Indianapolis Airport Authority - Indianapolis International Airport

indianapolis Airport AuthorityNotes to Financial StatementsDecember 31, 2010 and 20091Note 10: Indianapolis Maintenance CenterAs discussed previously in these footnotes, the Authority, the State of Indiana, the City of Indianapolis andUnited financed the construction and equipping of the IMC. As a part of the financing of these facilities, theAuthority issued $220,705,000 in special facility revenue bonds of which $172,046,477 remains outstanding atDecember 31, 2010. The Authority had, and continues to have, no obligation to make interest and principalpayments on these special facility bonds other than from revenues derived from leasing the IMC facilities.Previously, the interest and principal payments for the Series 1995 Special Facility Revenue Bonds were fundedby rentals paid by United under its lease agreement with the Authority. On December 9, 2002, United filed forbankruptcy under Chapter 11 of the United States Bankruptcy Code. On May 9, 2003, the Bankruptcy Courtmade effective United’s rejection of its lease of the IMC and United abandoned the IMC facilities, whereby all ofthe IMC assets reverted to the Authority’s control.In 2004, the Authority and the Trustee of the bondholders entered into a Settlement Agreement which, amongother things, provides for up to $7.5 million in reimbursements for certain costs incurred after May 2003. TheSettlement Agreement also provides for reimbursement for up to $6.5 million of capital improvements, ifcertain conditions are met.For the years ended December 31, 2010 and 2009, the Authority incurred approximately $8.1 million and$9.2 million of costs for the IMC, respectively. However, the majority of these costs may be recovered in futureyears, along with any costs incurred in excess of the aforementioned amounts from future revenues of the IMC.The Authority has received reimbursements under the Settlement Agreement aggregating approximately $6.8million for both 2010 and 2009. Also, as of December 31, 2010 and 2009, the Authority has accrued approximately$2,400,000 and $1,500,000, respectively, in reimbursements for allowable costs incurred.United emerged from bankruptcy effective February 1, 2006, however, the Settlement Agreement remains ineffect for the life of the original special facility revenue bonds. During 2007, the Indianapolis Airport Authorityreceived over $487,000 in United Airlines’ bankruptcy distributions. These distributions paid off all remainingpre-petition bankruptcy invoices and awarded the Authority over $420,000 in damages related to unearnedrental revenues resulting from United Airlines’ bankruptcy.The Authority has entered into various leases for certain portions of the IMC. These leases include hangarspace, office areas and the backshops (which are being used primarily for the maintenance, repair and overhaulof commercial aircraft) and certain warehouse space for non-aviation related use. As a part of the SettlementAgreement, rentals collected for the IMC are not considered revenue to the Authority, but instead are requiredto be deposited into a trust held on behalf of the United bondholders. The monies held in trust are to be usedto pay ongoing operating and maintenance costs of the IMC and must be applied in a manner prescribed bythe terms of the Settlement Agreement, including reimbursement of past capital and operating costs, paymentof ground rent and payment of debt service on the bonds.