permit preparation of 
financial statements in conformity with generally accepted accounting 
principles or any other criteria applicable to such statements and (b) 
to maintain accountability for assets. 

Access to assets is permitted in accordance with management's 
authorization. 

The records of assets are compared with their physical existence at 
reasonable intervals and appropriate action is taken with respect to 
any discrepancies. 

The concept of reasonable assurance recognizes that the cost of a system of 
internal control should not exceed the benefits derived, and also that the 
evaluation of internal control factors necessarily requires estimates and 
judgments by management. We believe that the internal accounting controls 
existing in the Department of Aviation adequately safeguard assets and 
provide reasonable assurance of the proper recording of financial trans- 
actions. 

For internal managment purposes, budgetary control is maintained through 
the use of an encumbrance system to control costs at the su'oactivity object 
level. Encumbrances which exceed appropriation authority cannot be 
released unless authorized by allotment increase, transfer oc other legal 
means. Outstanding encumbrances are not reflected in the statements 
included in this report; however, schedules demonstrating compliance with 
the Annual Appropriation Ordinance are included in the comprehensive 
Annual Report of the Com_ptroller_of the C ity of C hicago. 

The three primary sources of revenue, flight fees and related rental, 
concession income and interest income are effectively controlled. With 
respect to the first two items, appropriate use of information available from 
the FAA is used to determine compliance with the related agreements. 
Furthermore, with the assistance of The Top Committee, landing fees are 
reviewed semi-annually. 

The compliance by concessionaires with their agreement is controlled in 
part by their monthly and annual reporting of revenues. 

The outstanding effort of the Comptroller's office has allowed O'Hare to 
invest available funds at the highest possible rate. This demonstrates the 
positive effect of two city departments working together. 



DEPARTMENT OF AVIATION 



FINAN CIAL HIGHLIGHTS 

During the year ended December 31, 1980, O'Hare improved upon its already 
good financial condition. The following highlights key financial 

information: 



December 31 



OPER ATIONS 

Operating revenues 
Interest income and other 

Operating expenses 
Non-operating expenses 

Revenues in excess of expenses 



FINANC IA L POSI HON 

Cash and investments 
Receivables and other assets 
Fixed assets-net 



Revenue bonds payable 
Other liabilities 

Total liabilities 

Total Equity 



1980 



1979 



94,259,000 
7,238,000 



83,144,000 
5,449,000 



101,497 , 000 

' 76, 047, '000 

4,861,000 



88,59 3, 000 

68, 3 17, "000 

6,144,000 



80^908,000 

$ 20, 5 8 9, "00 0" 



$ 87,509,000 

11,908,000 

221,425,000 

$ 320,8 4270"0'0" 

7^,577,000 
15,327,000 



74,461,000 



$ 14,132,000 



89,90 4,000 
230,938,000 



$ 320,8 42,000 



$ 77,716,000 

15,563,000 

227,072,000 

$ 320,35T,"000" 

96,467,000 
17,815,000 

114,28 2,000 

206,069,000 
J~320, 351,000 



Revenues increased by $12,904,000 or 14.6°6 over 1979. Expenses increased 
$6,447,000, 8.796 over 1979, well below the inflation rate. This was due in 
part to prudent management of the O'Hare Airport facilities. 

During 1980, Revenue 3onds with a principal value of $21,890,000 were 
retired. This is $16,154,000 more than is required in the Revenue Bond 
Ordinance. As of December 31, 1980, O'Hare has retired $99,991,000 of 
bonds in excess of the Revenue Bond Ordinance requirement. If the airport 
retires the minimum as required by the Revenue Bond Ordinance, all bonds 
will be retired 10 years before the scheduled maturity dates. 

O'HARE H IG H LIGHTS 

Chicago's O'Hare International Airport has been the world's busiest airport 
since 1961 when it took over that title from Chicago's Midway Airport. 
Despite a falloff in worldwide traffic in 1980, O'Hare had 43,600,000 
passengers, some 3,000,000 more than the world's second busiest airport in 
Atlanta, Georgia. 



DEPARTMENT OF AVIATION 



O'Hare, now in its 34th ye ar of operation, is located on nearly 7,000 acres, 
40 minutes northwest of downtown Chicago. During 1980, its 7 runways and 
10 taxiways handled 725,000 take-offs and landings. 

More than 25 domestic and international airlines, employing 24,000 people, 
serve O'Hare. With the employees of the City of Chicago (900), the Federal 
Government (2,100), concessionaires (1,500), and other support services 
(6,100), the total work force at the airport approximates 35,000 people. 

Passenger traffic is handled at one international and two domestic terminals 
with approximately 100 passenger gates. 

Cargo traffic and mail in 1930 totaled more than 1,700,000,000 pounds and 
is handled at a 194 acre cargo complex at the southeast corner of the 
airport. 

There are 17,500 parking spaces at the airport, almost 9,000 of them in the 
parking garage just steps from the passenger terminals. 

One of the world's largest on-airport hotels, with 888 rooms, is operated on 
land leased from the City of Chicago. Thirty-three shops, restaurants and 
service facilities are located in the passenger terminals. 

O'Hare is named after Edward H. "Butch" O'Hare, the Navy's first Air Ace 
of World War II and a winner of the Congressional Medal of Honor. The 
airport, which had served as a Douglas Aircraft Assembly Center during 
World War II, was opened to commercial traffic on October 23, 1946 during 
the administration of Mayor Edward 3. Kelly. After upgrading into a major 
facility in the late 19.50's and early 60's, it was rededicated in 1963 by 
President John F. Kennedy. 

ACKN OWLEDGMENTS 

To operate the world's busiest airport, while maintaining the highest of 
standards for quality of service, requires the support of the Mayor and the 
City Council. We extend our thanks for this vital support. 

A major element in any public enterprise is the contribution of dedicated 
employees. To these employees we extend our appreciation and thanks. To 
the citizens of Chicago we pledge our continued efforts to maintain the 
highest quality of service at Chicago-O'Hare International Airport. 

Very truly yours, 



\ 



r _^4^r>*^-^- 1 




THOMAS KAPSALIS 
Commissioner 

cc: The Honorable Wilson Frost 

Chairman of the Finance Committee 



/ 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
YEARS ENDED DECEMBER 31, 1980 AND 1979 



CONTENTS 



Page 

Accountants' report 1 

Financial statements: 

Balance sheets 2 

Statements of changes in contributed capital 3 

Statements of changes in retained earnings 4 

Statements of revenues and expenses 5 
Statements of "net revenues" as defined in Revenue 

Bond Ordinance 6 

Statements of changes in financial position 7 

Notes to financial statements 8-17 



i 



ASS0 



Current assets: 
Cash 

U.S. government securities, at 
Accounts receivable, less allov^ 
for doubtful accounts of $1,59 
in 1980 and $1,908,104 in 1979 
Due from other City of Chicago 
Prepaid expenses and deposits 
Due from restricted funds 

Total current assets 



Restricted assets: 

Cash, including certificates of 
deposit of $1,148,000 in 1980 
$148,000 in 1979 
U.S. government securities, at 
Due from unrestricted funds 
Accrued interest receivable 

Total restricted assets 



AND EQUITY 



ets 



Fixed assets: 
Land 

Buildings and other facilities 
Construction in progress 



Less allowances for depreciatio 
Net fixed assets 



Other assets: 

Deferred engineering costs, les 
amortization of $1,226,702 in 
and $1,178,717 in 1979 

Total assets 



1980 



6,036,000 

10,365,401 

3,064,089 



19 ,465,490 

180,138 
150,262 
907,565 
247,154 

1,485,119 

68,541,000 

412,724 
89,904,333 

107,951,420 



8,411,830 

10,502 

4,712,826 

43,790,698 

563,050 

26,601,267 



84 
38 


,090, 
f 896 


173 
,167 


122 


,986 


,340 


230 


,937 


,760 



1979 



$ 5,736,000 

10,336,473 

5,828, 382 

98,544 



21,999,399 



21,705 

36,587 

1,031,901 



1,090,193 



90,731,000 



461,421 

114 ,282,013 



105 ,258 ,368 



10,707,310 
4,928,371 
3,223,938 

38,782,508 
514,465 

17,259,265 



75, 

25 


415, 
,394 


,8 57 
,530 


100 


,810 


,387 


206 


,068 


,755 



$320,842,093 $320,350,768 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
BALANCE SHEETS,- DECEMBER 31, 1980 AND 1979 



ASSETS 



Current assets: 
Cash 

U.S. government securities, at cost 
Accounts receivable, less allowance 
for doubtful accounts of $1,592,760 
in 1980 and $1,908,104 in 1979 
Due from other City of Chicago funds 
Prepaid expenses and deposits 
Due from restricted funds 

Total current assets 



Restricted assets: 

Cash, including certificates of 
deposit of $1,148,000 in 1980 and 
$148,000 in 1979 
U.S. government securities, at cost 
Due from unrestricted funds 
Accrued interest receivable 

Total restricted assets 



Fixed assets: 
Land 

Buildings and other facilities 
Construction in progress 



Less allowances for depreciation 
Net fixed assets 



Other assets: 

Deferred engineering costs, less 
amortization of $1,226,702 in 1980 
and $1,178,717 in 1979 

Total assets 



1980 



$ 10,126,914 
18,407,791 



10,288,949 
921,756 
450,917 
247 ,154 

40,443,481 



1,777,249 
56,615,820 

580,956 

58,974,025 



50,994,641 

314,326,230 

16,732,874 

382,053,745 

160,629,158 

221,424,587 



1979 



$ 12,622,280 
5,945,491 



13,544,681 

1,555,657 

315,977 



33,984,086 



279,211 

58,219,321 

98,544 

649,709 

59,246,785 



50,994,641 

309,295,537 

16,046,017 

376,336,195 

149 ,264 ,283 

227,071,912 



LIABILITIES AND EQUITY 



47,985 
$320,842,093 $320,350,768 



Current liabilities: 

Revenue bonds payable, current 

maturities (Note 3) 
Accounts payable 

Due to other City of Chicago funds 
Due to restricted funds 



Total current liabilities 

Liabilities payable from restricted assets: 
Accounts payable 

Due to other City of Chicago funds 
Airline deposits (Note 2) 
Due to unrestricted funds 

Total liabilities payable 
from restricted assets 

Long-term liabilities: 

Revenue bonds payable, less 
current maturities (Note 3) 

Deferred liabilities: 

Deferred rental income (Note 4) 

Total liabilities 

Commitments (Note 6) 

Equity: 

Contributed capital 
Retained earnings: 
Reserved : 

Debt service 

Revenue bond retirement 

Maintenance 

Emergency 

Construction, elevated garage 

Future flight fee reduction 

Unreserved 

Total retained earnings 

Total equity 

Total liabilities and equity 



1980 



$ 6,036,000 

10,365,401 

3,064,089 



19,465,490 



180,138 
150,262 
907,565 
247,154 

1,485,119 




89,904,333 



107,951,420 



8,411,830 

10,502 

4,712,826 

43,790,698 

563,050 

26,601,267 



84, 
38 


,090, 

,896, 


,173 
,167 


122 


,986, 


,340 


230, 


,937, 


,760 


$320, 


,842, 


.093 



1979 



$ 5,736,000 

10,336,473 

5,828,382 

98,544 



21,9 99,399 



21,705 

36,587 

1,031,901 



1,090,193 

90,731,000 
461,421 



114 ,2ti2,013 



105,258,36« 



10,707,310 
4,928,371 
3,223,938 

38,782,508 
514,465 

17 ,259,265 



75, 
25, 


,415, 
,394, 


,857 
,530 


100, 


,810, 


,387 


206, 


,068 , 


,755 



$320,350,768 



See notes to financial statements, 



Balance, beginning of year 

Add: 

Increase in fixed assets 
acquired with: 
City of Chicago money, net 
Public utility, concession; 

and airline money 
Operating revenues 



Less : 

Provision for depreciation 
Amortization of deferred 
engineering costs 



Balance, end of year 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

STATEMENTS OF CHANGES IN CONTRIBUTED CAPITAL 

YEARS ENDED DECEMBER 31, 1980 AND 1979 



Year ended December 31, 1980 Total 



City 
of 


State 

and 

Federal 


Public utility, 
Concessionaire 
and Airline 


Total 


Year ended 
Decembe r 31, 


Chicago 


1980 
$105,258,368 


1979 


$19,897,689 


$49,972,931 


$35,387,748 


$ 95,617,151 



Balance, beginning of year 

Add: 

Increase in fixed assets 
acquired with: 
City of Chicago money, net 3,951,994 3,951,994 4,818,150 

Public utility, concessionaire 

and airline money 328,282 328,282 

Operating revenues 1,437,273 1,437 ,273 7,672,050 

3,951,994 1,765,555 5,717,549 12,490,200 

23,849,683 49,972,931 37,153,303 110,975,917 108,107 ,351 

Less : 

Provision for depreciation 250,299 1,541,127 1,185,086 2,976,512 2,799,915 
Amortization of deferred 

engineering costs 47,985 47,985 49,068 

298,284 1,541,127 1,185,086 3,024,497 2,848,983 

Balance, end of year $23,551,399 $48,431,804 $35,968,217 $107,951,420 $105,258,368 



See notes to financial statements. 



-^ 



Reven 

bon 
interierved_ 



Total 



Total 
Year ended 
December 31, 
1979 



Balance, beginning of year 

Add (deduct) : 

Allocation of net revenue 
Transfer of premiums on 

revenue bonds retired 
Interest earned on investments, 

restricted 
Transfer from debt service account 
Fixed assets acquired with revenue 

bond money 
Revenue bonds retired 



-394,530 $100,810,387 $ 91,501,159 



4,68 



590,000 21,890,000 



4 f 68^ 390, 000 74,435,034 57,594,628 



Less: 

Interest paid on revenue bonds 
Amounts expended for retirement 

of revenue bonds 
Application of deferred income 

from preceding year as reduction 

of flight fees 
Expenditures from maintenance 

reserve account 
Expenditures for fixed assets 

acquired with revenue bond 

money 
Provision for depreciation of 

assets acquired with revenue 

bond money 



Balance, end of year 



4,68 



4,68 



48,043,608 38,642,5tf8 

173,750 375,05b 

4,327,676 3,518,134 



75,848 
14,983,000 



^84,530 175,245,421 149,095,787 



4,687,497 5,769,270 

21,863,894 15,358,058 

17,259,265 la, 56b, 428 

60,062 131,725 



388,363 



8,388,363 



75,848 



8,384,071 



4,68* 88,363 52,259,081 48,285,400 



$ ^96,167 $122,986,340 $100,810,387 



r^ 



CHICAGO-O'IIARE INTE NATIONAL AIRPORT 

STATEMENTS OF CHANGES 4 RETAINED EARNINGS 

YEARS ENDED DECEMBER 31, 1980 AND 1979 



Year ended December 31, 1980 



Revenue 

bond 
interest 



Debt 
service 



Revenue 

bond 

retirement 



Contruction, 
elevated 
Maintenance Emerg ncy garage 



Total 



Future 
flight fee 
reduction 



Total 
reserved 



Unreserved 



Total 



Year ended 

December 31, 

1979 



Balance, beginning of year 

Add (deduct) : 

Allocation of net revenue 
Transfer of premiums on 

revenue bonds retired 
Interest earned on investments, 

restricted 
Transfer from debt service account 
Fixed assets acquired with revenue 

bond money 
Revenue bonds retired 



Less: 

Interest paid on revenue bonds 
Amounts expended for retirement 

of revenue bonds 
Application of deferred incane 

from preceding year as reduction 

of flight fees 
Expenditures from maintenance 

reserve account 
Expenditures for fixed assets 

acquired with revenue bond 

money 
Provision for depreciation of 

assets acquired with revenue 

bond money 



$10,707,310 $ 4,928,371 $3,223,938 $38,78 ,508 $514,46 5 $17,259,265 $ 75,415,857 $25,394,530 $100,810,387 $ 91,501,159 



4,687,497 



14,476,795 
173,750 

( 2,295,480) 2,295,480 



1,160,000 1,11 ,049 



388,950 3,89 ,141 48,585 



Balance, end of year 



4,687,497 ( 2,295,480) 16,946,025 1,548,950 



4,687,497 



4,687,497 



21,863,894 



60,062 



4,687,497 



21,863,894 



60,062 



5,00:1,190 



8,411,830 21,874,396 4,772,888 43,790,698 



48,585 
563,050 



26,601,267 48,043,608 

173,750 

4,327,676 



48,043,608 38,642,588 

173,750 375,05b 

4,327,676 3,518,134 



75,848 
21,890,000 21,890,000 14,983,00U 



26,601,267 52,545,034 21,890,000 74,435,034 57,594,628 

43,860,532 127,960,891 47,284,530 175,245,421 149,095,787 



4,687,497 
21,863,894 

17,259,265 17,259,265 

60,062 



4,687,497 5,769,270 

21,863,894 15,3b8,U58 

17,259,265 18, 56b, 428 

60,062 131,725 



8,388,363 



8,388,363 



17,259,265 43,870,718 8,388,363 52,259,081 



75,848 



8,384,071 



48,285,400 



$ ~ • $ 8,411,830 $ 10,502 $4,712,826 $43,790,698 $563,050 $26,601,267 $ 84,090,173 $38,896,167 $122,986,340 $100,810,387 



See notes to financial statements. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
STATEMENTS OF REVENUES AND EXPENSES 
YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



1980 



1979 



Operating revenues: 
Flight fees 
Rent, concessions and other 

Total operating revenues 

Operating expenses: 

Salaries and wages 

Provision for depreciation 

Amortization of deferred 
engineering costs 

Repairs and maintenance, 
including expenditures from 
maintenance reserve account 

Other operating expenses 

Total operating expenses 

Total operating income 

Nonoperating income (expense): 
Interest earned on investments 
Discount on revenue bonds retired 
Interest incurred on revenue bonds 
Premium on revenue bonds retired 

Net nonoperating 
income (expense) 

Revenue in excess of expenses 



$45,610,247 $42,622,151 
48,648,829 40,521,891 



94,259,076 



28,083,324 
11,364,875 

47,985 



13,551,402 
22,999,584 

76,047,170 

18,211,906 



83,144,042 



24,217,980 
11,183,987 

49,068 



13,945,979 
18,919,607 

68,316,621 

14,827,421 



7,038,214 5,449,201 
199,856 

( 4,687,497) ( 5,769,269) 

( 173,750) ( 375,058) 



2,376,823 ( 



695,126) 



$20,588,729 $14,132,295 



See notes to financial statements. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
STATEMENTS OF "NET REVENUES" AS DEFINED IN REVENUE BOND ORDINANCE 
YEARS ENDED DECEMBER 31, 1980 AND 19 79 

1980 1979 



Revenues in excess of expenses $20,588,729 $14,132,295 

Add (deduct) adjustments to reflect 
ordinance basis of accounting: 
Amounts included above in determination 
of revenues in excess of expenses: 
Provision for depreciation 11,364,875 11,183,987 

Amortization of deferred 

engineering costs 47,985 49,068 

Expenditures from maintenance 

reserve account 60,062 131,725 

Interest earned on investments, 

restricted ( 4,327,676) ( 3,518,134) 

Interest on revenue bonds 4,687,497 5,769,269 

Discount on revenue bonds retired ( 199,856) 
Amounts not included above in 
determination of revenues in 
excess of expenses: 
Expenditures of operating revenues 

for capital improvements ( 1,437,273) ( 7,672,050) 

Application of deferred income from 
preceding year as reduction of 
flight fees 17,259,265 18,566,428 

"Net revenues" as defined in 

Revenue Bond Ordinance $48,043,608 $38,642,588 

Allocation of "net revenues" in 
order of priority: 
Revenue bond interest $ 4,687,497 $ 5,769,270 

Revenue bond retirement, minimum payment 5,736,000 5,449,000 
Maintenance reserve 1,160,000 1,160,000 

Emergency reserve 1,118,049 1,059,030 

Deferred income to reduce flight fees 

in following year 26,601,267 17,259,265 

Remainder, additional allocation to 
revenue bond retirement 8,740,795 7 ,946,023 

Total allocation of "net revenues" $48,043,608 $38,642,588 



See notes to financial statements. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
STATEMENTS OF CHANGES IN FINANCIAL POSITION 
YEARS ENDED DECEMBER 31, 19 80 AND 19 79 

1980 1979 



Source of working capital: 
From operations: 

Revenues in excess of expenses $20 f 588,729 $14,132,295 

Add (deduct) items not affecting 
working capital: 
Provision for depreciation 11,364,875 11,183,987 

Amortization of deferred 

engineering costs 47,985 49,068 
Amortization of deferred revenue ( 48 ,697 ) 

Working capital provided from operations 31,952,892 25,365,350 

Increase in deferred rental income 461,421 

City of Chicago net contributions for 

fixed assets 3,951,994 4,818,150 
Airline contributions for fixed assets 328,282 
Decrease in net restricted assets 667 ,686 

36,900,854 30,644,921 



Use of working capital: 

Acquisition of fixed assets 5,717,550 12,566,049 

Decrease in long-term liabilities 22,190,000 15,270,000 

Increase in net restricted assets 3 ,941 ,614 

27,907,550 31,777,663 



Increase (decrease) in working capital $ 8,993,304 ( $ 1,132,742 ) 

Changes in components of working capital: 
Increase (decrease) in current assets: 
Cash 

U.S. government securities 
Accounts receivable 

Due from other City of Chicago funds 
Prepaid expenses and deposits 
Due from restricted funds 

Increase (decrease) in current 
liabilities: 
Revenue bonds payable, current 

maturities 
Accounts payable 

Due to other City of Chicago funds 
Due to restricted funds 



($ 2,495,366) 


$ 3,388,417 


12,462,300 


( 4,056,273) 


( 3,255,732) 


4,289,604 


( 633,901) 


663,868 


134,940 


( 17,010) 


247,154 





6,459,395 4,268,606 



Increase (decrease) in working capital 

See notes to financial statements. 



300,000 


287,000 


28,928 ( 


696,966) 


( 2,764,293) 


5,828,382 


( 98,544) ( 


17,068) 


( 2,533,909) 


5,401,348 


$ 8,993,304 ($ 


1,132,742) 



I 

[ 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
NOTES TO FINANCIAL STATEMENTS 
YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



Summary of significant accounting policies: 

Basis of accounting: 

Financial statements have been prepared on the accrual basis 
of accounting, accounted for as an enterprise fund of the 
City of Chicago and conforming with the reporting requirements 
set forth in National Council of Governmental Accounting 
(NCGA) Statements 1 and 2. 

Restricted assets: 

The authorizing Revenue Bond Ordinance requires that during 
the period in which bonds are outstanding the City of Chicago 
will maintain trust accounts for the proceeds from the sale 
of bonds and certain allocations of "net revenues" as defined. 
The assets of the trust accounts may be used only for the 
specific purpose of each trust, including bond interest, bond 
retirement, maintenance reserve, emergency reserves and con- 
struction. 

U.S. government securities: 

Investments in U.S. treasury bills and treasury notes are 
carried at cost. Interest is accrued only on those securi- 
ties having stated interest rates, i.e., treasury notes. 
Discounts and premiums are recognized at the time of maturity 
or sale. The aggregate cost and market value at December 31, 
1980 and 1979, are as follows: 

Cost Market 



1980 1979 1980 1979 



Unrestricted $18,407,791 $ 5,945,491 $18,567,654 $ 5,947,403 
Restricted 56,615,820 58,219,321 57,047,950 57,502,039 

$75,023,611 $64,164,812 $75,615,604 $63,449,442 



7 T_T_T .1 _T^T^. . 



I 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



1. Summary of significant accounting policies: (continued) 

Accounts receivable: 

In accordance with the Revenue Bond Ordinance, all accounts 
receivable uncollected for a period of 30 days after due 
date are considered uncollectible, and accordingly an 
allowance for doubtful accounts is provided. As at December 
31, 1980 and 1979, allowances of $1,592,760 and $1,908,104, 
respectively, were recorded for these accounts. Approxi- 
mately $702,000 of the 1980 accounts receivable which were 
included in the allowance was collected between January 1, 
1981, and May 8, 1981. 

Fixed assets: 

All assets are recorded at cost. Land includes the cost of 
earthwork and landscaping. Assets are acquired with Revenue 
Bond proceeds and three other sources as follows: 

a. Assets acquired with City of Chicago money include 

$333,154 capitalized interest in 1980 for the use of 
City of Chicago money. Interest is capitalized from 
the commencement of the land improvement or construction 
activity through the year of completion. 

b. Assets are acquired with state and federal money from 

grants received that are reimbursements for assets 
paid for with City of Chicago money. The grants are 
recognized only as received. As at December 31, 1980, 
a maximum of $39,145,539 may be realized in future 
periods from such grants. 

c. Assets acquired with public utility, concessionaire 

and airline money comprise direct reimbursements of 
amounts expended directly and indirectly from operating 
revenues. The Revenue Bond Ordinance does not allow 
the expenditure of operating revenues for capital 
improvements. However, the airlines' representative 
has agreed to substantially all of these expenditures, 
which totaled $1,437,273 in 1980 and $7,672,050 in 1979. 
Using operating revenues for this purpose has the 
effect of increasing flight fees. 






I 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



1. Summary of significant accounting policies: (continued) 

Fixed assets: (continued) 

In accordance with the Revenue Bond Ordinance, all replacements 
of vehicles, furnishings, signs and other equipment are 
expensed when acquired. 

Depreciation and amortization: 

Provisions for depreciation of buildings and other facilities 
are provided on a straight-line basis over the estimated 
useful lives of the individual assets. Depreciation charges 
are begun in the year following the year of acquisition or 
completion. Deferred engineering costs were amortized on a 
straight-line basis over 25 years ended December 31, 1980. 

Allocation of revenues: 

The Revenue Bond Ordinance requires the allocation of net 
revenues, as defined, for specified purposes in the following 
order of priority: 

a. For ordinary costs of operation and maintenance, but 

not in excess of the amount budgeted by the City of 
Chicago for such purposes. 

b. For amounts equal to interest payable in the current 

year on bonds outstanding. 

c. To maintain the balance of the Debt Service Reserve at 

an amount equal to two years' interest requirements. 
The Debt Service Reserve for all Revenue Bond issues 
outstanding was fully funded through allocations made 
in prior years. Bonds in the principal amounts of 
$21,890,000 and $14,983,000 were purchased or called 
during the years 1980 and 1979, respectively. The 
corresponding interest requirements of $2,295,480 in 
1980 and $1,569,140 in 1979 were transferred to the 
Revenue Bond Retirement Reserve. 



10 



II 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



1981 


1982 


1983 


1984 


1985 


1986 



1. Summary of significant accounting policies: (continued) 

Allocation of revenues: (continued) 

d. For required minimum payments to the Revenue bond 
Retirement Reserve. The minimum payment for the year 
ended December 31, 1980, was $5,736,000. Remaining 
minimum Bond Retirement deposits are as follows: 

Required minimum 
Bond Retirement 
Period payment 

$ 6,036,000 
6,354,000 
6,685,000 
7,042,000 
7,412,000 
through 1995 41,048,000 

$74,577,000 

As mentioned in Note lh below, additional allocations of 
net revenues to the Revenue Bond Retirement Reserve may 
be made. Allocations to the Revenue Bond Retirement 
Reserve for the required minimum retirements and re- 
maining revenues after all other required allocations 
totaled $14,476,795 in 1980 and $13,395,023 in 1979. 

For annual payment of $1,160,000 to the Maintenance 
Reserve until $4,833,334 is accumulated in the Reserve. 
This money is available for the payment of major 
repairs, renewals and replacements. Expenditures of 
$60,062 during 1980 and $131,725 during 1979 were made 
from this account for the specified purposes. 

To pay to the Emergency Reserve an amount equal to the 
sum of the annual provisions for depreciation and 
amortization of fixed and other assets acquired with 
City of Chicago money and interest on City of Chicago 
money invested in fixed and other assets of the Airport. 



11 



I 

I 

11 



[ 

i 
fl 
I 



li 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



Summary of significant accounting policies: (continued) 

Allocation of revenues: (continued) 

f. continued: 

The components of this amount for 19 80 and 19 79 are as 
follows : 

1980 1979 



Depreciation $ 250,299 $ 220,580 
Amortization 47,985 49,068 

Interest 819,765 789,382 

Total allocation $1,118,049 $1,059,030 

Monies held to the credit of the Emergency Reserve 
Account will be treated as revenues to provide for the 
abatement of landing fees in the event that the Airport 
is closed. 

To provide for deferred income to reduce future flight 
fees. To the extent that "net revenues" as defined 
in the Revenue Bond Ordinance for the year, including 
the application of deferred income from the previous 
year, exceed "airport expense" as defined, the excess 
will be considered deferred income and as revenues of 
the next succeeding year. For the years ended December 
31, 1980 and 1979, $26,601,267 and $17,259,265, respec- 
tively, had been deferred to reduce future flight 
fees . 

To provide for the retirement of Revenue Bonds in addi- 
tion to the minimum payment referred to in Note Id 
above. Any remaining revenues after making the pre- 
viously listed allocations will be allocated to the 
Revenue Bond Retirement Reserve; $8,740,795 and 
$7,946,023 were so credited for 1980 and 1979, respec- 
tively. 



12 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



2. Airline deposits: 

Under the terms of a Financing Participation Agreement, the City 
of Chicago and certain participating airlines are sharing the 
cost of improvements to the Federal Inspection area within the 
International Terminal Building. The participating airlines 
deposited $1,022,451 in 1979 with the City, as the airlines' 
share of the project cost. The deposits are included in the 
accompanying balance sheets and include interest income earned 
on the funds less costs incurred for the improvements through 
December 31, 1980 and 1979. The balance sheets at December 
31, 1980 and 1979, include the following amounts relating to 
this agreement: 



Restricted assets: 

Cash, including certificates 
of deposit of $1,148,000 in 
1980 and $148,000 in 1979 

U.S. government securities, 
at cost 

Accrued interest receivable 



Liabilities payable from 
restricted assets: 
Accounts payable 
Due to other funds 
Net airline deposits 



1980 



$1,152,428 



18,059 



177,823 

85,099 

907,565 



1979 



156,627 
911,861 



$1,170,487 $1,068,488 



$ 36,587 
1,031,901 



$1,170,487 $1,068,488 



13 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



3. Revenue Bonds and retirement: 

Revenue Bonds: 

The Chicago-0 'Hare International Airport Revenue Bonds were 
issued under the authority of an ordinance adopted December 
29, 1958, and subsequent supplemental ordinances. The Bonds 
were issued to provide monies for the initial construction 
and subsequent extensions and improvements of the Airport 
and its facilities. The following information is presented 
regarding the status of the Bonds as at December 31, 19 80 
and 1979: 



1980 



1979 



Amount authorized 

Amount sold 

Amount called or purchased 

and retired 
Amount outstanding at 

year-end 



$238,000,000 $238,000,000 

232,000,000 232,000,000 

157,423,000 135,533,000 

$ 74,577,000 $ 96,467,000 



The Revenue Bonds outstanding at December 31, 1980 and 197 9, 
are comprised of the following: 



1980 



1979 



4 3/4% Series 

4 3/4% Series 

4 1/4% Series 

4 1/2% Series 



of 1959 
A of 1961 
B of 1961 
of 1967 



5% Series of 1968 
6.80% Series of 1970 
6% Series of 1972 



Less current maturities 



$27,203,000 
5,677,000 
736,000 
1,289,000 
5,817,000 
29,085,000 
4,770,000 

74,577,000 

6,036,000 

$68,541,000 



$38,548,000 
8,030,000 
1,116,000 
1,806,000 
7,592,000 
33,800,000 
5,575,000 

96,467,000 

5,736,000 

$90,731,000 



14 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



Revenue Bonds and retirement: (continued) 

Retirement: 

Revenue Bonds are to be retired as rapidly as practicable 
through the revenues allocated to the Revenue Bond Retirement 
Reserve. Bonds may be redeemed by call at prices ranging 
downward from 104.5% to 100% of principal amount to December 
31, 1995, plus accrued interest. In addition, Bonds may be 
redeemed by purchase in the open market or tender at prices 
not in excess of the next predetermined call prices. The 
following information is presented regarding Bonds purchased 
or called for retirement during the years ended December 31, 
1980 and 1979, and the cumulative amounts through December 
31, 1980: 

Cumulative 1980 1979 



Par value of bonds 

purchased or called $157,423,000 $21,890,000 $14,983,000 
Cost of bonds 

purchased or called 

(excluding premium) $150,922,175 $21,690,144 $14,983,000 
Premiums paid on 

bonds purchased or 

called $ 1,944,536 $ 173,750 $ 375,058 

Premiums paid on Bonds purchased or called are charged to Air- 
port operations in the year of purchase. Discounts on Bonds 
purchased are retained in the Bond Retirement Reserve to pur- 
chase additional Bonds. 

Bonds also may be redeemed with monies that are not allocations 
of revenues to the Retirement Reserve. Call prices for this 
type of redemption have been adopted which exceed the 
previously referred to call prices by not more than 2% of 
principal amount. 



15 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1980 AND 1979 



4. Deferred rental income: 

In 1979, the City of Chicago consented to the assumption by a 
third party of a bankrupt tenant's lease and received $461,421 
from the sale of such lease. The sales price is recognized 
annually over the remaining life of the lease parallel with 
the rental escalation terms of the assumed lease approximately 
as follows: 

1980-1982 $48,700 

1983 53,800 

1984-1987 58,400 

1988 $28,000 

5. Pension plans: 

The employees of the City of Chicago are covered under various 
contributory retirement plans established by state statute and 
administered by independent pension boards. Substantially all 
of the Airport employees are members of the Policemen's Annuity 
and Benefit Fund of Chicago, the Firemen's Annuity and Benefit 
Fund of Chicago, the Municipal Employees', Officers' and 
Officials' Annuity and Benefit Fund of Chicago or the Laborers' 
and Retirement Board Employees' Annuity and Benefit Fund of 
Chicago. 

Each pension plan is financed primarily by (a) City contribu- 
tions, (b) employee contributions, and (c) income from pension 
fund investments. The City contributions, which are established 
by state statute, are multiples of the employee's contribution 
made two years prior. The City's contribution is financed 
through a separate property tax levy and the personal property 
replacement tax. The Airport reimburses the City's Corporate 
Fund for the estimated contribution which pertains to Airport 
employees. These reimbursements , recorded as expense, amounted 
to $2,813,804 and $2,476,506 in 1980 and 1979, respectively. 

All pension funds receive an actuarial valuation annually. How- 
ever, the amount of unfunded liabilities or required current 
year actuarial provisions which pertain expressly to the Airport 
are not computed, as no specific identification of Airport 
employees is made for actuarial purposes. 



16 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 19 80 AND 19 79 



6. Commitments: 

Purchase orders and contract commitments to be financed by the 
operation and maintenance account totaled $11,64 5,426 at 
December 31, 1980. In addition, $18,363,074 of the Airport's 
unexpended appropriations as at December 31, 1980, has been 
earmarked by Airport management for specific future projects, 
although not under purchase order, contract or other formal 
commitment. 



17 



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