Indianapolis Airport Authority - Indianapolis International Airport

indianapolis Airport AuthorityNotes to Financial StatementsDecember 31, 2010 and 20091The aforementioned lease agreements contain a number of incentives to be provided by the Authorityin the form of grants and rent credits over the terms of these leases, which currently range from sixmonths to ten years. These grants and rent credits are designed to assist the tenants with start-up costsand the acquisition of certain capital assets, including leasehold improvements, and to encourage themto expand their operations and/or increase the amount of space they lease. Grants for start-up costs arerecorded as deferred lease costs by the Authority and amortized over the respective lease term, whilegrants for capital improvements result in new depreciable assets of the Authority. Success payments (forexpanding operations) and other similar grants are expensed as they are earned by the tenants. All existingIMC capital assets, as well as those acquired by the tenants through Authority grants or otherwise,remain the property of the Authority, subject only to the tenants’ rights to use such assets during theirrespective lease terms. As of December 31, 2010, the Authority has provided $6.6 million in grants and$6.2 million in rental credits to the lessees of the IMC.Note 11: Risk ManagementRisk management is the responsibility of the Authority. Operationally, the Authority is exposed to variousrisks of loss related to the theft of, damage to and destruction of assets, natural disasters as well as certaintort liabilities for which commercial insurance is carried. The commercial insurance policies carry deductiblesranging from $0 to $100,000. Insurance policies procured, including commercial general liabilityand commercial property damage, are inclusive of coverage for certain war casualty and acts of terrorism.Coverage terms, limits, and deductibles have each been benchmarked in comparison with thosemaintained at other mid-size airports and found to be within the range of our peers. Although coveragelimits are significant, no assurance can be given that such coverage will continue to be available at suchamounts and/or at a reasonable cost.Casualty loss involving damage to or destruction of physical property in the course of construction iscovered by a separate Builders Risk policy. This policy contains a deductible of $100,000 per occurrenceapplicable to all covered causes of loss, including flood and earth movement. The Authority recognizedapproximately $175,000 and $1.4 million in insurance recoveries as nonoperating revenue in 2010 and2009, respectively, under the builders risk policy associated with the New Indianapolis Airport.Lastly, an owner’s protective professional indemnity policy is in place insuring the Authority from financialloss or damages assessed in relation to claims involving contracted professional services, such as architectsor engineers. This policy contains a per claim self-insured retention amount of $1 million; however,contracted professional service firms participating in this project are required to provide evidence of coverage,naming the Authority as an additional insured, in amounts equal to or exceeding this retention,leaving the Authority minimally exposed.