CHICAGO - Mayor Richard Daley of Chicago announced yesterday a development plan for the city's two airports that could total nearly $2 billion and will include the use of bonds.

Speaking at a press conference, the mayor said because plans to build a new airport in the so-called Lake Calumet area of the city's southeast side are "dead, dead, dead," Chicago would now turn its attention to improving O'Hare International and Midway airports.

"I hope that today's announcement puts to rest further speculation about Lake Calumet. Lake Calumet is dead," the mayor said.

He said legislation that would have allowed the city, Illinois, and Indiana to form an authority to oversee the $10.8 billion new airport failed in the Illinois General Assembly in July due to the lack of Republican support in the Senate.

Mayor Daley said he "cannot delay future development needs at O'Hare and Midway while Republicans in the Senate play politics."

While the mayor ditched plans for the new airport immediately after the legislation failed to muster support in the Senate, Gov. Jim Edgar of Illinois has vowed to resurrect the legislation during the fall veto session.

Gary Mack, Gov. Edgar's spokesman, said yesterday the governor still believes that the Lake Calumet site is the "most viable" alternative for a new airport. Mr. Mack said the governor. continues to hope that "mayor will reconsider" his decision.

"It continues to mystify me that the mayor appeared to be so gungho for the project and then abandoned it as quickly as he did," Mr. Mack said.

He added that "the mayor knows full well" that legislation seldom passes on the "first go-around" in the General Assembly.

Mayor Daley said the city would soon apply to the Federal Aviation Administration to levy a passenger facility charge to generate as much as $90 million a year for the development program. The mayor had previously earmarked the revenues from the passenger charge for the new airport.

The mayor also announced the appointment of David Mosena, his chief of staff, as the city's aviation commissioner to oversee the development plan.

Mr. Mosena said the city plans to use airport revenue bonds, as well as revenues from the passenger facility charges and aviation trust fund moneys, to pay for the development projects. He added he did not know how much of the nearly $2 billion plan would be funded through bonds. He also said he was unsure whether the city would use revenues from the passenger charges to back bonds.

In recent months, the rating agencies have put airports on notice about backing bonds with only revenues from the charges. Last month, Standard & Poor's Corp. said it would not rate bonds backed solely by the charges, while Moody's Investors Service has said such debt would be unlikely to achieve an investment grade rating. An official at Fitch Investors Service has said the agency would review the bond issues on a case-by-case basis.

Mr. Daley and Mr. Mosena hedged on whether the airport development plan would include new runways, which have been opposed by communities near the airports. The plan outlined by the mayor for O'Hare Airport calls for airfield, terminal, and ground transportation improvements, noise abatement work, and the possible development for economic purposes of more than 700 areas currently unused or occupied by the military. City officials said those improvements could run anywhere from $1 billion to $1.4 billion.

At Midway Airport, the mayor's plan calls for $400 million in airfield, terminal, and parking improvements, as well as noise abatement programs. Mr. Mosena said it may take a couple of months for the aviation department to come up with a final development plan for the airports.

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