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

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 










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DEPUTY 
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Operations & Maintenance Planning & Construction Finance & Administration 



Facilities Security 



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Chicago-O'Hare International Airport 

Years Ended 

December 31 , 1982 and 1981 



CHICAGO O'HARE INTERNATIONAL AIRPORT 
YEARS ENDED DECEMBER 31, 1982 AND 1981 



Accountants' report 



Page 



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 changes in financial position 6-7 

Notes to financial statements 8-17 



pCT Laventhol & Horwath 



Certified Public Accountants 



111 East Wacker Drive 

Chicago, IL 60601 

(312) 644-4570 



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 
International Airport as at December 31, 1982, and the related state- 
ments of changes in contributed capital, changes in retained earn- 
ings, 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 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 



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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.