Annual financial report, Chicago O'Hare International Airport

HE-
C53Xq

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 300Sochh,"e6o^

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-O1 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,

r510

($13,163,398)

( 2,

r 335,

,745)

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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