(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

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

1981 ANNUAL FINANCIAL REPORT 

Chicago-O'Hare International Airport 



City of Chicago, Illinois 
Jane M. Byrne, Mayor 

Anthony N. Fratto, City Comptroller 

Department of Aviation 




■niiniii 

3 5556 030 762090 



CHICAGO-0 * HARE INTERNATIONAL AIRPORT 



FINANCIAL STATEMENTS 



YEARS ENDED DECEMBER 31, 1981 AND 1980 



I- 



TRANSPORTATION 
. LIBRARY 

# 4 fo 



e 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 



FINANCIAL STATEMENTS 



ACCOUNTANTS' REPORT 

FINANCIAL STATEMENTS 

EXHIBIT A - BALANCE SHEETS 

EXHIBIT B - STATEMENTS OF CHANGES IN CONTRIBUTED CAPITAL 
EXHIBIT C - STATEMENTS OF CHANGES IN RETAINED EARNINGS 
EXHIBIT D - STATEMENTS OF REVENUES AND EXPENSES 
EXHIBIT E - STATEMENTS OF CHANGES IN FINANCIAL POSITION 
NOTES TO FINANCIAL STATEMENTS 



ACCOUNTANTS' REPORT 



Bernstein 
and 
Bank, Ltd. 

Certified 

Public 

Accountants 



6677 No. 

Lincoln 

Avenue 

Chicago, 

Illinois 

60645 



The Honorable Mayor and Members 

of the City Council of the 

City of Chicago 
Chicago, Illinois 

We have examined the balance sheet of Chicago-O'Hare Inter- 
national Airport as of December 31, 1981, and the related statements of 
changes in contributed capital, changes in retained earnings, revenues 
and expenses, and changes in financial position for the year then ended. 
Our examination was made in accordance with generally accepted auditing 
standards and, accordingly, included such tests of the accounting records 
and such other auditing procedures as we considered necessary in the 
circumstances. The financial statements of Chicago-O'Hare International 
Airport for the year ended December 31, 1980, were examined by other 
auditors whose opinion, dated May 8, 1981, on those statements was 
qualified as to the effects on the financial statements of the failure to 
comply with certain provisions of the Revenue Bond Ordinance. 



As discussed in Note 1 to the financial statements, expendi- 
312 tures are made from operating revenues for capital improvements, which is 
286 4755 not P erm i tte d under the Revenue Bond Ordinance. 

In our opinion, except for the effects on the financial state- 
ments of not complying with certain provisions of the Revenue Bond 
Member Ordinance as discussed in the preceding paragraph, the 1981 finan- 
National cial statements referred to above present fairly the financial position 
CPA Group of Chicago-O'Hare International Airport as of December 31, 1981, and the 
results of its operations and the changes in its financial position, and 
Member the changes in its contributed capital and retained earnings for the year 
Firms in then ended, in conformity with generally accepted accounting principles 
Principal and the provisions of the Revenue Bond Ordinance applied on a basis 
C^ies consistent with that of the preceding year. 



May 21, 1982 



3 8 a a 3 52 S i s 






c a s a -h ?■§ ^ 2 
I 5 a § 5 sl 3] 



^ <3 w ii! J °°^J<J 



sag SPS 



2 . |JS S 

3 g S-S 5 



g alalia 
3 S a f s g s 8 



I3§as -3 

g1*Jj 



sa 

" i 



Digitized by the Internet Archive 

in 2012 with funding from 

CARLI: Consortium of Academic and Research Libraries in Illinois 



http://www.archive.org/details/annualfinancialr1981chic 



a aS 
a S3 


s 


s . ■*. 


jjj 


5,454.909 
698.595 

860,003 
3,653.115 


2 


a a 


1 









1 II 



1 

3 1 






So 2 ^ ff| s 



I s 



8 a 



3£ 

a 3 



s s 5i i. 






S * t? -a s? « < *i 



ffS. 

1-3 



S 3 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

STATEMENTS OF REVENUES AND EXPENSES 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



1981 



Operating Revenues 
Flight Fees 
Rent, Concessions and Other 

Total Operating Revenues 

Operating Expenses 
Salaries and Wages 

Provision for Depreciation and Amortization 
Repairs and Maintenance, Including Expenditures 

from Reserve Maintenance Account 
Other Operating Expenses 

Total Operating Expenses 

Total Operating Income 

Nonoperating Income (Expense) 
Interest Earned on Investments 
Discount, Net of Premiums on Revenue 

Bonds Retired 
Interest Incurred on Revenue Bonds 



$41,463,349 $45,610,247 
47,750,769 48,648,829 

89,214,118 94,259,076 



33,390,667 28,083,324 
11,484,209 11,412,860 



11,255,147 13,551,402 
23,275,370 22,999,584 



79,405,393 76,047,170 
9,808,725 18,211,906 



12,289,166 7,038,214 

156,027 26,106 
(3,729,422 ) (4,687,497 ) 



Net Nonoperating Income 
Revenues in Excess of Expenses 



2,376,823 



$18,524,496 $20,588,729 



The accompanying notes to financial statements are 
an integral part of these statements. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

STATEMENTS OF CHANGES IN FINANCIAL POSITION 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



EXHIBIT E 



1981 



1980 



Sources of Working Capital 
From Operations 

Revenues in Excess of Expenses 

Add (Deduct) Items Not Affecting Working Capital 
Provision for Depreciation and Amortization 
Amortization of Deferred Revenue 
Total From Operations 
Airline Contributions for Fixed Assets 
Decrease in Net Restricted Assets 
Grant Proceeds Received for Prior Years 

Capital Expenditures 
City of Chicago Net Contributions for Fixed Assets 

Total Sources of Working Capital 



$18,524,496 $20,588,729 



11,484,209 
(48,697 ) 

29,960,008 
860,003 



698,595 
5,454,909 



11,412,860 
(48,697 ) 

31,952,892 
328,282 
667,686 



3,951,994 



36,973,515 36,900,854 



Uses of Working Capital 

Acquisition of Fixed Assets 
Decrease in Long-Term Liabilities 
Increase in Net Restricted Assets 

Total Uses of Working Capital 

Increase in Working Capital 



10,666,622 5,717,550 
17,751,000 22,190,000 
7,104,226 - 



35,521,848 27,907,550 
$ 1,451,667 $ 8,993,304 



Changes in Components of Working Capital 
Increase (Decrease) in Current Assets 
Cash 

U.S. Government Securities 
Accounts Receivable, Net 
Due from Other City of Chicago Funds 
Prepaid Expenses and Deposits 
Due from Restricted Funds 



$ 3,393,709 $(2,495,366) 



343,481 

296,010 

511,411 

36,969 

(222,730) 



12,462,300 
(3,255,732) 
(633,901) 
134,940 
247,154 



4,358,850 6,459,395 



Increase (Decrease) in Current Liabilities 
Current Portion of Revenue Bonds Payable 
Accounts Payable 

Due to Other City of Chicago Funds 
Due to Restricted Funds 



318,000 300,000 

337,954 28,928 

2,251,229 (2,764,293) 

- (98,544 ) 



Increase in Working Capital 



2,907,183 (2,533,909 ) 
$ 1,451,667 $ 8,993,304 



The accompanying notes to financial statements are 
an integral part of these statements. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 1 - Summary of Significant Accounting Policies 

Basis of Accounting 

The financial statements have been prepared on the accrual basis of 
accounting, accounted for as an enterprise fund of the City of Chicago and con- 
forming with the reporting requirements set forth in National Council of Govern- 
mental 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. 

The Revenue Bond Ordinance requires that all revenues, in each year, 
shall first be allocated to pay the operation and maintenance expenses of the 
airport, but not in excess of the amount budgeted by the City of Chicago for such 
purposes. The Revenue Bond Ordinance requires the remaining available "Net 
Revenues" shall then be allocated in the following order of priority: 

a) Revenue Bond Interest - an amount equal to interest payable in the 
current year. 

b) Debt Service Reserve - an amount necessary to maintain the balance 
of this reserve at an amount equal to two years ' interest require- 
ments on all bonds outstanding. 

c) Revenue Bond Retirement Reserve - an amount necessary for the 
required minimum payments. 

d) Reserve Maintenance Account - an annual payment of $1,160,000 to the 
Reserve Maintenance Account until $4,833,334 is accumulated. In 
addition, interest earned on the Reserve Balance is retained in this 
account . 

e) Emergency Reserve - an amount equal to the sum of the annual pro- 
visions for depreciation and amortization of fixed and other assets 
acquired with City of Chicago money and interest on the City of 
Chicago money invested in fixed and other assets of the Airport. 

Any amount of "Net Revenues" not considered deferred income (which is 
used to reduce future flight fees), as defined by the Revenue Bond Ordinance, and 
in excess of the required allocations above shall be allocated to the Revenue Bond 
Retirement Reserve. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 1 - Summary of Significant Accounting Policies - Continued 

Investments 

Investments consist of U.S. Treasury Bills and Treasury Notes, which are 
carried at cost. Interest is accrued only on those securities having stated 
interest rates, i.e., U.S. Treasury Notes. The aggregate cost and market value at 
December 31, 1981 and 1980, are as follows: 

Cost Market 

1981 1980 1981 1980 



Unrestricted $18,751,272 $18,407,791 $18,817,678 $18,567,654 

Restricted 64,082,858 56,615,820 64,535,090 57,047,950 

Totals $82,834,130 $75,023,611 $83,352,768 $75,615,604 

Fixed Assets 

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

a. City of Chicago, including capitalized interest of $171,672 in 
1981 and $333,154 in 1980 for the use of City of Chicago money. 
Interest is capitalized from the commencement of the improvement or 
construction activity through completion. 

b. Grant proceeds from State and Federal governmental agencies. The 
Grant proceeds are recognized only as received. Expenditures are 
initially paid for by the City of Chicago and are transferred to 
the State and Federal contributed capital category upon receipt of 
the grant proceeds. As of December 31, 1981, a maximum of approxi- 
mately $29,990,000 may be realized in future periods from such 
grants. 

c. Public utility, concessionaire and airlines by direct reimbursements 
of amounts expended directly and indirectly from operating revenues. 
The Revenue Bond Ordinance does not allow the expenditure of operat- 
ing revenues for capital improvements. However, the airlines' 
representative has agreed to substantially all of these expendi- 
tures, which totaled $4,351,710 in 1981 and $1,437,273 in 1980. 
Using operating revenues for this purpose has the effect of increas- 
ing flight fees. 

Depreciation and Amortization 

The provision for depreciation is provided on a straight-line basis and 
begins in the year following the year of acquisition or completion. The estimated 
useful lives of significant fixed asset categories are as follows : 

Water Drainage and Sewer System 20-50 Years 
Runways, Aprons, Tunnels, 

Taxiways and Paved Roads 30 Years 

Buildings and Hangars 25 Years 

Electrical System 15-20 Years 

Other 10-30 Years 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 1 - Summary of Significant Accounting Policies - Continued 

Depreciation and Amortization - Continued 

Deferred engineering costs were amortized on a straight-line basis over 
25 years, which ended December 31, 1980. 

Note 2 - Revenue Bonds 

General 

The Chicago-O'Hare International Airport Revenue Bonds were issued under 
the authority of an ordinance adopted December 29, 1958, and subsequent supple- 
mental ordinances. The Bonds, which were issued to provide monies for the initial 
construction and subsequent improvements of the Airport and its facilities, had a 
total face value of $232,000,000. 



The Revenue Bonds payable at December 31, 
the following: 



1981 and 1980 are comprised of 



1981 



1980 



4-3/4% Series of 1959 
4-3/4% Series A of 1961 
4-1/4% Series B of 1961 
4-1/2% Series of 1967 
5% Series of 1968 
6.80% Series of 1970 
6% Series of 1972 



Less - Current Maturities 
Totals 



$ 18,205,000 $ 27,203,000 



3,783,000 
425,000 
915,000 

4,416,000 
25,275,000 

4,125,000 

57,144,000 
6,354,000 



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

74,577,000 

6,036,000 



$ 50,790,000 $ 68,541,000 



Minimum bond retirements for future years are as follows : 



1982 
1983 
1984 
1985 
1986 
1987 through 1995 



$ 6,354,000 
6,685,000 
7,042,000 
7,366,000 
7,673,000 
22,024,000 



Total 



$57,144,000 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 2 - Revenue Bonds - Continued 

Retirement 



Revenue Bonds are to be retired as rapidly as practicable through 
amounts allocated to the Revenue Bond Retirement Reserve. Bonds may be purchased 
or called at prices ranging from 104.5% to 100% of principal amount plus accrued 
interest. 

The cost of bonds purchased or called amounted to $168,179,797 from 
issuance through 1981 excluding premiums paid. Premiums paid on Bonds purchased 
or called, which amounted to $1,963,886 from issuance through 1981, are charged to 
Airport operations in the year of purchase. Discounts on Bonds purchased, which 
amounted to $6,676,203 from issuance through 1981, are credited to Airport opera- 
tions in the year of purchase and are retained in the Bond Retirement Reserve. 

Revenue Bond Ordinance - "Net Revenues" as Defined 
and Allocation of "Net Revenues" 



The Revenue Bond Ordinance provides that certain items be accounted 
for as reductions or increases to Revenues in Excess of Expenses. In 1981 a 
provision for doubtful accounts of $612,075 in excess of the recorded provision is 
necessary in determining "Net Revenues" to meet the requirements of the Revenue 
Bond Ordinance. "Net Revenues" as defined by the Revenue Bond Ordinance is 
determined as follows : 

1981 1980 



Revenues in Excess of Expenses $18,524,496 $20,588,729 

Add (Deduct) Adjustments to Reflect Ordinance 
Basis of Accounting 

Application of Deferred Income from Preceding 

Year as Reduction of Flight Fees 26,601,267 17,259,265 

Provision for Depreciation and Amortization 11,484,209 11,412,860 

Interest on Revenue Bonds 3,729,422 4,687,497 

Grant Proceeds Received for Prior Years Capital 

Expenditures 698,595 

Expenditures from Reserve Maintenance Account 332,132 60,062 

Interest Earned on Investments, Restricted (7,802,385) (4,327,676) 

Expenditures of Operating Revenues for 

Capital Improvements (4,351,710) (1,437,273) 

Additional Provision for Doubtful Accounts (612,075) 

Discount on Revenue Bonds Retired (175,377 ) (199,856 ) 

"Net Revenues" as Defined in 

Revenue Bond Ordinance $48,428,574 $48,043,608 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 2 - Revenue Bonds - Continued 



Revenue Bond Ordinance - "Net Revenues" as Defined 
and Allocation of "Net Revenues" - Continu 



As previously stated in Note 1, the Revenue Bond Ordinance requires the 
"Net Revenues" to be allocated as follows: 

Amount 



1981 



1980 



"Net Revenues" as Defined in Revenue Bond Ordinance 

Revenue Bond Interest 

Debt Service Reserve 

Revenue Bond Retirement Reserve 

Reserve Maintenance Account 

Emergency Reserve 

Deferred Income Which is Used to Reduce Future 
Flight Fees 



$48,428,574 $48,043,608 
3,729,422 4,687,497 



6,036,000 



1,456,725 



5,736,000 
1,160,000 
1,118,049 



27,807,556 26,601,267 
39,029,703 39,302,813 



$ 9,398,871 $ 8,740,795 



Totals 

Balance to be Allocated to Revenue 
Bond Retirement Reserve 

Note 3 - Leasing Arrangements with Tenants 

Leasing operations consist of the leasing of most of the airport's land, 
buildings and terminal space to airlines and other tenants. The operating leases 
for most of the airport's land, buildings and terminal space expire in 1998. 

The following is a schedule by years of the minimum future rental income 
on noncancelable operating leases as of December 31, 1981: 



1982 
1983 
1984 
1985 
1986 
Later Years 



$ 21,241,596 
20,915,161 
20,230,419 
17,816,520 
17,784,232 
191,122,973 



Total Minimum Future Rental Income 



$289,110,901 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 3 - Leasing Arrangements with Tenants - Continued 

Minimum future rental income does not include contingent rentals which 
may be received under certain leases based on the tenants' revenues or fuel flow. 
Contingent rentals, excluding flight fees, amounted to approximately $8,128,000 
for the year ended December 31, 1981. 

In 1979, the City of Chicago received $461,421 from the sale of a 
bankrupt tenant's lease. This amount is being amortized- over the remaining life 
of the lease at approximately $50,000 per year. 

Note 4 - Airline Deposits 

Under the terms of a Financing Participation Agreement, the City of 
Chicago (which is being reimbursed primarily from a Federal grant) and certain 
participating airlines are sharing the cost of improvements to the Federal Inspec- 
tion 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, interest earned on the deposits and costs of construction 
are included in the accompanying financial statements. The following activity 
took place during 1981 and 1980 relating to this agreement: 

1981 1980 



Deposit Balance at Beginning of Period $ 907,565 $1,031,901 
Interest Income 122,496 101,999 

Airlines' Share of Expenditures (771,952 ) (226,335 ) 

Deposit Balance at End of Period $ 258,109 $ 907,565 

Note 5 - Pension Plans 

The employees of the City of Chicago are covered under various con- 
tributory 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 contributions, (b) 
employee contributions, and (c) income from pension fund investments. The City's 
contributions, which are established by state statute, are multiples of the 
employees' 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 $3,157,380 and $2,813,804 in 1981 and 1980. 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1981 AND 1980 



Note 5 - Pension Plans - Continued 

All pension funds receive an actuarial valuation annually. However, 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. 

Note 6 - Commitments and Contingencies 

Purchase orders and contract commitments to be financed by the operation 
and maintenance account totaled approximately $16,221,000 at December 31, 1981. 
In addition, approximately $7,862,000 as of December 31, 1981, has been earmarked 
by Airport management for specific future projects, although not under purchase 
order, contract or other formal commitment. 

The City of Chicago is a defendant in litigation related to the Airport 
in which a judgement was entered against the City on January 6, 1982. The City of 
Chicago has appealed the decision. In the opinion of the City this claim will not 
have a material effect on the financial condition of the Airport.