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

HE- 
C53X q 



City of Chicago 

Harold Washington, Mayor 



Department of Aviation 

Thomas Kapsalis 
Commissioner 

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



June 15, 19 



The Honorable Harold Washington 

Mayor 

City of Chicago 

Room 507 - City Hall 

121 North LaSalle Street 

Chicago, Illinois 60602 

Dear Mayor Washington: 



TRANSPORTATION LIBRARY 

AUG 2 8 1985 
NORTHWESTERN IMlVflWIY 



We are submitting with this letter the Annual Financial Report for the City 
of Chicago O'Hare International Airport for the year ending December 31, 
1983 and results of operations. The report was 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 highlighting the 
salient elements of the report and significant accomplishments at O'Hare 
International Airport. 

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 Chicago's municipal airports. He is supported by First Deputy 
Commissioner Earl F. Hord. They are assisted by four Deputy Com- 
missioners. 

Deputy Commissioner Edward Levell, Jr. has the day-to-day responsibility for 
operations at O'Hare. Deputy Commissioner William T. Corbett is respon- 
sible for safety and security issues involving the airport. Deputy Com- 
missioner John D. Drummond is responsible for planning, design, and develop- 
ment of airport projects. Deputy Commissioner Ivan L. Harlan is responsible 
for financial and administrative functions of the Department. 

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. 



The Honorable Harold Washington 

Mayor 

June 15, 1984 

Page Two 



DEPARTMENT OF AVIATION 



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 1983. O'Hare's activity 
relative to the world's other largest airports is illustrated in Exhibit I. 

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 II. This trend of decreasing activity has, in 
general, been experienced at other major airports during this period. Al- 
though these decreases stand in marked contrast to the previous twenty-year 
rise in air transportation activity, forecasts by various government and 
private sources of future air traffic activity generally predict sustained, 
long-term growth. 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 (1983), and 1995 are shown as follows: 



, Total Passengers 

Total Aircraft 
Operations 



1978 



1983 



1995 



49,196,341 42,873,953 82,350,000 

760,606 667,963 920,000 



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. 



The Honorable Harold Washington 

Mayor 

June 15, 1984 

Page Three 



DEPARTMENT OF AVIATION 



OPERATIONS AND FINANCIAL MATTERS 



In 1983, the O'Hare Budget totaled $142,191,436; Chicago Midway Airport 
and Merrill C. Meigs Field are funded separately. Total revenues derived as 
a result of O'Hare International's operation in 1983 equalled $93.3 million, 
which was net of $6.8 million refund of flight fees to airlines, as compared 
to $93.6 million for 1982. Flight fees and terminal area use charges 
amounted to $55.1 million as compared to $46.1 million for 1982. Con- 
cession income increased by approximately $2.3 million whereas rentals 
reflect a decrease of $4.8 million which were substantially reclassified to 
terminal area use charges as required under the new 1983 Use Agreement. 
The major differences are attributable to higher operating expenses and 
expansion costs for the O'Hare Development Program. 

Total operating expenses, excluding depreciation and amortization, for the 
airport during 1983 amounted to $81.5 million, an increase over the 1982 
total of $80.5 million. This increase is primarily the result of: 1) increased 
personnel costs, amounting to nearly $2.0 million expended in connection 
with the O'Hare Development Program and an increased number of snow 
removal "ready-alerts", and an offsetting 2) decrease in repairs and main- 
tenance costs reflective of anticipated construction under the O'Hare 
Development Program amounting to $1.6 million. 

There were several significant accomplishments at O'Hare during 1983. 

A new Airport Use Agreement became effective in May, 1983. O'Hare 
International Airport's operations were divided into five cost/revenue cen- 
ters which include: 1) airfield, 2) terminal, 3) parking and roadway, 4) cargo 
and flight kitchens and 5) other related activities. 

Construction activity on the O'Hare Development Program continued on 
Terminal 3 expansion/Concourse L development and was completed on June 
1, 1984, 4 months ahead of schedule. Also during the year, construction was 
initiated on a new airport services complex which will house maintenance 
and snow removal vehicles as well as new flight kitchen facilities. 

The design and engineering of some ninety major Phase II capital develop- 
ment projects was begun during the year and are now ready for construction 
pending final approval by the Federal Aviation Administration. The 
Department received the Federal Aviation Administration's preliminary 
approval on May 31, 1984. 



DEPARTMENT OF AVIATION 



The Honorable Harold Washington 

Mayor 

June 15, 1984 

Page Four 



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 Department of Finance. The funds are maintained by an 
independent trustee, using budgetary control procedures prescribed by the 
Annual Appropriation Ordinance, as approved by the Chicago City Council 
and administered by the Office of Budget and Management. 

The five major sources of airport revenue are flight fees, terminal area use 
charges, concessions, rents and income earned on investments. With respect 
to flight fees, terminal area use charges, and rents, information provided by 
the Federal Aviation Administration is used to determine compliance with 
related agreements. In cooperation with the Chicago Airlines TOP Com- 
mittee, flight fees are reviewed and, when necessary, are adjusted semi- 
annually to meet increases or decreases in expenditure needs. 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 by the Department of Finance to insure 
completeness and accuracy of all financial reporting systems. 

During 1983, all outstanding Revenue Bonds were retired and $175 million in 
new Revenue Bonds were issued. 



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 confers with its' airport consultant, the signatory 
airlines and other airline parties in the preparation of the airport budget. 
The Department of Aviation then submits its proposed budget, including the 
budget for O'Hare Airport, to the City's Budget Director. The Budget 
Director incorporates the Department's budget in the City budget proposal 
for approval by the Mayor, who in turn submits the City's budget to the City 
Council for approval. 



The Honorable Harold Washington 

Mayor 

June 15, 1984 

Page Five 



FINANCIAL HIGHLIGHTS 



Years Ended 
December 31 



DEPARTMENT OF AVIATION 



OPERATIONS 
Flight Fees 

Concessions & Rentals 
Terminal Area Use Charges 
Refund of Flight Fees 

Operating Revenues 
Interest Income and Other 
Total Revenues 

Operating Expenses 
Interest Expense 
Provision for Judgments 
Loss From Early Extinguishment 
of Debt 

Total Expenses 

Revenues In Excess of Expenses 



1983 



$43,570,929 
45,011,868 
11,603,098 
(6,847,899) 

93,337,996 

6,375,845 

$99,713,841 

92,592,692 
3,295,220 



1,635,035 

$97,522,947 

$2,190,894 



1982 



$46,096,512 
47,507,578 



93,604,090 

10,603,799 

$104,207,889 

91,733,708 
2,827,039 
1,224,000 



$95,784,747 
$8,423,142 



FINANCIAL POSITION 



Years Ended 
December 31 



Cash and Investments 
Receivables & Other Assets 
Fixed Assets-Net 



$146,268,918 

25,469,453 

268,542,051 



$ 87,006,182 

17,612,355 

227,975,976 



Total Assets 

Revenue Bonds Payable 

(1983-Less Bond Discount 

of $4,182,059) 
Junior Lien Obligation 

Other Liabilities 

Total Liabilities 
Total Equity 



$440,280,422 



170,817,941 
14,500,000 
44,726,953 

$230,044,894 

$210,235,528 



$332,594,513 

38,474,000 

27,112,413 

$65,586,413 

$267,008,100 



Debt Service Coverage 



5.06* 



*1959 Revenue Bond Ordinance 
**1983 Revenue Bond Ordinance 



The Honorable Harold Washington 

Mayor 

June 15, 1984 

Page Six 



DEPARTMENT OF AVIATION 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. 



WAT.TF.R KNCiRR THOMASKAPSAT.TS^ 



WALTER KNORR 
City Comptroller 
Department of Finance 



THOMAS KAPSALIS^ 
Commissioner 
Department of Aviation 



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CHICAGO-O'HARE INTERNATIONAL AIRPORT 
YEARS ENDED DECEMBER 31, 1983 AND 1982 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 
YEARS ENDED DECEMBER 31, 1983 AND 1982 



CONTENTS 



Page 

Accountants' report 1 

Financial statements: 

Balance sheets 2 

Statements of changes in contributed capital 3 

Statements of changes in retained earnings 4 

Statements of revenues and expenses 5 

Statements of changes in financial position 6-7 

Notes to financial statements 8-18 



IfS] Laventhol &Horwath 300So c h h," e 6o^ 

II Certified Public Accountants (312)648-0555 



The Members of the 

City Council of the City of Chicago 
Chicago, Illinois 

We have examined the balance sheets of Chicago-O 1 Hare 
International Airport as of December 31, 1983 and 1982, and the 
related statements of changes in contributed capital, changes in 
retained earnings, revenues and expenses and changes in financial 
position for the years then ended. Our examinations were made in 
accordance with generally accepted auditing standards and, accord- 
ingly, included such tests of the accounting records and such other 
auditing procedures as we considered necessary in the circumstances. 

As discussed in Note 1 to the financial statements, 
expenditures for capital improvements were made from operating 
revenues, which practice was not permitted under the 1959 Revenue 
Bond Ordinance. The 1959 Revenue Bonds were retired in 1983. 

In our opinion, except for the effects on the 1982 finan- 
cial statements of the failure to comply with certain provisions of 
the 1959 Revenue Bond Ordinance as discussed in the preceding para- 
graph, the 1983 and 1982 financial statements referred to above 
present fairly the financial position of Chicago-O' Hare International 
Airport as of December 31, 1983 and 1982, and the results of its 
operations and the changes in its financial position, contributed 
capital and retained earnings for the years then ended, in conformity 
with generally accepted accounting principles and the provisions 
of the Bond Ordinances applied on a consistent basis after restate- 
ment for the change, with which we concur, in the method of account- 
ing for vacation benefits as described in Note 4 to the financial 
statements . 



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June 14, 1984 



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CHICAGO-O'HARE INTERNATIONAL AIRPORT 

STATEMENTS OF REVENUES AND EXPENSES 

YEARS ENDED DECEMBER 31, 1983 AND 1982 

1983 



Operating revenues: 
Flight fees 

Rent, concessions and other 
Terminal area use charges 
Refund of flight fees (Note 



Operating expenses: 
Salaries and wages 
Provision for depreciation and 

amortization 
Repairs and maintenance, including 

expenditures from Reserve 

Maintenance account 
Other operating expenses 



Income from operations 

Nonoperating income (expense): 
Interest earned on investments 
Discount, net of premiums, on 

Revenue Bonds retired 
Interest incurred on Revenue 

Bonds 
Interest incurred on Junior 

Lien Obligation 
Provision for judgments 



Revenues in excess of expenses 
before extraordinary loss 

Loss from early extinguishment 
of debt (Note 5) 

Revenues in excess of expenses 



1982 

(Restated, 

Note 4) 



$43,570,929 $46,096,512 



45,011,868 

11,603,098 

( 6,847,899 ) 

93,337,996 



40,050,000 
11,126,661 



11,698,266 
29,717,765 



92,592,692 
745,304 



47,507,578 

93,604,090 

38,125,570 
11,238,653 



13,339,962 
29,029,523 



91,733,708 
1,870,382 



6,375,845 10,378,452 

225,347 

( 2,881,795) ( 2,827,039) 

( 413,425) 
( 1,224,000 ) 

3,080,625 6,552,760 



3,825,929 



( 1,635,035) 



), 423, 142 



$ 2,190,894 $ 8,423,142 



See notes to financial statements. 

5 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

STATEMENTS OF CHANGES IN FINANCIAL POSITION 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



1983 



1982 



Sources of working capital: 
From operations: 

Revenues in excess of expenses 

before extraordinary loss 
Add (deduct) items not affecting 
working capital: 
Provision for depreciation 

and amortization 
Amortization of deferred rental 

income 
Amortization of bond discount 

Total from operations before 
extraordinary loss 

Loss from early extinguishment 
of debt 

Total from operations 

Proceeds from Junior Lien 

Obligation debt 
Proceeds from Revenue Bonds 

net of bond discount 
City of Chicago contributions 

for fixed assets 
Airline contributions for 

fixed assets 



Uses of working capital: 

Acquisition of fixed assets 
Payment of long-term debt 
Increase in net restricted assets 
Transferred to City of Chicago 

Corporate Fund 
Increase in other assets 



Increase (decrease) in working capital 
(continued) 



(Restated, 
Note 4) 



$ 3,825,929 $ 8,423,142 



11,126,661 



( 53,705) ( 
104,116 



15,003,001 

( 1,635,035 ) 
13,367,966 



11,238,653 
48,697) 



19,613,098 



19,613,098 



14,500,000 
170,713,825 

4,710,498 4,084,519 
13,310 37,676 



203,305,599 



51,672,511 
31,804,000 
29,364,447 

63,687,274 
10,977,729 



23,735,293 



18,607,629 

18,986,000 

1,567,188 



187,505,961 39,160,817 
$ 15,799,638 ($15,425,524) 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

STATEMENTS OF CHANGES IN FINANCIAL POSITION (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



1983 1982 



Changes in components of working capital: 
Increase (decrease) in current assets: 
Cash and U.S. government securities 
Accounts receivable, net 
Due from other City of Chicago funds 
Prepaid expenses and deposits 
Due from Restricted Funds 
Accrued interest receivable 



Increase (decrease) in current liabilities: 
Current portion of Revenue 

Bonds payable ( 6,670,000) 316,000 

Accounts payable 173,907 4,003,423 

Due to other City of Chicago funds 1,913,086 2 ,527,185 

( 4,583,007 ) 6,846,608 

Increase (decrease) in working capital $15,799,638 ($15,425,524) 









( Restated, 








Note 4) 


$16, 


,094, 


r 510 


($13,163,398) 


( 2, 


r 335, 


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2,898,648 


( 2, 


,807, 


,255) 


1,692,890 




64, 


,367 


17,368 
( 24,424) 




200 

,216 


,754 
,631 




11 


( 8,578,916) 



See notes to financial statements. 
7 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



1. Summary of significant accounting policies: 

Basis of accounting: 

The Airport is accounted for as an enterprise fund of the 
City of Chicago. The financial statements have been prepared 
on the accrual basis of accounting and conform with the 
reporting requirements set forth in the National Council of 
Governmental Accounting (NCGA) Statements. 

Investments: 

Investments consist of U.S. Treasury bills and Treasury notes, 
which are carried at cost plus accrued interest, which 
approximates market value. The aggregate costs at December 
31, 1983 and 1982, are as follows: 

1983 1982 



Unrestricted $ 515,502 $ 5,386,992 
Restricted 105,916,602 67,232,231 



$106,432,104 $72,619,223 



Fixed assets: 



All fixed assets are recorded at cost. Expenditures for the 
acquisition, construction or equipping of a capital project, 
together with related design, architectural and engineering 
fees are capitalized. Expenditures for vehicles and other 
moveable equipment are expensed as incurred. Fixed assets 
are acquired with funds from proceeds of revenue bonds and 
the following three sources: 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 

1. Summary of significant accounting policies: 
Fixed assets: (continued) 

A. City of Chicago, including capitalized interest of 

$330,398 and $119,064 for 1983 and 1982, respectively, 
for use of City of Chicago money. Interest is capital- 
ized from the commencement of the improvement or 
construction activity through completion. 

B. 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. 

C. Public utility, concessionaire and airlines by direct 

reimbursements of amounts expended directly and indi- 
rectly from operating revenues. The 1959 Revenue Bond 
Ordinance did not allow the expenditure of operating 
revenues for capital improvements. However, the air- 
lines' representative has agreed to these expenditures, 
which totaled $13,753,686 in 1983 and $10,281,791 in 
198 2. Using operating revenues for this purpose has 
the effect of increasing flight fees. 

Depreciation: 

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-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 

1. Summary of significant accounting policies: (continued) 

Capitalization of interest cost: 

Total interest incurred on revenue bonds amounted to 
$11,414,440 in 1983 and $2,827,039 in 1982. Capitalized 
interest totaled $2,300,000 in 1983, which is net of interest 
income received of $6,232,645. 

Bond discount: 

Discount on bonds is deducted from the face amount of bonds 
in the balance sheet and is to be amortized as additional 
interest expense on the bonds-outstanding method. 

2. 1983 General Airport Revenue Bond Ordinance: 

Cash and U.S. government securities as of December 31, 1983, 
were restricted for the following: 

Construction fund $ 61,041,581 

Capitalized interest fund 21,672,838 

Debt service reserve fund 18,184,156 

Debt service interest fund 5,119,566 

Deferred maintenance fund 691,183 

Maintenance reserve fund 3,058,288 

Emergency reserve fund 915,083 

Airline deposits 383,216 

$111,065,911 

Construction and capitalized interest fund assets are restricted 
for capital and interest costs during construction for the 
O'Hare Development Plan. 

The debt service reserve fund and interest fund are restricted 
for the payment of bond principal and interest. 

The deferred maintenance and maintenance reserve funds are 
restricted for qualified maintenance expenditures. 

An amount equal to the sum of the annual provisions for depre- 
ciation 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 is 
required to be deposited into the emergency reserve fund. 



10 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



2. 1983 General Airport Revenue Bond Ordinance: (continued) 

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. As at December 31, 1983, $369,746 
was on deposit with the City Treasurer to pay for the remaining 
costs. 

3. Airline terminal construction escrow: 

The Airline terminal construction escrow was funded from proceeds 
of the 1983 Revenue Bonds (see Note 5), and is restricted for 
the retirement of the City of Chicago (Delta project) Series 
1982-A Bonds due on October 1, 1985. These bonds relate to 
the common area costs of the new Airline terminal project 
completed in June 1984. The common area costs incurred on 
the terminal, which is included in construction in progress, 
amounted to $14,932,371 at December 31, 1983. 

4. Change in accounting for vacation pay: 

Prior to 1983, the Airport accounted for the costs of employees' 
vacation pay benefits in the period in which they were paid. 
During 1983, as a result of the National Council of Govern- 
mental Accounting Statement No. 4, the Airport began accruing 
such benefits as they were earned. Retained earnings at 
January 1, 1983 and 1982, have been retroactively decreased by 
$2,172,000 and $2,013,000, respectively, which represents the 
effect of the change as of those dates. The effect on 1982 was 
to decrease revenues in excess of expenses by $159,000. The 
accounting change had no material effect on the statement of 
revenues and expenses for 1983. 



11 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



Revenue Bonds: 

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 (1983 
Series) for the purpose of financing or reimbursing the cost of 
improvements and expansion of the airport and to redeem existing 
outstanding bond obligations of the airport. On May 12, 1983, 
the City of Chicago issued $175,000,000 1983 Series A and B 
Bonds. The proceeds were used as follows: 

Retirement of 1959 Ordinance Bonds $ 29,223,425 

Refunding of Series 1982-A Bonds 

related to Delta Project 25,010,100 

Deposit to Debt Service Reserve Fund 18,184,156 

Deposit to Construction Fund and 
Revenue Fund: 

Project accounts and Revenue Fund 76,421,144 

Capitalized Interest Account 21,000,000 

Cost of Issuance 875,000 

Bond discount 4,286,175 

Total bond issue $175,000,000 

In connection with the retirement of the- 1959 Bonds, $1,635,035 
of premiums were paid. These costs were accounted for as an 
extraordinary loss in accordance with Statement of Financial 
Accounting Standards No. 4, Reporting Gains and Losses from 
Extinguishment of Debt. 

In accordance with the 1959 Revenue Bond Ordinance, the 

$63,687,274 remaining in the Emergency Reserve Account after 

the payment of all 1959 Revenue Bonds was paid to the City 
of Chicago Corporate Fund. 



12 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



Revenue Bonds: (continued) 

The following is a schedule of maturities and applicable inter- 
est rates related to the 1983 Series Bonds: 



January 


1 












of the 




Series A 


Series B 






Interest 


year 




amount 


amount 


Total 




rates 


1985 




$ 290,000 


$ 160,000 


$ 450, 


,000 


6.00% 


1986 




310,000 


695,000 


1,005, 


,000 


6.50 


1987 




330,000 


1,105,000 


1,435, 


,000 


7.00 


1988 




350,000 


1,210,000 


1,560, 


,000 


7.50 


1989 




380,000 


1,300,000 


1,680, 


,000 


7.75 


1990-2013 


32,000,000 


136,870,000 


168,870, 


,000 


8.0% - 














9.625% 




$33,660,000 


$141,340,000 


$175,000, 


,000 





6. Junior Lien Obligation debt: 

The Airport obtained a $25,000,000 line of credit from a bank, 
which expires June 30, 1984. As of December 31, 1983, the 
Airport had borrowed $14,500,000 from the line of credit. The 
loan is due June 30, 1985. Interest is payable each January 1 
and July 1 at the following rates: 

(1) From the date of the first loan through June 30, 1984, 

at the floating certificate of deposit rate plus 1% 
and, 

(2) From July 1, 1984, to payment of the loans, at the bank's 

corporate base rate. 

The interest rates may be modified as defined in the agreement. 



13 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 

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 noncancelable operating leases as of December 31, 
1983: 

Year ending 

December 31, Amount 



1984 $ 9,895,975 

1985 8,229,833 

1986 7,781,833 

1987 7,781,833 

1988 7,746,593 
Later years 50 ,296,970 

Total minimum future 

rental income $91,733,037 



At May 12, 1983, the 1983 Airport Use Agreement was signed by 
certain airlines. At the same time, the hangar, terminal, 
ramp and cargo building leases, in effect under the 1959 Airport 
Use Agreement for these airlines were canceled. The lost 
revenues from these leases will be recovered under the 1983 
use agreement through the institution of a terminal use charge 
and a revision in the method of computing flight fees. 

Rental income, consisting of all rental and concession revenues 
except ramp rentals and automobile parking, amounted to 
$27,113,256 and $26,979,817 in 1983 and 1982, respectively. 
Contingent rentals included in the totals were approximately 
$11,878,000 and $8,128,000 for 1983 and 1982, respectively. 
Contingent rentals which may be received under certain leases 
based on the tenant's revenues or fuel flow are not included 
in minimum future rental income. 



14 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



8. Refund to airlines: 

Certain capital expenditures from operating revenues were for 
design, development and planning associated with the O'Hare 
Development Plan. The airline parties approved these expendi- 
tures with the understanding that they would be reimbursed by 
the City of Chicago from proceeds of the sale of the 1983 
General Airport Revenue Bonds. The amount refundable to the 
airlines for these expenditures totaled $6,847,899, was paid 
in June and November 198 3, and was accounted for as a reduction 
of flight fees in the statement of revenue and expenses. 

9. 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 
Ch icago. 

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 $3,556,719 and $3,510,707 in 1983 and 
1982, 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. 



15 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



10. Commitments and contingencies: 

Purchase orders and contract commitments to be financed by 
the operation and maintenance account totaled approximately 
$21,974,000 and $13,676,000 at December 31, 1983 and 1982, 
respectively. In addition, approximately $4,183,000 and 
$10,708,000 at December 31, 1983 and 1982, respectively, had 
been earmarked by Airport management for specific future 
projects, although not under purchase order, contract or 
other formal commitment. 

11. 1983 General Airport Revenue Bond Ordinance - "net revenues 

for calculation of coverage" as defined and calculation of 
"coverage" as defined: 

The 1983 General Airport Revenue Bond Ordinance provided that 
certain items be accounted for as reductions or increases to 
revenues in excess of expenses. For purposes of the follow- 
ing calculation, the "bond year" is the period May 13, 1983, 
through December 31, 1983. "Net revenues for calculation of 
coverage" as defined by the 1983 General Airport Revenue Bond 
Ordinance is determined as follows: 



16 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 



11. 1983 General Airport Revenue Bond Ordinance - "net revenues 
for calculation of coverage" as defined and calculation of 
"coverage" as defined: (continued) 

Revenue in excess of expenses before 
extraordinary loss for the year 
ended December 31, 1983 $ 3,825,929 

Less revenues in excess of expenses before 
extraordinary loss for the period 
January 1, 1983, through May 12, 1983 1,849,174 

Revenues in excess of expenses for the period 
May 13, 1983, through December 31, 1983 1,976,755 

Add (deduct) adjustments to reflect ordinance 
basis of accounting: 
Interest payable on Revenue Bonds, net of 

$1,874,781 of interest prepaid by bond 

holders 10,471,009 

Interest payable on Junior Lien Obligation 413,425 
Depreciation and amortization for the period 

May 13, 1983, through December 31, 1983 7,107,267 

Amortization of bond discount 104,116 

Amortization of deferred financing fees 20,225 

One-half the net revenue in Land Support 

Cost Revenue Center ( 381,874) 

Balance held in the Revenue Fund 
at May 12, 1983 9,708,442 

Interest earned, Emergency Reserve Fund ( 21,613) 
Interest earned, Construction Fund ( 5, 167 , 420 ) 

"Net revenues for calculation of coverage" 
as defined $24,230,332 



17 



CHICAGO-O'HARE INTERNATIONAL AIRPORT 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

YEARS ENDED DECEMBER 31, 1983 AND 1982 

11. 1983 General Airport Revenue Bond Ordinance - "net revenues 
for calculation of coverage" as defined and calculation of 
"coverage" as defined: (continued) 

The 1983 General Airport Revenue Bond Ordinance requires the 
"net revenues for calculation of coverage" to be allocated as 
follows : 

"Net revenues for calculation of coverage", 
as defined $24,230,332 

Required deposits from revenues to funds: 

Operation and maintenance reserve $ 5,112,500 

Maintenance reserve 3,000,000 

Junior Lien Obligation debt service fund 413 , 425 

Total required deposits 8, 525,925 

Amount available for calculation of coverage 15,704,407 

Aggregate debt service for the 
bond year, net of $1,874,781 of 
interest prepaid by bond holders $10,471,009 
Less amount in capitalized ^ 
interest account for payment 

of interest ( 7,364,312 ) 

3,106,697 • 
Percentage required by the 
ordinance 125% 

Net aggregate debt service as required by 
General Airport Revenue Bond Ordinance 3 ,883 ,371 

Excess "net revenues" for calculation 
of coverage under the ordinance $11,821,036 



Section 704(b) of the General Airport Revenue Bond Ordinance 
also requires an allocation to the Debt Service Reserve. No 
allocation is reflected above as the reserve was funded at 
the total required amount from proceeds of the bond issue. 
Also, the Operations and Maintenance Reserve and Maintenance 
Reserve have been funded at $14,500,000 and $3,000,000 respec- 
tively. For the period May 13, 1983, through December 31, 
1983, there was no required allocation to Special Capital 
Projects Fund. 



18 



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