CHICAGO — Opponents of Chicago’s $7.5 billion runway expansion at O’Hare International Airport suffered yet another legal setback this week when the federal appellate court here refused to rehear their case alleging that the planned demolition of a suburban cemetery violates religious freedom laws. The two-year-old lawsuit filed by the suburbs of Bensenville and Elk Grove Village and the cemetery’s owner, St. John’s United Church of Christ, has prevented Chicago so far from demolishing St. Johannes Cemetery. The demolition is required as the city moves into the second phase of the runway project in the coming years. The group has vowed to pursue the case all the way to the Supreme Court.The group had asked the Seventh Circuit U.S. Court of Appeals to rehear the case following a decision by an appellate panel in September that found an amendment to state law approved as part of the state legislation paving the way for the expansion did not violate federal First Amendment protections of religious rights.“We are pleased with the court’s order in this regard,” Rosemarie S. Andolino, executive director of the O’Hare Modernization Program, said in a statement. “We will continue to move forward with the acquisition process for St. Johannes Cemetery, and welcome the opportunity to work with church officials during this process.”Chicago offered $630,000 to purchase the cemetery in March 2006, but that offer was rejected. The city in October initiated condemnation proceedings which remain pending. The city has so far acquired 533 of the 611 parcels needed in Bensenville. The court’s rejection of the motion to rehear marked the latest in a series of legal setbacks for the expansion’s opponents. This past summer a District of Columbia appellate panel rejected litigation that challenged the Federal Aviation Administration’s letter of intent to provide grants for the project on similar grounds that it violated religious freedom. That court too has refused to reconsider the decision. The group has another petition pending also challenging the grant funding.Meanwhile, the city’s planned sale of nearly $1 billion of O’Hare related new-money and refunding revenue bonds remains on the day-to-day calendar. The city initially planned to sell the bonds early this month but decided to hold it due to current interest rates and watch the market. The deal may not price until next year, officials have said. Lehman Brothers is the senior manager.Overall, the first phase of the runway expansion relies on $1.6 billion of general airport revenue bonds, $659 million of bonds backed by passenger facility charges as well as general airport revenues, $330 million of federal grants, and the pay-as-you-go use of PFCs. Airlines have so far approved only the first phase. Negotiations are ongoing over the next phase. The first phase is currently about $400 million over budget.The Chicago City Council approved the airport sale last spring, but Chicago held off on issuing the debt until the FAA’s recent approval of its application to finance various projects with the PFCs it collects on the price of a ticket and to use $270 million to help cover the $400 million in cost overruns that the city has blamed on delays in land acquisition and demolition because of the ongoing litigation.The deal includes about $530 million of new-money bonds secured by both a third-lien GARB pledge and PFCs, and another $230 million of refunding GARBs and $200 million of bonds that will refund first-lien, PFC bonds. The airport has $3.6 billion of outstanding third-lien general airport revenue bonds, $720 million of second-lien bonds, and $73 million of first-lien bonds. The airport has $645 million of second-lien PFC-backed bonds.

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