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Full text of "O'Hare International Airport ... annual report"

3 5556 032 903122 



CHICAGO-O HARE INTERNATIONAL AIRPORT 

1985 ANNUAL REPORT 



„■ 



TRAN 
HE 
9797. 7C4 

C532a 
1985 



TRANSPORTATION LIBRARY 



DEC 20 



TOP' 



r RTH WESTERN UiH.lv 



GAYLORD 



CHICAGO-O'HARE INTERN ATIONAL AIRPORT 

1985 ANNUAL REPORT 



TRANSPORTATION LIBRARY 



DEC 20 i cr ' 



[' RTHWESfZRN U ri! 



TRAN 
HE 

9797. 7C4 
C532a 
1985 




CITY OF CHICAGO 

Harold Washington, Mayor 

DEPARTMENT OF AVIATION 

Jerome R. Butler, Commissioner 

City Hall, Room 1111 • 121 North LaSalle Street • Chicago, Illinois 60602 

(312) 744-6892 










City of Chicago 

Harold Washington, Mayor 



Department of Aviation 

Jerome fV Butler 
Commissioner 

City Hall. Room 1111 
121 North LaSalle Street 
Chicago, Illinois 60602 
(012) 744-6892 



The Honorable Harold Washington 

Mayor 

City of Chicago 

121 North LaSalle Street 

City Hall - Room 507 

Chicago, Illinois 60602 

Dear Mayor Washington: 

It is with great pride and pleasure that we transmit the following annual report of 
the Chicago Department of Aviation for the fiscal year ending December 31 , 1 985. 

O'Hare International Airport is unquestionably the world's greatest airport in 
passengers served and in number of aircraft operations. We are pleased to inform 
you officially that, in 1985, O'Hare was still the world's leading airport and is laying 
the groundwork for continued dominance. The total number of foreign and 
domestic passengers who passed through O'Hare in 1985 was 49,954,362 or 
more than 96 per minute, an increase of 9.3 percent over 1984. 

During 1985, parking facilities could accommodate 14,200 automobiles. This and 
the increased use by the traveling public of the new Chicago Transit Authority 
station at O'Hare have greatly enhanced the airport's convenience and efficiency 
for passengers, especially those who live in the Chicago area. 

At the same time, the old International Terminal was demolished and an interim 
facility established for international travelers. In addition, ground was broken for 
a major new terminal. 

We have also made rapid strides toward achieving your affirmative action goals. 
All in all, 1985 was a banner year at O'Hare. 

Ronald D. Picur 
Comptroller 
Department of Finance 




Jerome R. Butler 
Comissioner 
Department of Aviation 




facilities and the O'Hare parking 
garage are the largest in the nation, 
the latter accommodating 14,200 
automobiles. 

What does all this mean for the 
public? A more efficient airport with 
greater ease of movement for 
planes and people alike. Greater 
capacity without expanding 
runways. And equally important, an 
expansion of airport capacity with a 
reduction of air and noise pollution. 

During 1985, significant progress 
occurred in the development 
program. Construction contracts 
totalling $96,313,826 were let as 
the work moved forward, on time 
and on budget. 

This ambitious project is totally 
sponsored by the City of Chicago 
and the airlines that use O'Hare. 
The O'Hare Development Program 
Management Office, a team of 
experts from the City of Chicago's 
Departments of Aviation and Public 
Works, oversees the program with 
aid from a variety of private firms 
undertaking various aspects of the 
construction and design work. 

The level of professionalism in 
the Department of Aviation and the 
administrative offices at O'Hare 
International has been raised. 
Members of minority groups and 
women have been appointed to top 
positions in the Department. 
Persons with extensive experience 
and impressive credentials in 
finance, office and human resource 
management and engineering have 
been given leadership positions in 
the department. The new 
management team has put 
effective financial controls in place 
including the monitoring of costs 
and scheduling of the O'Hare 
Development Program (ODP).. 

While the total ODP plan will not 
be complete until 1995, work to 
expand passenger services con- 
tinues everyday. 

During 1985, many innovative 
and varied new concessions were 
under consideration to be brought 
on line the following year. Among 
them are: Accent Chicago O'Hare, 
American Indian Shop, Midwest 
Gourmet, Sky Pies. More rent-a-car 
agencies, a bank, and candy stores, 
were also being assessed with the 




single goal of better service for 
O'Hare's passengers. 

In addition, the Chicago Transit 
Authority's O'Hare line gained 
recognition as the most cost- 
efficient way to arrive at or depart 
from the airport. Ten thousand 
people used the CTA during 1985, 
enjoying the ease of travel and 
access to terminals — both 
domestic and foreign. 

All of the progress in construction 
and expansion of services is occur- 
ring at O'Hare with another new, 
exciting and cost-effective principle 
— expanding the range of people 
who provide the services. 

In keeping with the Washington 
Administration's goals of providing 
opportunities to small businesses, 
women-owned and minority-owned 
businesses, both the ODP and the 
Federal Aviation Administration 
engaged in aggressive contracting 
to small, minority and women- 
owned enterprises. 

Contracts to minority- and 
female-owned businesses greatly 
increased in 1985. The O'Hare 
Development Program (ODP), 
hitting its stride, let a total of 
$96,313,826 in construction 
contracts for calendar year 1985. 
The total awards to minority 
business enterprises or MBEs 
amounted to 29.34 percent of the 
overall figure or $28,268,080: MBE 
Asian, $9,631,981 or 10 percent; 
MBE Black, $10,024,796 or 10.41 
percent, and MBE Hispanic, 
$8,61 1 ,302 or 8.94 percent. The 
nearly 30 percent going to MBE s 
exceeded the Washington 
Administration's goal of 25 percent 
for minority participation. 

A total of $3,388,688 or 3.52 
percent went to women-owned 
business enterprises (WBEs): The 
3.52 percent was slightly under the 
city's goal of 5 percent for WBE s, 
reflecting the historical rarity of 
women-owned construction firms. 
The $96 million let in construction 
awards by ODP were funded by 
general assistance revenue bonds. 

FAA contracts for equipment 
supplies, construction and 
professional services also reflected 
this progressive policy. Of $20 
million in contracts let, more than 




$5 million or 28.70 percent went 
to minority-owned business 
enterprises and $847,000 or 4.24 
percent went to women-owned 
businesses. 

O'Hare — A Good Neighbor 

As is true of any airport, O'Hare can 
be noisy. But all those engaged in 
operations at the airport are 
working hard to minimize noise 
and its impact on our neighbors. 

As its redevelopment program 
soared to new heights, O'Hare 
International Airport continued its 
ongoing intergovernmental 
programs with the twenty-five 
suburban communities surrounding 
it to the north, south and west. 
O'Hare is demonstrably a good 
neighbor contributing, as it does, 
billions of dollars to the region's 
economy and thousands of jobs. 
Throughout its year of operation at 
O'Hare, the Department of Aviation 
has sought to reach agreements 
with its suburban neighbors on 
noise abatement and land use in 
the area. The Department also 
operates a Noise Abatement Office 
around the clock to monitor aircraft 
noise and to receive complaints. 

Although operations continue to 
increase at O'Hare, new quieter 
aircraft and fine tuning in 
scheduling have protected the 
environment throughout O'Hare 's 
rapid growth. Despite larger 
numbers of flights than in earlier 
years, it is expected that the sound 
level of aircraft at O'Hare in the 
1990s will be lower. 

The year 1985 was one of 
expansion, of service, of operations, 
and vision to better serve the 
Chicago metropolitan area, the 
Midwest, the nation, indeed the 
world, today and tomorrow. 



City off Chicago, Illinois 

CHICAGO-O'HARE INTERNATIONAL AIRPORT 



1 985 AIRPORT ACTIVITY — WORLD'S 1 MAJOR AIRPORTS 



Airport 

CHICAGO-O'HARE INTERNATIONAL 

Hartsfield Atlanta International 

Los Angeles International 

Dallas/Fort Worth International 

Heathrow Airport (London) 

Kennedy International (New York) 

Newark International 

Stapleton International (Denver) 

Tokyo International (Haneda) 

San Francisco International 



Total 


Total Cargo 


Tota 




Passengers 


Metric Tons 


Operations 


49,954,362 


805,090 


(4)* 


746,697 


(2r 


42,494,630 


536,639 


(6) 


755,807 


(D 


37,647,983 


842,824 


(3) 


546,162 


(4) 


37,104,026 


413,753 


(12) 


561,652 


(3) 


31,289,254 


603,200 


(5) 


309,400 


(28) 


28,945,288 


1,104,634 


(1) 


286,076 


(32) 


28,576,586 


285,732 


(18) 


379,738 


(14) 


28,485,927 


209,707 


(24) 


495,286 


(6) 


27,167,402 


378,866 


(14) 


155,652 


(94) 


25,018,395 


452,166 


(11) 


398,022 


(8) 



Source: Airport Operators Council International 



* Ranked in order of total cargo tonnage. 
** Ranked in order of total operations. 



CHICAGO-O'HARE AIRPORT ACTIVITY (1981-1985) 

1981 1982 1983 1984 1985 

Passengers 
Domestic scheduled including 

commuter 

International scheduled 

All other 

Total passengers 

Aircraft Operations 
Scheduled carriers (domestic & 

international) 

Commuter 

All other 

Total operations 645,614 604,383 667,963 731 ,742 746,697 



34,846,608 


34,712,713 


39,567,765 


42,179,099 


46,497,977 


2,742,410 


2,566,106 


2,793,494 


3,252,787 


3,310,467 


403,133 


464,779 


512,694 


294,053 


145,918 


37,992,151 


37,743,598 


42,873,953 


45,725,939 


49,954,362 


473,999 


442,436 


450,031 


514,819 


594,237 


84,198 


87,541 


129,927 


139,733 


86,380 


87,417 


74,406 


88,005 


77,190 


66,080 



Cargo (metric tons) 

Total cargo (domestic & 
international) 



828,530 



792,786 



816,135 



800,452 



805,090 



FINANCIAL HIGHLIGHTS 

OPERATIONS 

Operating revenues: 

Flight fees 

Concessions & rentals 

Terminal area use charges 

Operating expenses 

Operating income 

Non-operating revenue (expense): 
Interest earned on investment . . 
Interest: 

Revenue bonds 

Junior lien obligation debt 

Net income 

*Net of refundable fees 



Years Ended 
December 31, 



1985 

$ 66,143,413 
59,082,318 
27,009,698 



1984 

$ 37,304,535* 
50,662,493 
17,359,537 



$152,235,429 $105,326,565 



132,858,436 



19,376,993 



40,628,760 

(39,918,384) 

(1,159,254) 

(448,878 ) 



101,202,158 



4,124,407 



15,458,270 

(13,516,467) 

(2,258,779) 

(316,976 ) 



$ 18,928,115 $ 3,807,431 



FINANCIAL POSITION Years Ended 

December 31, 

ASSETS 1985 1984 

Cash and investments $ 876,563,074 

Receivables & others 25,304,025 

Fixed assets (net) 534,622,738 

Total assets $1,436,489,837 

LIABILITIES AND FUND EQUITY 

Revenue bonds payable (see note 4) 1 ,056,689,554 

Other 141,281,081 

Total liabilities 1,197,970,635 

Total equity 238,519,202 

Total liabilities and fund equity $1,436,489,837 



$558,775,195 

19,521,471 

356,319,670 

$934,616,336 



608,424,860 
114,329,883 
722,754,743 



211,861,593 
$934,616,336 



u 



Laventhol &Horwath WSo aKftoM6 

Certified Public Accountants (3 12 ) 648-05 5 5 



The 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 of December 31 , 1 985, and the 
related statements of revenues and expenses, changes in retained earnings and contributed capital and changes in 
financial position for the year then ended. Our examination was made in accordance with generally accepted auditing 
standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we 
considered necessary in the circumstances. The financial statements of the Chicago-O'Hare International Airport for 
the year ended December 31 , 1 984, were examined by other auditors whose report dated June 21 , 1 985, expressed 
an unqualified opinion on those statements. 

In our opinion, the 1 985 financial statements referred to above present fairly the financial position of Chicago-O'Hare 
International Airport as of December 31 , 1 985, and the results of its operations and the changes in its financial position 
for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with 
that of the preceding year. 



June 30, 1986 




City of Chicago, Illinois 

CHICAGO-O'HARE INTERNATIONAL AIRPORT 



BALANCE SHEET 

December 31,1 985 and December 31,1 984 

Assets 

Current assets: 

Cash and investments, at cost 

Accounts receivable, less allowance for doubtful accounts 

of $5,500,000 in 1 985 and $2,500,000 in 1 984 

Due from other City of Chicago funds 

Prepaid expenses and deposits 

Accrued interest receivable 

Total current assets 

Restricted assets: 

Cash and investments, at cost (Note 2) 

Accrued interest receivable 

Accounts receivable 



1985 



850,612,021 
4,929,916 
5,365,820 

860,907,757 



1984 



$ 25,951,053 


25,952,866 


14,240,592 


15,901,935 


— 


1 ,436,787 


665,680 


490,056 


102,017 


1,165,165 


40,959,342 


44,946,809 



532,822,329 
527,528 

533,349,857 



Other assets: 
Deferred financing fees, net of 
amortization 3,584,533 

Property and facilities: 

Land 55,294,641 

Buildings and other facilities 403,1 35,045 

Construction in progress 284,569,424 

742,999,110 

Less accumulated depreciation 211,960,905 

531,038,205 
Total assets $1 ,436,489,837 



2,900,662 



55,294,641 
338,768,315 
165,053,032 

559,115,988 
205,696,980 

353,419,008 

$934,616,336 



See accompanying notes to financial statements. 



10 



BALANCE SHEET 

December 31 , 1 985 and December 31 , 1 984 

Liabilities and Fund Equity 



1985 1984 



Current liabilities: 

Current portion of revenue bonds payable (Note 4) $ 2,035,000 $ 450,000 

Junior lien obligation debt 10,250,000 

Accounts payable 16,894,317 18,350,274 

Due to other City of Chicago funds 14,199,726 11,325,305 

Deferred revenue 2,727,782 13,884,622 

Total current liabilities 35,856,825 54,260,201 

Liabilities payable from restricted assets (Note 3): 

Accounts payable 68,568,504 45,092,406 

Accrued interest payable 30,931 ,547 1 4,344,91 

Airline deposits — 426,587 

Due to other City of Chicago funds 5,685,043 — 



105,185,094 59,863,903 

Long-term liabilities: 

Revenue bonds payable, net of current portion (Note 4) 1 ,087,61 0,000 624,550,000 

Less bond discount 30,920,446 16,125,140 

1,056,689,554 608,424,860 



Deferred rental income 239,162 205,779 

1,197,970,635 722,754,743 



Commitments and contingencies (Note 8) 

Fund equity: 

Contributed capital 153,838,712 139,117,998 

Retained earnings: 

Reserved 27,1 71 ,277 8,454,340 

Unreserved 57,509,213 64,289,255 

84,680,490 72,743,595 

238,519,202 211,861,593 

Total liabilities, retained earnings and contributed capital $1,436,489,837 $934,616,336 



11 



City of Chicago, Illinois 

CHICAGO-O'HARE INTERNATIONAL AIRPORT 



STATEMENT OF OPERATIONS 

Years ended December 31,1 985 and December 31,1 984 



See accompanying notes to financial statements. 



1985 1984 



Operating revenues: 

Flight fees $ 66,143,413 $ 37,304,535 

Rent, concessions, and other 59,082,318 50,662,493 

Terminal area use charges 27,009,698 17,359,537 

152,235,429 105,326,565 



Operating expenses: 

Salaries and wages 55,101,692 49,346,164 

Provision for depreciation 13,238,190 11,238,524 

Repairs and maintenance, including expenditures 

from Reserve Maintenance Account 16,286,843 13,505,125 

Other operating expenses 48,231,711 27,112,345 

132,858,436 101,202,158 

Income from operations 19,376,993 4,124,407 



Nonoperating revenue (expense): 

Interest earned on investments 40,628,760 1 5,458,270 

Interest incurred on Revenue Bonds (39,918,384) (13,516,467) 

Interest incurred on Junior Lien Obligation (1,159,254 ) (2,258,779 ) 

(448,878 ) (316,976 ) 

Net income $ 18,928,1 15 $ 3,807,431 



12 



STATEMENT OF CHANGES IN RETAINED EARNINGS 
AND CONTRIBUTED CAPITAL 

Years ended December 31 , 1 985 and December 31 , 1 984 

Retained earnings Contributed 

Total Unreserved Reserved capital 

Balance at December 31 , 1 983 $204,895,659 $ 60,51 2,240 $ 4,831 ,781 $1 39,551 ,638 

Net income 3,807,431 3,807,431 — — 

Contributed capital (Note 3) 3,158,503 — — 3,158,503 

Reallocation of provision for 

depreciation — 3,592,143 — (3,592,143) 

Bond ordinance transfers — (3,622,559 ) 3,622,559 — 

Balance at December 31, 1984 211,861,593 64,289,255 8,454,340 139,117,998 

Netincome 18,928,115 18,928,115 — — 

Contributed capital (Note 3) 7,729,494 — — 7,729,494 

Reallocation of provision for 

depreciation — 5,200,623 — (5,200,623) 

Transfer of contributed capital 

(Note 3) — (12,191,843) — 12,191,843 

Bond ordinance transfers — (18,716,937 ) 18,716,937 — 

Balance at December 31, 1985 $238,519,202 $ 57,509,213 $ 27,171,277 $153,838,712 

See accompanying notes to financial statements. 



13 



City of Chicago, Illinois 

CHICAGO-O'HARE INTERNATIONAL AIRPORT 



STATEMENT OF CHANGES IN FINANCIAL POSITION 

Years ended December 31 , 1 985 and December 31 , 1 984 



1985 1984 



Sources of working capital: 
From operations: 

Netincome $18,928,115 $ 3,807,431 

Add items not affecting working capital: 

Provision for depreciation and amortization 13,381,963 11,283,533 

Total working capital provided by operations 32,310,078 15,090,964 

Contributed capital 7,729,494 3,1 58,503 

Proceeds from junior lien obligation debt — 1 0,500,000 

Proceeds from revenue bonds, net 454,410,432 435,851,000 

494,450,004 464,600,467 



Uses of working capital: 

Acquisition of property and facilities 1 90,857,386 96,1 1 5,480 

Reduction of long-term revenue bonds 6,940,000 450,000 

Reduction of long-term debt junior lien obligation — 25,000,000 

Increase in net restricted assets 282,236,709 367,799,282 

480,034,095 489,364,762 

Increase (decrease) in working capital $ 14,415,909 $ (24,764,295 ) 



Changes in components of working capital: 
Increase (decrease) in current assets: 

Cash and investments $ (1,813) $ (9,250,141) 

Accounts receivable, net (1 ,661 ,343) 4,754,073 

Due from other City of Chicago funds (1,436,787) 1,117,985 

Prepaid expenses and deposits 1 75,624 (79,565) 

Accrued interest receivable (1,063,148 ) 964,41 1 

(3,987,467 ) (2,493,237 ) 

Increase (decrease) in current liabilities: 

Current portion of revenue bonds payable 1 ,585,000 450,000 

Junior lien obligation debt (1 0,250,000) 1 0,250,000 

Accounts payable (1 ,455,957) 1 ,456,589 

Due to other City of Chicago funds 2,874,421 1 ,569,716 

Deferred revenue (11,156,840 ), 8,544,753 

(18,403,376 ) 22,271,058 

Increase (decrease) in working capital $ 14,415,909 $ (24,764,295 ) 

See accompanying notes to financial statements. 



14 



NOTES TO FINANCIAL STATEMENTS 

Years Ended 

December 31 , 1985 and 1984 



1. Summary of Significant Accounting Policies: 

Basis of Accounting: 

Chicago-O'Hare International Airport (Airport) is accounted for 
as an enterprise fund of the City of Chicago (City). The financial 
statements are presented on the accrual basis of accounting and 
in conformity with generally accepted accounting principles. 

Investments: 

Investments consist of U.S. Treasury securities and are carried at 
cost plus accrued interest, which approximates market value. 

Property and Facilities: 

Property and facilities are stated 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 movable 
equipment are expensed as incurred. Property and facilities 
funded by Federal, State and City funds are accounted for as 
contributed capital. 

The provision for depreciation on facilities is provided on the 
straight-line method, and begins in the year following the year of 
acquisition or completion. The estimated useful lives of signifi- 
cant facility categories are as follows: 

Years 



Water drainage and sewer system 
Runways, aprons, tunnels, 

taxiways, and paved roads 
Refrigeration and heating systems 
Buildings and hangars 
Electrical system 
Other 



20-50 

30 

30 

25 
15-20 
10-30 



Capitalization of Interest Cost: 

Total interest incurred in connection with construction in progress 
amounted to $53,507,278 in 1985 and $16,691,081 in 1984. Cap- 
italized interest totaled $18,476,130 in 1985 and $6,572,773 in 
1984, which is net of interest income received of $35,031,148 and 
$10,118,308, respectively. 

Bond Discount: 

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

Revenue Recognition: 

Flight fees and terminal area use charges are charged to the 
various airlines based on predetermined rates which are 
designed to cover certain expenses as defined by the 1983 
Airport Use Agreement. Deferred revenue represents flight fees 
and terminal area use charges charged in excess of the defined 
expenses and is utilized to reduce the following year's charges. 

Compensated Absences: 

Airport employees are granted vacation and sick leave in accor- 
dance with prescribed City policies. Liability for accrued vacation 
is recorded as a current liability. In the event of termination, an 
employee is paid for accumulated vacation time. Accumulated 
unpaid sick leave is not paid upon termination and therefore is not 
accrued. 

Financial Statement Reclassifications: 

Certain 1984 amounts have been reclassified to conform to the 
1985 presentation. 



2. Restricted Assets: 

The General Airport Revenue Bond Ordinance (Ordinance), 
adopted March 31, 1983, authorizes the issuance of first lien 
revenue bonds to finance or reimburse the costs of capital 
improvements and expansion of the Airport. Net operating reve- 
nues are pledged for first lien bond principal and interest 
payments. 

The Ordinance also authorizes the issuance of second (junior) 
lien notes, bonds and other obligations that are secured by 
amounts deposited in the junior lien debt services account cre- 
ated under the Ordinance. 

There are certain limitations and restrictions contained in the 
Ordinance which, among other restrictions, require the creation 
and maintenance of separate accounts to be held by an outside 
trustee into which required deposits are made by the Airport on a 
periodic basis to fund construction, debt retirement, operations 
and maintenance and contingencies. 

The Airport Use Agreement and Terminal Facilities Lease 
(Agreement), which defines the Airport's relationship with the 
various tenants of the airport facilities, also contains certain lim- 
itations and restrictions. 

Cash and investments were restricted by the Ordinance for the 
following purposes as of December 31, 1985 and 1984: 

1985 1984 



Construction 
Capitalized interest 
Debt service reserve 
Debt service interest 
Debt service 

Operation and maintenance 
Maintenance reserve 
Emergency reserve 
Other 



$560,643,424 

115,767,627 

114,043,774 

18,853,838 

3,380,400 

25,506,458 

2,850,917 

4,058,809 

5,506,774 

$850,612,021 



$347,859,056 

68,683,780 

73,943,742 

10,838,522 

450,000 

25,349,176 

3,053,699 

2,442,748 

1,201,606 

$533,822,329 



Construction and capitalized interest assets are restricted for 
authorized capital improvements and related interest costs dur- 
ing construction. 

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

The operation and maintenance account is restricted to pay oper- 
ating and maintenance expenses as incurred and to repay loans 
from the maintenance reserve account as the funds become 
available. 

The maintenance reserve account is restricted for qualified main- 
tenance expenditures. 

The emergency reserve account is restricted to make payments 
for use charges, landing fees, etc. that are deemed uncollectible 
and also for any judgments or settlements against the Airport. 

An amount equal to the sum of the annual provisions for deprecia- 
tion and amortization of property and facilities 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 account. 

The Airport has complied with all significant limitations and 
restrictions contained in the Ordinance and Agreement during the 
year ended December 31, 1985. 



15 



NOTES TO FINANCIAL STATEMENTS 



3. Property and Facilities: 

Property and facilities are acquired with funds from proceeds of 
revenue bonds and the following three sources: 

A. City of Chicago, including capitalized interest of $217,091 and 
$307,363 for 1985 and 1984, respectively, for use of City of Chicago 
money. Interest is capitalized from the commencement of the 
improvement or construction activity through completion. 

B. Grant proceeds from state and federal governmental agen- 
cies. Expenditures are initially paid for by the City of Chicago and 
are transferred to the state and federal contributed capital 
account upon receipt of the grant proceeds. 

C. Public utilities, concessions and airlines by direct reimburse- 
ments of amounts expended directly and indirectly from operat- 
ing revenues. The 1983 General Airport Revenue Bond 
Ordinance and 1983 Airport Use Agreement do not specifically 
provide for the expenditure of operating revenues for capital 
improvements. The 1985 and 1984 expenditures from operating 
revenues for capital improvements are subject to approval by the 
airlines' representative. Amounts equal to these expenditures are 
recorded as contributed capital. 

4. Revenue Bonds: 

On March 31, 1983, the City Council of the City of Chicago 
adopted the General Airport Revenue Bond Ordinance (Ordi- 
nance) authorizing the issuance and sale of Chicago-OHare 
International Airport General Airport Revenue Bonds for the pur- 
pose of financing or reimbursing the cost of improvements and 
expansion of the airport and to redeem existing outstanding bond 
obligations of the Airport. The Ordinance further permits the 
issuance of the second lien notes, bonds, and other obligations 
which are payable from, and secured by, a pledge of amounts 
deposited in the junior lien obligation debt service account 
created under the Ordinance. 

Only first and second lien revenue bonds and junior lien obliga- 
tion debt have been issued under the Ordinance. The following 
summarizes revenue bonds outstanding at December 31, 1985 
and 1984: 



1985 



1984 



$175,000,000 Series 1983 A and 
B first lien bonds issued May 12, 
1983, due 1985 to 2013, interest 
at 6-9.625%. 

$350,000,000 Series 1984 A and 
B first lien bonds issued 
November 27, 1 984, due 1 986 to 
2015, interest at 6.5-10.625%. 

$50,000,000 Series 1984 A 
second lien bonds issued 
December 27, 1984, due 1986 to 
2015, interest varies. 

$50,000,000 Series 1984 B 
second lien bonds issued 
December 27, 1984, due 1986 to 
2015, interest varies. 

$470,000,000 Series 1985 A first 
lien bonds issued December 30, 
1985 due 1989 to 2016, interest 
at 6.75%-8.75%. 

Less current portion 



$ 174,550,000 $175,000,000 



345,095,000 



50,000,000 



50,000,000 



470,000,000 

1 ,089,645,000 
2,035,000 



350,000,000 



50,000,000 



50,000,000 



625,000,000 
450,000 



$1,087,610,000 $624,550,000 



Total interest incurred during 1985 and 1984 amounted to 
$58,611,605 and $20,396,603, respectively. 

Following is a schedule of debt service requirements of the first 
lien bonds to maturity: 



Year 


Principal 


Interest Total 


1986 


$ 1 ,005,000 


$ 58,257,603 $ 59,262,603 


1987 


1 ,435,000 


92,476,117 93,911,117 


1988 


4,270,000 


92,175,529 96,445,529 


1989 


9,435,000 


91,855,279 101,290,279 


1990 


10,475,000 


91,165,241 101,640,241 


1991-2016 


963,025,000 


1,586,514,257 2,549,539,257 




$989,645,000 


$2,012,444,026 $3,002,089,026 


Following is a 


schedule of debt principal payments to maturity of 


the second lien bonds: 






Year 


Total 




1986 


$ 1 ,030,000 




1987 


1,165,000 




1988 


1 ,205,000 




1989 


1 ,350,000 




1990 


1 ,295,000 




1991-2015 


93,955,000 
$100,000,000 



In September 1985, the Airport placed $4,922,815 in an irrevo- 
cable trust and restricted its use solely to satisfy all future 
principal and interest requirements on $2,375,000 1984 Series A 
and $2,530,000 1984 Series B first lien bonds, each of which 
matures in January 1986 and 1987. 

Such defeased bonds, amounting to $4,905,000 at December 31 , 
1985, are considered extinguished and are not reflected as an 
obligation of the Airport as of December 31, 1985. 



16 



5. Leasing Arrangements With Tenants: 

Leasing operations consist of the leasing of most of the Airport's 
land, buildings and terminal space to airlines and other tenants. 
The operating leases for most of the Airport's land, buildings and 
terminal space expire in 1998. 

The following is a schedule by years of the minimum future rental 
income on noncancelable operating leases as of December 31, 
1985: 



Year ending 




December 31, 


Amount 


1986 


$ 18,071,000 


1987 


17,977,000 


1988 


17,506,000 


1989 


17,464,000 


1990 


17,131,000 


Thereafter 


117,013,000 


Total minimum 




future rental 




income 


$205,162,000 



Contingent rentals that may be received under certain leases 
based on the tenant's revenues or fuel flow are not included in 
minimum future rental income. 

Rental income, consisting of all rental and concession revenues 
except ramp rentals and automobile parking, amounted to 
$33,773^810 and $28,537,842 in 1985 and 1984, respectively. 
Contingent rentals included in the totals were approximately 
$9,139,080 and $12,115,760 for 1985 and 1984, respectively. 

6. 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 Officials' 
Annuity and Benefit Fund of Chicago or the Laborer's and Retire- 
ment Board Employees' Annuity and Benefit Fund of Chicago. 

Each pension plan is financed primarily by (a) City contributions, 
(b) employee contributions, and (c) income from pension fund 
investments. The City's contributions, which are established by 
state statute, are multiples of the employees' contribution made 
two years prior. The City's contribution is financed through a 
separate property tax levy and the personal property replace- 
ment 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 
$5,158,000 and $4,725,000 in 1985 and 1984, 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. 



7. Related-Party Transactions: 

Included in operating expenses are reimbursements to the City 
Corporate Fund for services provided by other City departments, 
employee fringe benefits, and self-insured risks. Such reimburse- 
ments amounted to $29,240,000 and $24,453,000 in 1985 and 
1984, respectively. 

8. Commitments and Contingencies: 

Purchase orders and contract commitments to be financed by the 
operation and maintenance account totaled approximately 
$28,810,500 and $26,245,800 at December 31, 1985 and 1984, 
respectively. In addition, approximately $81,095,100 and 
$22,494,000 at December 31, 1985 and 1984, respectively, had 
been designated by Airport management for specific future cap- 
ital projects. 

The Airport has certain contingent liabilities resulting from litiga- 
tion, claims and commitments incident to the ordinary course of 
business. It is the opinion of Airport management that the final 
resolution of such contingencies will not materially affect the 
financial position or results of operations of the Airport. 



17 



NOTES TO FINANCIAL STATEMENTS 



9. Debt Service Coverage: 

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. "Net revenues for calculation of coverage" 
as defined by the 1983 General Airport Revenue Bond Ordinance is determined as follows: 

Net income for the year ended 
December 31 , 1 985 $1 8,928, 1 1 5 

Add (deduct) adjustments to reflect 
ordinance basis of accounting: 

Interest payable on revenue bonds 26,307,826 

Depreciation for the year ended 

December 31, 1985 13,238,190 

Amortization of bond discount 409,223 

Amortization of deferred financing fees 1 43,773 

One-half the net revenue in Land Support 
Cost Revenue Center 420,272 

Balance held in the Revenue Fund 
at December 31, 1984 13,884,622 

Interest earned, Emergency Reserve Fund ( 1,178,951) 

Interest earned, Construction Fund ( 28,662,981 ) 

"Net revenues for calculation of coverage" 
as defined $43,490,089 

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 $43,490,089 

Required deposits from revenues to funds: 
Maintenance reserve 291 ,941 

Total required deposits 291 ,941 

Amount available for calculation of coverage 43,782,030 

Aggregate debt service for the 
bond year, net of $2,604,818 of 

interest paid by bond purchasers $59,287,072 

Less amount transferred from 

capitalized interest accounts 

for payment of interest ( 29,453,120) 

29,833,952 
Percentage required by the 
Ordinance 1 25% 

Net aggregate debt service as defined by 
General Airport Revenue Bond Ordinance 37,292,440 

Excess "net revenues" for calculation 
of coverage under the ordinance 6,489,590 

Debt service coverage ($43,782,030/$29,833,952) 1.47 



18 



10. Deferred Compensation Plan: 

The City of Chicago Public Employees Deferred Compensation 
Plan (the "Plan") was established pursuant to the Deferred Com- 
pensation Plan passed by the City of Chicago on December 29, 
1981. Under the Plan provisions, employees of the Airport are 
eligible to contribute a portion of their compensation into the Plan, 
through payroll deductions. Amounts contributed by employees 
are deferred for Federal and State income tax purposes until 
benefits are paid to the employees. The Airport does not make 
any employer contributions to the Plan. 










The Future 

As 1985 comes to an end, the Chicago Department of Aviation looks 
forward to ongoing expansion of the O'Hare Development Program. As it 
continues, passengers will enjoy greater convenience and accessibility to 
O'Hare Airport. Plans are also underway for a new cargo facility, which upon 
completion will provide greater efficiency in handling of cargo. 

United Airlines' plans for a striking new terminal with huge twin concourses 
which will begin to take shape, promising a modernistic addition to O'Hare. 



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