City and County of Denver Municipal Airport System ANNUAL ...

City and County of Denver
Municipal Airport System
NOTES TO FINANCIAL STATEMENTS
December 31, 2010 and 2009
The United lease provides that it can be terminated by the airline if the airline’s cost per enplaned passenger
exceeds $20 in 1990 dollars. Current costs per enplaned passenger did not approach this limit for either 2010 or
2009. Rental rates for airlines are established under a ratemaking methodology whereby a compensatory
method is used to set terminal rental rates and a residual method is used to set landing fees. Rentals, fees, and
charges must generate gross revenues together with other available funds sufficient to meet the rate
maintenance covenant per the Bond Ordinance.
(e)
Federal grants
Under the terms of the Federal grants, periodic audits are required and certain costs may be questioned as not
being appropriate expenditures under the terms of the grants. Such audits could lead to reimbursement to the
grantor agencies. The Airport System management believes disallowances, if any, will be immaterial to its
financial position and activities of the Airport.
(18) Insurance
The Airport System is exposed to various risks of loss related to torts; thefts of, damage to, and destruction of assets;
errors and omissions; and natural disasters. The Airport System has purchased commercial insurance for the various
risks.
Employees of the City (including all Airport System employees) are covered by the City’s insurance policies.
Effective October 1, 1989, the City established a workers’ compensation self-insurance trust in accordance with State
statutes, to be held for the benefit of the City’s employees.
The City’s Workers’ Compensation Internal Service Fund compensates City employees, or their eligible dependents,
for injuries as authorized by the State Workers’ Compensation law or City ordinances. The administrators of the fund
provide safety training and enhancement programs, in addition to maintaining in-house records of claims. On
August 1, 1991, a separate insurance program was established by the City to insure all contract labor working on-site
at Denver International. The program provides medical and indemnity payments as required by law for on-the-job
related injuries for all non-City employees and builders’ risk, general liability, and professional liability for all
applicable construction and consulting firms working on-site at the Denver International Airport. The insurance
program covers only incidents incurred prior to September 1994.
Deductibles under this insurance program are: (1) workers’ compensation liability of $250,000 per occurrence; and
(2) general liability, builders’ risk, and professional liability insurance of $25,000, $100,000, and $1,000,000 per
occurrence, respectively.
Settled claims for these risks have not exceeded this commercial coverage in any of the past three fiscal years.
(19) Significant Concentration of Credit Risk
The Airport System derives a substantial portion of its operating revenues from airline’s landing and facility rental fees
(airline operating revenue). For each of the years ended December 31, 2010 and 2009, United Airlines group not
including Continental Airlines represented approximately 54% of the Airport System’s airline operating revenue.
Frontier Airlines group represented 14.1% and 14.1% in 2010 and 2009 of the Airport System’s airline operating
revenue, respectively. Southwest Airlines represented 12.1% and 10% in 2010 and 2009, respectively. No other airline
represented more than 10% of the Airport System’s airline operating revenues. The Airport System requires
performance bonds to support airlines and concession accounts receivables.
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