CHICAGO — Chicago's $8 billion expansion of O'Hare International Airport won a major court victory late last week that paves the way for its acquisition and relocation of a cemetery now in the path of a planned runway.
The victory marks the end of a year during which the city struck an agreement with the suburb of Bensenville, ending the village's long-standing challenge to the project and clearing the path for its acquisition and demolition next year of properties in the path of a new runway.
The advances — which come as Chicago plans early in 2010 to sell up to $1.5 billion of new-money and refunding general airport revenue bonds, with some of the proceeds earmarked for the expansion project — represent critical victories. But the overall project enters the new year still facing significant fiscal challenges as struggling airlines refuse to sign off on the future pieces of the plan that include a new western terminal.
The latest court decision favoring Chicago was issued Friday by DuPage County Circuit Court Judge Hollis Webster, who rejected the claim by attorneys representing St. John's United Church of Christ that the city's relocation of St. Johannes Cemetery, which the church owns, would violate the constitutional rights of those buried there to remain undisturbed.
Chicago cited past state and federal court rulings in support of its claim to use its power of eminent domain. Webster sided with the city. An attorney for the church, Joe Karaganis, said an appeal is planned. The city now must negotiate a sale price that is subject to court approval.
Aviation Commissioner Rosemarie Andolino, who heads up the $8 billion project known as the O'Hare Modernization Program, said in a statement Friday: "Today's ruling, together with prior rulings in the case, will allow the court to proceed expeditiously to determine the amount of money to be paid for the cemetery, after which the relocation process can begin."
The Chicago City Council last month approved an agreement with the adjacent village of Bensenville that ended litigation filed by the village objecting to the acquisition and demolition of properties and against the expansion project.
The city agreed to various demolition controls, to pay for infrastructure work if needed, and other compensation. Though not in the settlement approved, the city has also agreed to pay the village $16 million for the acquisition of properties. Andolino's spokeswoman, Eve Rodriguez, said yesterday the city hopes to complete the demolition between January and September.
Bensenville dropped its opposition and decided to negotiate with Chicago after the election of a new village president. Frank Soto beat incumbent John Geils in the April election. Elk Grove Village, which also had been a staunch opponent and provided funding for the opposition movement along with Bensenville, earlier this year dropped its fight.
The litigation has driven up the cost of the first phase of the plan by $400 million to $3.3 billion, but officials have said they are on track with the first phase. Under the overall plan, the city is shifting the airport's runways to a parallel configuration from an intersecting design that leads to runway closures during poor weather conditions and negatively impacts the national air traffic grid.
The city last year opened the first new runway, a milestone for the project. It has provided some flight-delay relief, although more significant relief is not expected until an additional runway opens in 2011. The plan, unveiled by Mayor Richard Daley in 2001, is designed to expand capacity to a yearly 1.2 million flights from the roughly one million it can now handle.
The city has the approval of O'Hare's airlines for the first phase but not for the remainder of the projects that the city hopes to complete by 2014. United Airlines and American Airlines both operate hubs at O'Hare and account for more than 50% of flights there. The airlines support the runway construction plans but have resisted funding the western terminal, given their own fiscal struggles.
Karaganis said he expects the project's funding issues will be the subject of future litigation.
"There are ongoing conversations with the airlines, but the city is also looking at other forms of funding," Rodriguez said yesterday. The city has previously said it is looking at a possible public-private partnership for the $800 million western terminal.
Andolino earlier this month testified at a U.S. House Committee on Transportation and Infrastructure meeting on progress on transportation spending in the stimulus package. She thanked lawmakers for the stimulus funding and pushed for additional federal grants for airport infrastructure and approval of a new multi-year reauthorization bill that raises the passenger facility cap to $7.50.
"Increasing the PFC will help us with the O'Hare Modernization Program and stimulate the economy by creating thousands of jobs every year for the next five years without burdening taxpayers," she said.
The city is planning in late January or February to sell up to $1.5 billion of O'Hare new-money and refunding debt, with proceeds going to refund outstanding debt and finance various runway, airfield, capital improvement, and noise-mitigation projects. Bank of America Merrill Lynch is senior manager on the O'Hare transaction
The first phase relies on $1.6 billion of general airport revenue bonds and $659 million of bonds backed by passenger facility charges, as well as general airport revenue, the use of PFCs on a pay-as-you-go basis, and $330 million in federal grants.
Overall, the total runway plan loosely relies on $4.43 billion of GARBs, $1.6 billion of PFC-backed debt, $752 million of third-party financing, and $677 million of federal aid and other pay-as-you-go funds.
O'Hare has about $4 billion of GARBs outstanding in three liens that are rated from the mid- to high single-A range on the third lien to the high double-A range on the first senior lien.
The credit's challenges include the size and complexity of the OMP and potential disruptions that could affect the airport's operations and financial performance. Its strengths include strong demand for air travel provided by the region.