O'Hare International Airport ... annual report

3 5556 032 903122

CHICAGO-O HARE INTERNATIONAL AIRPORT

1985 ANNUAL REPORT

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9797. 7C4

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1985

TRANSPORTATION LIBRARY

DEC 20

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GAYLORD

CHICAGO-O'HARE INTERNATIONAL AIRPORT

1985 ANNUAL REPORT

TRANSPORTATION LIBRARY

DEC 20 icr'

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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 0 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 WSoaKftoM6

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 0

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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