Airport Financing: Use of Funds for Capital Improvements at Chicago
O'Hare International Airport (Correspondence, 09/29/2000,
GAO/RCED-00-275R).

This correspondence focuses on the funds provided and spent at Chicago
O'Hare International Airport for capital improvements. The Airport
Improvement Program, passenger facility charges, General Airport Revenue
Bonds, and other revenue bonds provided Chicago with $2.4 billion for
use at O'Hare International Airport. The city spent about $1.9 billion
of those funds on capital improvement projects between 1990 and 1999.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-00-275R
     TITLE:  Airport Financing: Use of Funds for Capital Improvements
	     at Chicago O'Hare International Airport
      DATE:  09/29/2000
   SUBJECT:  Airports
	     Federal aid for transportation
	     Municipal bonds
	     Fees
IDENTIFIER:  FAA Airport Improvement Program
	     Chicago-O'Hare International Airport (Chicago, IL)
	     FAA Passenger Facility Charge Program

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GAO/RCED-00-275R

Airport Financing at Chicago's O'Hare Airport

B- 286088 September 29, 2000 The Honorable Henry J. Hyde The Honorable Jesse
Jackson, Jr. House of Representatives

Subject: Airport Financing: Use of Funds for Capital Improvements at Chicago
O'Hare International Airport

This report responds to your concerns about the funds provided and spent at
Chicago O'Hare International Airport for capital improvements in light of
the questions you have raised about the capacity of the airport system in
the Chicago area. Specifically, you asked us to determine funding sources
for capital improvements at Chicago's O'Hare International Airport from 1990
through 1999 and the type of projects this funding was spent on. As agreed,
we focused our work on the following four funding sources:

ï¿½ the Airport Improvement Program (AIP), a grant program administered by the
Federal Aviation Administration (FAA). Historically, somewhat more than 50
percent of this funding has been allocated on the basis of formulas mandated
by the Congress, although FAA has discretionary authority to allocate part
of the funds on the basis of specific needs identified by airports. If all
formula changes associated with funding AIP at levels authorized in AIR 21 1
are implemented, the share of AIP allocated by formula would increase above
60 percent.

ï¿½ passenger facility charges (PFC), a per- passenger fee levied on each
passenger enplaning at the airport. Airports have more flexibility using
these funds than using AIP, although FAA still must approve an airport's
application to impose this fee, as well as the total amount to be collected
and the projects to be funded with the proceeds.

ï¿½ General Airport Revenue Bonds (GARB) issued by the city of Chicago, which
owns and operates the airport. These bonds are secured by a pledge of the
general revenues of Chicago O'Hare International Airport.

1 The Wendell H. Ford Aviation Investment and Reform Act for the 21 st
Century, P. L. 106- 181, signed April 15, 2000.

Resources, Community, and Economic Development Division United States
General Accounting Office Washington, DC 20548

B- 286088 2 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

ï¿½ other revenue bond unds that are not secured by general airport revenues,
but by specific sources of airport income. In the last 10 years, the city of
Chicago has issued bonds backed by revenue collected from the PFC program
and bonds backed by revenue generated specifically from the international
terminal at the airport.

In summary, we found that from 1990 through 1999, these four funding sources
provided the city of Chicago with $2.4 billion for use at O'Hare
International Airport. Of this amount, the city spent about $1.9 billion for
capital improvement projects. A portion of the remainder was spent on
capitalized interest during the construction period of the capital
improvement projects, certain debt service payments, and related financing
costs. As of December 31, 1999, approximately $205 million was available for
capital improvement projects and earmarked for future projects, according to
city officials. Figure 1 shows the amounts provided and spent for capital
improvement projects from each of the four funding sources. These amounts
represent the nominal sums of the dollars spent each year and have not been
adjusted for inflation. In enclosure V, we show figure 1 with amounts
provided and spent in constant (inflation- adjusted) 1999 dollars.

B- 286088 3 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Figure 1: Funds Provided and Spent for Capital Improvements, by Funding
Source, 1990 Through 1999

22% 31% 38%

9% 22%

31% 36%

11%

Airport Improvement Program funds

Passenger Facility Charges

General Airport Revenue Bonds

Other revenue bonds

Total funds provided: $2.4 billion

Total funds spent on capital projects:

$1.9 billion

$224 $519 $743

$914 $209

$409 $591 $669

Dollars in millions

Note: The $519 million available from the PFC program represents 23 percent
of the $2.2 billion FAA has approved for collection through 2017.

Source: GAO's analysis of FAA's and Chicago's data.

The types of capital projects varied by funding source. For example, over
two- thirds of the AIP funds were spent on taxiways, noise mitigation, and
aircraft parking aprons, while PFC funds were distributed more widely among
additional types of projects, such as terminals and runway rehabilitation. A
substantial amount of the funds from GARBs purchased property adjacent to
the airport from the federal government, and most of the funds from other
bonds were used for improvements at the international terminal. The types of
capital projects at O'Hare airport and the amounts spent on them were as
follows for each of the specific sources:

B- 286088 4 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

ï¿½ AIP funding: The city has spent $209 million of the $224 million available
for capital improvements, mainly for four types of projects: taxiways, noise
mitigation, aircraft aprons, and security. (See fig. 2.) These four project
types accounted for 78 percent of the total AIP funds spent from 1990
through 1999. The remaining funds have been earmarked for specific projects.
For the period of our review, most AIP funds were spent in the early 1990s,
before the shift to the newly created PFC program.

Figure 2: AIP Funds Spent on Capital Projects at O'Hare International
Airport, 1990 Through 1999

30% 20%

18% 22%

Taxiway improvements $61.7

Noise mitigation $42.4 Aircraft aprons

$37.9 Airport security

$20.8 All others

$46.3

10% Dollars in millions

Source: GAO's analysis of FAA's data.

B- 286088 5 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

ï¿½ PFC funding: Since the city first began collecting a PFC in late 1993, it
has spent $409 million of the total collected through 1999. About 60 percent
of this amount funded four types of projects: airport terminal
rehabilitation, taxiway improvements, aircraft aprons, and noise mitigation.
(See fig. 3.)

Figure 3: PFC Funds Spent on Capital Projects at O'Hare International
Airport, 1993 Through 1999

Dollars in millions

16% 12%

41% Terminals

$77.8 Taxiway improvements

$67.1 Aircraft aprons

$49.5 Noise mitigation

$47.1 All others

$168.0 12%

19%

Source: GAO's analysis of Chicago's data.

B- 286088 6 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

ï¿½ General Airport Revenue Bonds: Of the $743 million derived from GARBs from
1990 through 1999, the city has spent $591 million on capital projects, 2
mainly for land and terminal support, which includes land purchased from the
federal government, access roads, and parking structures 3 .( See fig. 4.)
The remainder of the proceeds is earmarked for future use on capital
projects.

Figure 4: GARB Funds Spent on Capital Projects at O'Hare International
Airport, 1990 Through 1999

Dollars in millions

47% 25%

Land support $280.3

Terminal support $148.5

All others $162.4 27%

Note: Percentages do not add to 100 because of rounding. Source: GAO's
analysis of Chicago's data.

2 In addition, Chicago paid $155.6 million in capitalized interest on these
bond funds that did not go directly to the projects. 3 During the same time
period, Chicago also issued nearly $1.5 billion in GARBs to refinance
existing

debt. Because these funds were not available to the city for capital
projects, we did not include them in our analysis.

B- 286088 7 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

ï¿½ Other revenue bond funds: Of the $914 million generated from other bonds,
the city has spent about $669 million on capital projects-- specifically,
the international terminal, noise mitigation, and airfield drainage
improvements. 4 (See fig. 5.) The remainder was used to fund capitalized
interest and debt service reserve funds for these bonds, except for $29
million which is earmarked for future use on noise mitigation and airfield
drainage improvements.

Figure 5: Other Revenue Bond Funds Spent on Capital Projects at O'Hare
International Airport, 1990 Through 1999

Dollars in millions

74% 22%

International terminal $496 Noise mitigation

$147 Airfield drainage

$26 4%

Source: GAO's analysis of Chicago's data.

Enclosures I through IV provide more details about each of these funding
sources.

Agency Comments

We provided a draft of this report to the Department of Transportation (DOT)
and the city of Chicago for their review and comment. FAA responded for DOT.
Both FAA and city of Chicago officials also provided us with technical
clarifications, which we incorporated as appropriate.

Scope and Methodology

To determine the funding sources, we obtained information from financial
data provided by FAA and the city of Chicago. Our analysis covered the
period from 1990

4 Chicago paid an additional $47.4 million in capitalized interest on these
bonds that did not go directly to the projects.

B- 286088 8 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

through 1999, except for PFCs, which were not a source of revenue to the
city until 1993. All figures reported in this report and in enclosures I
through IV are presented in nominal dollars, that is, without any adjustment
for the inflation that has reduced the purchasing power of the dollar during
this period. In enclosure V, we present figure 1 in constant (inflation-
adjusted) 1999 dollars. We used the Department of Commerce's chain- type
price index for gross domestic product to convert from nominal to constant
dollars.

For the AIP amounts, we used data and records supplied by FAA. The data
reflect the actual amounts of AIP funding that FAA released to the city of
Chicago. Because of time constraints, the city was not able to review and
reconcile any differences between FAA's data and records and the data and
records maintained by the city.

For the PFC amounts approved for collection, we used FAA's database of PFCs
and FAA's Record of Decision, which approves the PFC applications. For
actual PFC collections and use, we used financial data provided by the city
of Chicago. The data were derived from the Independent Auditor's Report and
Financial Statements prepared for O'Hare International Airport. For the
period 1990 through 1999, these audits have concluded the financial
statements present fairly, in all material respects, the airport's financial
position. We did perform limited cross- checking of information with
external sources to assess the reasonableness of the expenditure data. To do
this, we obtained quarterly reports on revenue and expenditures provided to
FAA by the city of Chicago. The city's reports on PFC expenditures are also
audited annually by an independent auditor. We reviewed the audit reports to
ensure that no problems were noted with these amounts.

We obtained information on bonds from bond prospectuses, expenditure
listings, and other data supplied by the city of Chicago. We did not verify
the accuracy of this information, but it is part of the financial statements
of O'Hare International Airport, which is audited annually by an independent
auditor.

We also interviewed officials at FAA's PFC Branch, the Great Lakes Regional
Office Airports Division, and the Chicago Airports District Office. At the
city of Chicago, we discussed the use and reporting of airport revenues with
representatives of the office of the City Comptroller, the Department of
Law, and the Department of Aviation.

We conducted our review from May through August 2000 in accordance with
generally accepted government auditing standards.

---- Unless you publicly announce its content earlier, we plan no further
distribution of this report until 5 days after its issue date. At that time,
we will send copies of the

B- 286088 9 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

report to the Honorable Rodney E. Slater, Secretary of Transportation; the
Honorable Jane F. Garvey, Administrator, Federal Aviation Administration;
and other interested parties. We will also make copies available to others
on request.

If you have any questions about this report, please call me at (202) 512-
2834. Key contributors to this report were Steven Calvo, Christopher Jones,
Christopher Hatscher, and Randy Williamson.

Gerald L. Dillingham, Ph. D. Associate Director

Transportation Issues Enclosures- 5

Enclosure I 10 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Airport Improvement Program Grants

Airport Improvement Program (AIP) grants are made available from the Airport
and Airway Trust Fund 5 and are distributed in accordance with provisions
contained in title 49 of the United States Code. Specifically, AIP funds are
distributed by formula for use at a specific airport or in a specific state
or insular area are referred to as apportionments. Under AIP, the funds are
broken down as passenger entitlements, which are apportioned based on the
number of enplaned passengers; cargo entitlements, which are apportioned
based on the landed weight of all cargo aircraft; state apportionment, which
is based on population and area; and Alaska supplemental, which is
apportioned according to a grandfather provision for amounts apportioned in
1980.

A second type of fund is the Small Airport Fund, portions of which can be
used for projects at small hub, nonhub, commercial service, and general
aviation airports. The remaining funds are for use at the discretion of the
Secretary of Transportation. The restrictions are commonly referred to as
discretionary set- asides. Of the remaining funds, 75 percent is set aside
for primary airports and relievers for capacity, safety, security, or noise
projects and 25 percent for any eligible project at the discretion of FAA.
These discretionary funds may also be restricted to certain types of work or
airports. For example, there are set- asides for the noise planning and
projects and for projects within the Military Airport Program.

Airports must share in the cost of projects approved for AIP funding. The
airports' share of costs varies with the type of airport and type of
project. For large primary airports, 6 such as O'Hare International, the
federal share is equal to 75 percent of a project's allowable cost. 7 The
FAA defines the project's scope in the grant agreement. The city of Chicago
funds the difference.

From fiscal years 1990 through 1999, the city of Chicago spent about $209
million of $224 million in AIP funds available for projects at O'Hare. The
funds were spent on 11 different types of projects. (See table 1.) Four of
the project types- taxiway improvements, noise mitigation, aircraft aprons,
and security- account for 78 percent of the total. The remaining $15 million
has been earmarked for specific projects.

5 The Trust Fund is financed by taxes on domestic and international airline
travel, domestic cargo transported by air, and noncommercial aviation fuel.
6 By law, AIP projects for large- and medium- hub airports, those that
enplane 0. 25 percent or more of the

total annual U. S. enplanements, have a 25- percent local match requirement.
7 For noise planning and mitigation, the ratio for large- and medium- hub
airports is 80/ 20 federal/ local.

Enclosure I 11 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Table 1: AIP Expenditures for O'Hare International Airport, by Project Type,
Fiscal Years 1990 Through 1999 Expenditures Project type Amount Percent of

total Examples of projects

Taxiways $61,676,811 30 ï¿½ Construction of high- speed exit taxiway

ï¿½ Rehabilitation of parallel taxiway “H” Noise mitigation
42,355,040 20 ï¿½ Design and construction to soundproof O'Hare area schools.
Aprons 37,877,919 18 ï¿½ Construction of international aircraft parking apron
Security 20,817,341 10 ï¿½ Design and installation of an access control and
intrusion detection

system Runways 17,036,538 8 ï¿½ Overlay and regrooving of runway

ï¿½ Repair of runway pavement joints Weather equipment 7,958,098 4 ï¿½ Purchase
of snowplows, blowers, brooms, and deicers Roadways 6, 107,408 3 ï¿½
Construction of road to international terminal

ï¿½ Construction of new ditch bridge Land 4,892,000 2 ï¿½ Acquisition of
leasehold rights to cargo facility Terminal development 4,129,215 2 ï¿½
Construction of terminal security bay

ï¿½ Upgrading and improving pedestrian corridors Lighting 3, 922,198 2 ï¿½
Rehabilitation of runway/ taxiway lighting

ï¿½ Installation of runway centerline lighting Safety 2,282,500 1 ï¿½ Purchase
of 3000- gallon fire fighting vehicle

ï¿½ Installation of 625 taxiway guidance signs

Total $209,055,068

Source: GAO's analysis of FAA's data.

AIP amounts have varied substantially from year to year, from a high of
$43.7 million in fiscal year 1990 to $1.9 million in fiscal year 1995. (See
fig. 6.) Annual amounts have been lower in the second half of the decade
than in the first half. Several factors contributed to this trend. First,
during the 1990s, the lowest levels of AIP appropriations occurred in 1995
and 1996. Second, 1995 project funding was largely provided in 1994 with a
multi- year grant award. Finally, the PFC program began at many airports,
including O'Hare. The PFC program requires that large- and medium- hub
airports like O'Hare return 50 percent of their AIP apportionment funds.

Enclosure I 12 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Figure 6: AIP Grant Awards to the city of Chicago at O'Hare International
Airport, Fiscal Years 1990 Through 1999

0 5

10 15

20 25

30 35

40 45

50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Dollars in millions

Source: GAO's analysis of FAA's data.

The shift away from AIP funding is further evident in the expenditure data,
in that over half of the AIP funds for the decade were expended prior to
fiscal year 1995. (See table 2.) The project types that consistently
continued to receive AIP funding after this shift were taxiway construction
and rehabilitation and noise mitigation.

Table 2: AIP Expenditures for O'Hare International Airport, by Year and
Project Type, Fiscal Years 1990 Through 1999

Dollars in millions Project type 1990 1991 1992 1993 1994 1995 1996 1997
1998 1999 Total

Taxiways $2.6 0 $3.3 $8.0 $20.6 0 $6.9 $10.6 $9.7 0 $61.7 Noise mitigation
5. 2 $9.0 8. 1 6.0 3. 6 $1.9 4. 1 1.8 2. 6 0 42.4 Aprons 17.3 0 0 6.6 14.0 0
0 0 0 0 37.9 Security 16.2 0 4.5 0 0 0 0.1 0 0 0 20.8 Runways 0 0 6. 4 4.9 0
0 0 0 5.8 0 17.0 Weather equipment 2.4 0 0.7 0 0 0 4.8 0 0 0 8.0 Roadways 0
6.1 0 0 0 0 0 0 0 0 6.1 Land 0 0 0 4.9 0 0 0 0 0 0 4.9 Terminal development
0 2. 8 1.3 0 0 0 0 0 0 0 4.1 Lighting 0 1.7 1. 6 0.7 0 0 0 0 0 0 3.9 Safety
0 0. 3 0 2. 0 0 0 0 0 0 0 2.3

Total $43.7 $19.9 $25.9 $33.1 $38.3 $ 1.9 $15.9 $12.3 $18.1 0 $209.1

Note: Amounts may not add because of rounding. Fiscal year 1999 awards
totaling $15 million remained unspent as of September 30, 1999.

Source: Developed by GAO on the basis of FAA's data.

Enclosure II 13 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Passenger Facility Charges

In 1990, the Congress gave commercial airports the option to impose a
Passenger Facility Charge (PFC) as an additional means to raise funds for
airport development. Beginning in 1992, airports were able to collect up to
$3 per enplaned passenger. 8 FAA must approve an airport's request to impose
the fee, including the total amount to be collected and the projects to be
funded. PFC funds can be used to further airport development by (1)
preserving or enhancing airport safety, security, or capacity; (2) reducing
noise; or (3) enhancing airline competition. To some degree, airports have
more flexibility in using these funds than they have using some of the other
major funding sources available to them- federal grants, state grants,
bonds, and airport revenues. For example, PFCs may be used to build aircraft
gates, while federal AIP grants may not. PFCs are more likely to be used for
“land- side” projects, 9 such as passenger terminal and ground
access improvements.

FAA first approved PFCs at O'Hare in late 1993, and since that time has
approved the city to collect over $2.2 billion through late 2017 for 11
different types of projects. As of December 31, 1999, the city had collected
$519 million and spent $409 million in PFC revenue on capital projects. The
remaining amount has been approved to be spent on specific capital projects.
The amount spent has risen since the program's inception in 1993, reaching a
peak of $107.7 million in 1999. (See fig. 7.)

8 AIR 21 increased the ceiling for PFCs to $4. 50 per enplaned passenger. 9
In contrast to land- side projects, air- side projects include runways,
taxiways, aircraft aprons, and safetyrelated

projects.

Enclosure II 14 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Figure 7: PFC Expenditures for O'Hare International Airport, 1993 Through
1999

0 20

40 60

80 100

120 1993 1994 1995 1996 1997 1998 1999 Dollars in millions

Source: GAO's analysis based on Chicago's data.

Most of the $409 million of PFC funds that were spent through 1999 at O'Hare
were for terminal construction and rehabilitation, taxiway improvements,
aircraft aprons, and noise abatement. Figure 8 shows the amounts approved
for collection through November 2017 and the amounts spent on each of the 11
project types through the end of 1999.

Enclosure II 15 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Figure 8: PFC Funds Approved and Expended at O'Hare International Airport,
by Project Type, 1993 Through 1999

Terminal

Expended through 1999 Approved for collection through 2017

Noise Access

Other Apron Runway Implementation

Security Taxiway Equipment

Planning Lighting

0 200 400 600 800 1000 Dollars in millions a

Enclosure II 16 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Notes:

Other is miscellaneous on- site projects, including service roads, fences,
weather equipment, and environmental projects.

Implementation includes expenses for PFC program management and construction
management costs, as well as consultation meetings, auditing, and legal
services.

a The amount spent on taxiways may exceed the amount approved because PFC
regulations (14 C. F. R. 158. 37) allow an airport operator to collect up to
15 percent more than the amount approved on a PFC application without
submitting an amendment to FAA.

Source: GAO's analysis based on Chicago's data.

As of December 31, 1999, the individual projects that received the most PFC
funds are the international terminal ($ 39.1 million), a new aircraft hold
pad ($ 31.4 million), and upgrades to airport concourse G ($ 19.1 million).
Table 3 provides more details on the capital projects that have been funded
in each category.

Table 3: PFC Expenditures at O'Hare International Airport by Project Type,
1993 Through 1999 Expenditures Project type Amount Percent

of total Examples of projects

Terminals $77,841,172 19 ï¿½ International terminal common- use areas

ï¿½ Upgrading of concourses E/ F/ G Taxiways 67,114,812 16 ï¿½ Rehabilitation of
multiple taxiways, including pavement

markings and lighting Aprons 49,466,670 12 ï¿½ Construction of an aircraft
hold pad

ï¿½ Rehabilitation of aprons at Concourses E/ F/ G/ H/ K Noise mitigation
47,107,097 12 ï¿½ Sound insulation for O'Hare area schools

ï¿½ Sound insulation for O'Hare area residences Runways 41,623,815 10 ï¿½
Rehabilitation of runways, including pavement

replacement, markings and lighting Equipment 28,399,531 7 ï¿½ Acquisition of
aircraft rescue and fire fighting equipment

ï¿½ Acquisition of snow removal equipment Access 23,455,053 6 ï¿½ Construction
of airport transit system remote parking lot

station

ï¿½ Repair of lower level terminal roadway Other 22,274,142 5 ï¿½ Improvements
to airfield drainage

ï¿½ Rehabilitation of hangar service road

ï¿½ Repairs to cargo tunnel Planning 19,406,550 5 ï¿½ Conduct site,
environmental, and construction analyses

for PFC projects Implementation and administrative costs 17,178,263 4 ï¿½ PFC
consultation meetings, auditing, and legal services

ï¿½ PFC program and construction management Security 12,021,210 3 ï¿½ Upgrades
to perimeter guard posts

ï¿½ Upgrades to former military area to comply with FAA requirements Lighting
3, 596,918 1 ï¿½ Acquisition of air traffic control tower lighting panel

Total $409,485,234

Source: GAO's analysis based on Chicago's data.

Enclosure III 17 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

General Airport Revenue Bonds

The largest category of airport funding- for airports in general and also
for O'Hare- is bonds. Because airport sponsors in the United States are
nearly always local or state governments or a special public authority, the
form of debt is usually a tax- exempt General Airport Revenue Bond (GARB).
These bonds are secured by a pledge of an airport's revenue. The issuer
pledges to make scheduled payments on the interest and principal over the
life of the bond. These bonds tend to be used by large- and mediumsized
airports whose revenues are large enough to provide adequate security.

From 1990 through the end of 1999, the city of Chicago issued about $743
million in GARBs to finance new projects. Table 4 shows the bond issues and
the primary purpose for the bond proceeds.

Table 4: GARBs Issued to Finance Capital Improvement Projects at O'Hare
International Airport, 1990 Through 1999

Bond issued Amount Primary purposes

General Airport Revenue Bonds, 1990 Series A and Series B

$244,035,000 ï¿½ Construction of international terminal

ï¿½ Construction of automated guideway transit system

ï¿½ Improvements to access roadway General Airport Revenue Bonds, 1992 Series
A 130,055,000 ï¿½ Construction of international apron

ï¿½ Improvements to central terminal utilities

ï¿½ Improvements to roadways and parking General Airport Second Lien Revenue
Bonds, 1994 Series B

68,700,000 ï¿½ Expansion of heating and refrigeration plant

ï¿½ Improvements to runway de- icing fluid facility

ï¿½ Rehabilitation of roads and parking General Airport Second Lien Revenue
Bonds, 1994 Series C

83,800,000 ï¿½ Improvements to parking General Airport Second Lien Revenue
Bonds, 1996 Series A and Taxable Series B

216,075,000 ï¿½ Acquisition from U. S. government of property located adjacent
to the airport

Total $742,665,000

Source: GAO's analysis based on Chicago's data.

Over this period, about $591 million of the GARB proceeds were spent on a
variety of projects. 10 These projects include runway and taxiway
improvements, service roads, aircraft parking areas, terminal structures,
heating and refrigeration plants, public parking facilities, roadways,
walkways, ground transportation system, and land acquisition. The remaining
funds are earmarked for future use on these projects. Figure 9 shows the
specific categories in which proceeds were spent.

10 In addition to the $591 million, the city paid an additional $155.6
million in capitalized interest on these bonds.

Enclosure III 18 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Figure 9: GARB Expenditures, 1990 Through 1999

0 50 100 150 200 250 300 International

terminal Airfield

Domestic terminal Implementation

cost Terminal support

Land support Dollars in millions

Notes:

Land support costs consist of outlying areas that surround the airport's
central core but are within its boundaries, such as land acquisition,
signage, lighting, and the safety and security communication center.

Terminal support costs consist of public parking facilities, roadways,
walkways, automobile rental areas, ground transportation system, and the
O'Hare Hilton Hotel.

Implementation costs consist of costs associated with developing projects,
such as project management and construction management.

Domestic terminal area costs consist of domestic terminal structures and a
designated portion of the heating and refrigeration plant.

Airfield costs consist of aircraft parking areas, runways, taxiways, and
service roads.

International terminal costs consist of designated portions of the heating
and refrigeration plant related to the international terminal.

Source: GAO's analysis based on Chicago's data.

Enclosure IV 19 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Other Revenue Bond Funds

Besides GARBs, the city of Chicago has issued other special revenue bonds
for capital projects. We identified two types of special revenue bonds the
city issued from 1990 through 1999- -International Terminal Special Revenue
Bonds and PFC Revenue Bonds. Like GARBs, these bonds were used to finance
capital projects. However, these bonds differ from GARBs in that they are
not secured by the airport's general revenue. Instead, they are secured with
revenue from the international terminal and by the revenues collected from
the PFC program.

From 1990 through 1999, the city of Chicago issued about $914 million in
these two types of bonds. Over this period, about $669 million of these bond
proceeds were spent on the International Terminal, noise mitigation, and
airfield drainage improvements. 11 The remaining funds were earmarked for
future use on noise mitigation and airfield drainage improvement projects.
Table 5 shows the bond issues and the primary purposes for the bond
proceeds.

Table 5: Other Bonds Issued to Finance Capital Improvement Projects at
O'Hare International Airport, 1990 Through 1999

Bond issued Amount Primary purposes

International Terminal Special Revenue Bonds, Series 1990 A

$489,735,000 ï¿½ Planning, designing, acquiring, constructing and equipping a
new international terminal and all related facilities International Terminal
Special Revenue Bonds, Series 1992

174,550,000 ï¿½ Planning, designing, acquiring, constructing, and equipping a
new international terminal Passenger Facility Charge Revenue Bonds, Series
1996 A and 1996 B

250,000,000 ï¿½ Noise mitigation projects

ï¿½ Improvements to airfield drainage

Total $914,285,000

Source: GAO's analysis based on Chicago's data.

11 In addition to the $669 million, the city paid $47.4 million in
capitalized interest on these bonds.

Enclosure V 20 GAO/ RCED- 00- 275R Airport Financing at Chicago's O'Hare
Airport

Funds Provided and Spent for Capital Improvement Projects, 1990 Through 1999

Figure 1 (see p. 3) showed the amounts provided and spent for capital
improvement projects at O'Hare from 1990 through 1999. Because inflation
reduced the purchasing power of a dollar during this period, figure 10 shows
the amount provided and spent at O'Hare in constant (inflation- adjusted)
1999 dollars. We used the Department of Commerce's chain- type price index
for gross domestic product to convert from nominal to constant dollars.

Figure 10: Funds Provided and Spent for Capital Improvements, by Funding
Source, 1990 Through 1999

20%

31% 39%

9%

21%

32% 36%

11%

Airport Improvement Program funds

Passenger Facility Charges

General Airport Revenue Bonds

Other revenue bonds

Total funds provided: $2.7 billion

Total funds spent on capital projects:

$2.0 billion

$249 $539 $832

$1 billion $233

$422 $646 $743

1999 constant dollars in millions, except where noted

Source: GAO's analysis of FAA's and Chicago's data.

(348237)

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