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
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CHICAGO-0 * HARE INTERNATIONAL AIRPORT
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1981 AND 1980
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TRANSPORTATION
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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 Permitted 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
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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.