1982 Annual Financial Report Chicago O'Hare International Airport City of Chicago Horold Washington, Mayor 11 | 3 5556 030 762108 May 27, 1983 The Honorable Harold Washington Mayor City of Chicago 121 North LaSalle Street Room 507 - City Hall Chicago, Illinois 60602 Dear Mayor Washington: To set forth the financial position and results of operations of O'Hare International Airport, we are submitting with this letter the Annual Financial Report for the City of Chicago O'Hare International Airport for the years ended December 31, 1982 and 1981. This report has been prepared in conformance with generally accepted accounting principles and is presented using the reporting requirements set forth by the National Council of Governmental Accounting. This letter is intended to provide background information for those not as familiar with the Airport and its operations as Your Honor, and to highlight the more salient elements of the report. DEPARTMENT OF AVIATION The world's busiest airport for over 20 years, Chicago O'Hare International Airport is owned by the City of Chicago and operated and maintained by the Department of Aviation. The Department of Aviation is headed by Com- missioner Thomas Kapsalis who has overall responsibility for the management and planning of aviation related functions. Commissioner Kapsalis is assisted by four deputy commissioners. First Deputy Commissioner Robert M. Cusumano has the day-to-day respon- sibility for operations at O'Hare. Deputy Commissioner William Corbett is responsible for safety and security issues involving the Airport. Deputy Commissioner John D. Drummond is responsible for planning, design, and development of airport projects, including major maintenance activities. Deputy Commissioner Ivan L. Harlan is responsible for coordination of all financial and administrative functions of the Department. The Department's organizational structure is illustrated in Exhibit I following this letter. The Department has a staff of over 1,200 people who operate and maintain the public facilities at the Airport. Approximately 28,000 employees of airlines, tenants, concessionaires, and the Federal government are also employed at the Airport. TRANSPORTATION LIBRARY NOV 3 1983 NORT UNIVERSITY He lit*- The Honorable Harold Washington Mayor May 27, 1983 Page Two AIRPORT ACTIVITY Chicago O'Hare International Airport is the busiest airport in the world as measured by total passengers and total aircraft operations. The Airport ranked third in terms of total cargo handled during 1982. O'Hare's activity relative to the world's other largest airports is illustrated in Exhibit II. From a record high of passengers, aircraft operations, and cargo volume in 1978, activity measures at O'Hare have generally decreased over the past five years, as shown in Exhibit III. This trend of decreasing activity has also generally been experienced at other major airports during the past five years. Such decreases are a result of several factors, including: (a) the effects of a recessionary world economy which has reduced the total number of airline passengers; (b) the escalation of jet fuel costs resulting in higher airline fares, further reducing the number of passengers; and (c) the August, 1981 strike of air traffic controllers and subsequent imposition of limits on total numbers of aircraft operations at domestic airports. These decreases are in marked contrast to the previous twenty-year increase in air transportation activity. Forecasts by various government and private sources of future air traffic activity generally predict the resumed long-term upward growth of airport activity. Based on the most recent information available, the future level of activity at Chicago O'Hare International Airport has been projected for 1995. Activity for the year of peak Airport activity (1978), the most recent historical year (1982), and 1995 are shown as follows: 1978 1982 1995 . Total Passengers 49,196,341 37,743,598 82,350,000 . Total Aircraft Operations 760,606 604,383 920,000 The diversity and number of Airlines and the availability of air service at O'Hare results in many passengers using the Airport as a place to change from one Airline or aircraft to another. This large volume of connecting passengers results in O'Hare being the second largest connecting airport in the country. In 1982, the O'Hare Budget totaled $143,258,642 million. Midway and Meigs are funded separately. The Honorable Harold Washington Mayor May 27, 1983 Page Three OPERATIONS AND FINANCIAL MATTERS Total operating revenues of the Airport for 1982 are $93.6 million, an increase of 4.9% over 1981 total operating revenues which were $89.2 million. Flight fees amounted to $46.1 million, an increase of 11.2% over the 1981 flight fees of $41.4 million. The increase is primarily attributable to higher operating expenses and preliminary expansion costs at the Airport. Total operating expenses, excluding depreciation and amortization, for the Airport for 1982 are $80.3 million, an increase of 18.3% over the 1981 total of $67.9 million. This increase is primarily the result of: 1.) increased personnel costs, amounting to nearly $4 million, expended in anticipation of the O'Hare Development Plan and an increased number of snow removal "ready-alerts", 2.) inflationary increases, amounting to $3.7 million, for energy and utilities costs; and, 3.) increased repairs and maintenance costs amounting to over $2.5 million, for parking lot rehabilitation, roof repairs and rental of snow removal equipment, debris removal services and shuttle bus service. Exhibit IV provides a summary of the Airport's operating revenues and operation and maintenance expenses for the five year period 1978 through 1982. ACCOUNTING SYSTEMS AND CONTROLS Although the Department of Aviation approves and processes all documents for input to the system, accounting records for the Department are maintained by the City Comptroller. The funds are maintained using budgetary control procedures prescribed by the Annual Appropriation Ordi- nance, as approved by the City and administrated by the Mayor's Budget Director. The four major sources of Airport revenue are flight fees, concessions, rents and income earned on interest. With respect to flight fees and rents, information provided by the F.A.A. is used to determine compliance with related agreements. In cooperation with the TOP Committee, flight fees are reviewed and, if necessary, readjusted semi-annually. Contract and lease compliance by Airport concessionaires is controlled in part by their monthly and annual revenue reports. In addition, internal audits are conducted on an ongoing basis to insure completeness and accuracy of all financial systems. Digitized by the Internet Archive in 2012 with funding from CARLI: Consortium of Academic and Research Libraries in Illinois http://www.archive.org/details/annualfinancialr1982chic The Honorable Harold Washington Mayor May 27, 1983 Page Four FINANCIAL HIGHLIGHTS OPERATIONS Flight Fees Concessions &. Rentals Operating Revenues Interest Income and Other Total Revenues Operating Expenses Interest Expense Provision for Judgments Total Expenses Revenues in Excess of Expenses Years Ended December 31 1982 $46,096,512 47,507,578 93,604,090 10,603,799 $104,207,889 91,574,708 2,827,039 1,224,000 $ 95,625,747 $ 8,582,142 1981 $41,463,349 47,750,769 89,214,118 12,445,193 $101,659,311 79,405,393 3,729,422 $ 83,134,815 $ 18,524,496 Years Ended December 31 FINANCIAL POSITION Cash and Investments Receivables &. Other Assets Fixed Assets-Net Total Assets Revenue Bonds Payable Other Liabilities Total Liabilities Total Equity 1982 $ 87,006,182 17,642,417 227,975,976 $332,624,575 38,474,000 24,970,475 $ 63,444,475 $269,180,100 1981 $ 96,754,631 13,315,209 220,607,000 $330,676,840 57,144,000 17,057,077 $ 74,201,077 $256,475,763 *Debt Service Coverage 3.68 * (Based on Net Revenue Bond Ordinance) 4.96 The Honorable Harold Washington Mayor May 27, 1983 Page Five During 1982, Revenue Bonds with a principal value of $18,670,000 were retired. This is $12,316,000 more than the minimum sinking fund required in the Revenue Bond Ordinance. As of December 31, 1982, O'Hare had retired $123,704,000 bonds in excess of the Revenue Bond Ordinance minimum sinking fund requirements. BUDGETARY PROCEDURES O'Hare is governed in all of its financial transactions by the City's Annual Appropriation Ordinance and must follow the City's budget process. The Department of Aviation consults with its airport consultant, the signatory airlines and the airline parties in the preparation of the Airport budget prior to submission to the City Council for approval. The Department of Aviation submits its proposed budget, including the budget for O'Hare Airport, to the City's Budget Director. The Budget Director includes the Department's budget in the City budget proposal for approval by the Mayor of the City, who submits the City's budget to the City Council for approval. ACKNOWLEDGEMENTS As in any business enterprise, the hard work and dedication of the employees who work at O'Hare must be recognized as one of the Airport's most valuable assets. To these employees we extend our appreciation and thanks. To the citizens of Chicago and the air-traveling public, we pledge our continued efforts to maintain the highest quality of service at Chicago O'Hare International Airport. WALTER KNORR THOMAS KAPSALIg/ Acting Comptroller Commissioner Department of Aviation EXHIBIT I ORGANIZATIONAL CHART HAROLD WASHINGTON MAYOR THOMAS KAPSALIS COMMISSIONER OF AVIATION ' 1 ST DEPUTY COMMISSIONER DEPUTY COMMISSIONER DEPUTY COMMISSIONER DEPUTY COMMISSIONER Operations & Maintenance Planning & Construction Finance & Administration Facilities Security 2 9 E o •- a K<0 OOvOOMAOOODOvOvtvO KMAOOKNCDOOOOvfOOl^ <f H OO* O* H vC o" <f 0\" H or-r-o<r\omcM<fro\ <lT>M^(^t r-ir>a3PvjvO(M<d-<*vo " E tn<rHiA<fNHOOvOQO r» r^KN^r^iA^r^r^m < Z o _ p « C£ co _ U c co ill UJ ^ a: < ? Zi£ g o a> £ c 0< aSSo.? & I (0 o id to a) o n UI _I*Q O _J c? c > 11 ilj rA NO ON O r-» r^ -H r- cn? 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Our examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing proce- dures as we considered necessary in the circumstances. The finan- cial statements of Ch icago-O 1 Hare International Airport for the year ended December 31, 1981, were examined by Bernstein & Bank, Ltd., whose opinion dated May 21, 1982, 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 the following paragraph. Effective September 1, 1982, & Horwath. Bernstein and Bank, Ltd., merged with Laventhol As discussed in Note 1 to the financial statements, expen- ditures for capital improvements were made from operating revenues, which practice is not permitted under the Revenue Bond Ordinance. In our opinion, except for the effects on the financial statements of the failure to comply with certain provisions of the Revenue Bond Ordinance as discussed in the preceding paragraph, the 1982 financial statements referred to above present fairly the financial position of Chicago O'Hare International Airport as at December 31, 1982, and the results of its operations and the changes in its financial position, and the changes in its contributed capital and retained earnings for the year then ended, in conformity with generally accepted accounting principles and the provisions of the Revenue Bond Ordinance applied on a basis consistent with that of the preceding year. April 15, 1983 A member of" Horwath &. Horwath International with affiliated offices worldwide s a sa-o b cu-c <1) -W U) 3 IN E 6 i-rtijOooO-oO 8 r: E O 2 S 3 J - E H X> «- n u *> o (« 10 c <t _ . tl 2 5 - 2 P ^ j E i: 4J u a ■i * c CD x E CHICAGO-0' HARE INTERNATIONAL AIRPORT STATEMENTS OF REVENUES AND EXPENSES YEARS ENDED DECEMBER 31, 1982 AND 1981 1981 Operating revenues: Flight fees $46,096,512 $41,463,349 Rent, concessions and other 47,507,578 47,750,769 93,604,090 89,214,118 Operating expenses: Salaries and wages 37,966,570 33,390,667 Provision for depreciation and amortization 11,238,653 11,484,209 Repairs and maintenance, including expenditures from Reserve Main- tenance account 13,339,962 Other operating expenses 29 , 029 , 523 91,574,708 2,029,382 11 23 255 275 147 370 79 405 ,393 9 808 725 Nonoperating income (expense): Interest earned on investments Discount, net of premiums on Revenue Bonds retired Interest incurred on Revenue Bonds Provision for judgments 10 ,378 ,452 12,289 ,166 225 ,347 156 ,027 ( 2 ( 1 ,827 224 ,039) 000) 3,729 ,422 6,552,760 8,715,771 Revenues in excess of expenses $ 8,582,142 $18,524,496 See notes to financial statements. CHICAGO-0' HARE INTERNATIONAL AIRPORT STATEMENTS OF CHANGES IN FINANCIAL POSITION YEARS ENDED DECEMBER 31, 1982 AND 1981 1982 1981 Sources of working capital: From operations: Revenues in excess of expenses $ 8,582,142 $18,524,496 Add (deduct) items not affecting working capital: Provision for depreciation and amortization 11,238,653 11,484,209 Amortization of deferred revenue ( 48 , 697 ) ( 48,697 ) Total from operations 19,772,098 29,960,008 Airline contributions for fixed assets 37,676 860,003 Grant proceeds received for prior years capital expenditures 698,595 City of Chicago net contributions for fixed assets 4,084,519 5,454,909 23,894,293 36,973,515 Uses of working capital: Acquisition of fixed assets 18,607,629 10,666,622 Decrease in long-term liabilities 18,986,000 17,751,000 Increase in net restricted assets 1 ,537 ,126 7,104,226 39,130,755 35,521,848 Increase (decrease) in working capital ($15,236,46 2) $ 1,451,667 (continued ) CHICAGO-0' HARE INTERNATIONAL AIRPORT STATEMENTS OF CHANGES IN FINANCIAL POSITION (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 1982 1981 Changes in components of working capital: Increase (decrease) in current assets: Cash S 200,882 $ 3,393,709 U.S. government securities ( 13,364,280) 343,481 Accounts receivable, net 2,898,648 296,010 Due from other City of Chicago funds 1,692,890 511,411 Prepaid expenses and deposits 17,368 36,969 Due from Restricted Funds 5 ,638 ( 222,730 ) ( 8,548,854 ) 4,358,850 Increase in current liabilities: Current portion of Revenue Bonds payable 316,000 318,000 Accounts payable 3,844,423 337,954 Due to other City of Chicago funds 2 ,527 ,185 2,251 ,229 6,687,608 2,907,183 Increase (decrease) in working capital ($15,236,46 2) $ 1,451,667 See notes to financial statements. CHICAGO-0 1 HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1982 AND 1981 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 conforming with the reporting require- ments set forth in National Council of Governmental Account- ing (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 Chi- cago 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 that the remaining avail- able "net revenues", as defined, shall then be allocated in the following order of priority: 1. Revenue bond interest - an amount equal to interest payable in the current year. 2. Debt service reserve - an amount necessary to maintain the balance of this reserve at an amount equal to two years' interest requirements on all bonds outstanding. 3. Revenue Bond retirement reserve - an amount necessary for the required minimum payments. 4. Reserve maintenance account - an annual payment of 51,160,000 to the reserve maintenance account until S4, 833, 334 is accumulated. In addition, interest earned on the reserve balance is retained in this account, CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 1. Summary of significant accounting policies: (continued) Restricted assets: (continued) 5. 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 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. 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, 1982 and 1981, are as follows: Cost Market 1982 1981 1982 1981 Unrestricted $ 5,386,992 $18,751,272 S 5,392,125 $18,817,67! Restricted 67,232, 231 64,082,858 69,332,721 64,535,09( $72,619,223 $82,834,130 $74,724,846 $83,352,76! 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: 1. City of Chicago, including capitalized interest of $119,064 in 1982 and $171,672 in 1981 for use of City of Chicago money. Interest is capitalized from the commencement of the improvement or construction activity through completion. CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 1, Summary of significant accounting policies: (continued) Fixed assets: (continued) 2. Grant proceeds from state and federal governmental agencies. 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. 3. Public utility, concessionaire and airlines by direct reimbursements of amounts expended directly and indi- rectly from operating revenues. The Revenue Bond Ordinance does not allow the expenditure of operating revenues for capital improvements. However, the air- lines' representative has agreed to substantially all of these expenditures, which totaled $10,281,791 in 1982 and $4,351,710 in 1981. Using operating revenues for this purpose has the effect of increasing 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 acquisi- tion 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-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 Revenue bonds: General: 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, which were issued to provide monies for the initial construc- tion and subsequent improvements of the Airport and its facilities, had a total face value of $23 2,000,000. The Revenue Bonds payable at December 31, comprised of the following: 1982 and 1981, are 1982 1981 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 $ 8,762,000 $18,205,000 1,774,000 100,000 499,000 2,899,000 21,000,000 3,440,000 38,474,000 6,670,000 3,783,000 425,000 915,000 4,416,000 25,275,000 4,125,000 57,144,000 6,354,000 $31,804,000 $50,790,000 Minimum bond retirements for future years are as follows: 1983 1984 1985 1986 1987 1988 through 1993 $ 6,670,000 6,922,000 4,834,000 2,784,000 2,864,000 14,400,000 $38,474,000 CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 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 inter- est. The cost of bonds purchased or called amounted to $186,512,089 from issuance through 1982, excluding premiums paid. Premi- ums paid on Bonds purchased or called, which amounted to $2,076,248 from issuance through 1982, are charged to Airport operations in the year of purchase. Discounts on Bonds pur- chased, which amounted to $7,013,911 from issuance through 1982, are credited to airport operations 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 1982, a provision for doubtful accounts of $462,812 ($612,075 in 1981) 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: CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 2. Revenue bonds: (continued) Revenue Bond Ordinance - "net revenues" as defined and allo- cation of "net revenues": (continued) 1982 1981 Revenues in excess of expenses $ 8,582,142 $18,524,496 Add (deduct) adjustments to reflect ordinance basis of accounting : Application of deferred income from preceding year as reduc- tion of flight fees 27,807,556 26,601,267 Provision for depreciation and amortization 11,238,653 11,434,209 Interest on Revenue Bonds 2,827,039 3,729,422 Grant proceeds received for prior years 1 capital expen- ditures 698,595 Expenditures from reserve maintenance account 1,571,375 332,132 Interest earned on invest- ments restricted ( 7,170,888) ( 7,802,385) Expenditures of operating revenues for capital improvements ( 10,281,791) ( 4,351,710) Additional provision for doubtful accounts ( 462,812) ( 612,075) Discount on Revenue Bonds retired ( 337,708 ) ( 175,377 ) "Net revenues" as defined in Revenue Bond Ordinance $33,773,566 $48,428,574 CHICAGO-0 1 HARE INTERNATIONAL' AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 avenue bonds: (continued) Revenue Bond Ordinance - "net revenues" as defined and allo- cation of "net revenues": (continued) As previously stated in Note 1, the Revenue Bond Ordinance requires the "net revenues" to be allocated as follows: 1982 1981 "Net revenues" as defined in Revenue Bond Ordinance $33,773,566 548,428 ,574 Revenue Bond interest 2,827,039 3,729,422 Revenue Bond retirement reserve 6,354,000 6,036,000 Debt service reserve Revenue maintenance account 1,160,000 Emergency reserve 976,294 1,456,725 Deferred income which is used to reduce future flight fees 12 ,472 ,979 27 ,807 ,556 23,790,312 39,029,703 Balance to be allocated to Revenue Bond retirement reserve S 9,983,254 S 9,398,871 Leasing arrangements with tenants: Leasing operations consist of the leasing of most of the Air- port'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 ren- tal income on noncancellable operating leases as of December 31, 1982: 1983 $ 21,908,000 1984 21,301,000 1985 19,645,000 1986 19,197,000 1987 19,197,000 Later years 184, 242,000 Total minimum future rental income $285,490,000 14 CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 Leasing arrangements with tenants: (continued) Minimum future rental income does not include contingent rentals which may be received under certain leases based on the ten- ant's revenues of fuel flow. Contingent rentals, excluding flight fees, amounted to approximately $8,128,000 for the years ended December 31, 1982 and 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. Airline deposits: Under 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 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, interest earned on the deposits and costs of construction are included in the accompanying financial statements. The following activity took place during 1982 and 1981 relating to this agreement: 1982 1981 Deposit balance, beginning of year $258,109 $907,565 Interest income 87,603 122,496 Airlines' share of expenditures ( 38 , 387 ) ( 771 ,952 ) Deposit balance, end of year $307,325 $258,109 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 Offi- cials' Annuity and Benefit Fund of Chicago or the Laborer's and Retirement Board Employees' Annuity and Benefit Fund of Chicago. 15 CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 Pension plans: (continued) Each pension plan is financed primarily by (a) city contribu- tions, (b) employee contributions, and (c) income from pension fund investments. The city's contributions, which are estab- lished by state statute, are multiples of the employees' con- tribution 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 53,510,707 and 53,157,380 in 1982 and 1981, 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. Commitments and contingencies: Purchase orders and contract commitments to be financed by the operation and maintenance account totaled approximately 513,676,000 at December 31, 1982. In addition, approximately 510,708,000 at December 31, 1982, has been earmarked by Airport management for specific future projects, although not under purchase order, contract or other formal commitment. During 1982, a judgment related to the Airport was entered against the City of Chicago from an existing lawsuit. Pursuant to an agreement dated September 10, 1982, the judgment claim, which initially totaled 51,907,000 was reduced to 51,224,000, which was accrued in 1982 and was paid in settlement of the judgment in 1983. The plaintiffs have filed pleadings alleging that the City has not complied with the settlement terms and have requested the court to have the City pay additional damages. In the opinion of the City, an additional claim, if any, will not have a material effect on the financial statements of the Airport. .16 CHICAGO-0' HARE INTERNATIONAL AIRPORT NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1982 AND 1981 7. Subsequent events: The City of Chicago on January 28, 1983, approved a new "Airport Use Agreement and Terminal Facility Lease" (1983 Use Agreement) which will become effective on or before the delivery of the 1983 Revenue Bonds. It provides that the aggregate of all rentals, fees and charges to be paid will be sufficient to pay the net cost of operating and maintaining the airport, including the satisfaction of all of the City's obligations to make deposits and payments under any ordinance or resolution authorizing airport obligations. On March 31, 1983, the City Council of the City of Chicago adopted ordinances authorizing the issuance and sale of Chicago- O'Hare International Airport General Airport Revenue Bonds for the purpose of financing or reimbursing the cost of improver ments and expansion of the airport and to redeem existing out- standing bond obligations of the airport. Upon redemption of the existing bond obligations, the balance in the Emergency Reserve Fund, which is approximately $59,400,000 at December 31, 1982, reverts to the City of Chicago.