At the Chairmans invitation, the Principal Assistant Secretary/Transport (PAS/T) elaborated on the Administrations response to the outstanding issues arising from the discussion on 17 April 1997, as contained in the information paper tabled at the meeting.

Post-meeting note:

Royalty

2. Responding to Mr CHAN Kam-lams question on the royalty rate for the tunnel link, the Principal Assistant Secretary/Treasury/Revenue (PAS/Tsy/R) advised that under the existing policy, the operation of a tunnel by a private company fell within the scope for a royalty to be charged. The proposed royalty rate for the tunnel link, being 2.5% of gross operating receipts, was considered reasonable as it was in line with that applicable to the Tates Cairn Tunnel taking into account the traffic restrictions to be imposed.

3. Noting that the Hong Kong Resort Company Ltd (HKR) did not expect to recover the capital costs of the tunnel link but would only recoup its recurrent costs from tunnel users through tolls, members generally considered the royalty rate too high and might become an excessive financial burden to HKR. They were also concerned that the royalty payable by the tunnel link would eventually require subsidy from tunnel users through toll increases if recurrent costs could not be recovered in the long term.

4. PAS/Tsy/R explained that the purpose of charging royalty was to ensure that the general revenue, and hence the public, received a fair share of the financial benefits arising from the use of this limited resource or service irrespective of whether the operation under such a regime was profitable or not. According to the study report prepared by the consultant engaged by HKR, the royalty payable for the first year of tunnel operation was only $152,100. The Administration considered the operating receipts adequate for recovering the recurrent costs of tunnel operation after deduction of the royalty. As the royalty was a percentage of gross operating receipts, less royalty would be payable if the revenue dropped.

5. Members generally found the proposed royalty structure for the tunnel link not acceptable. The Chairman suggested that the Bills Committee should consider moving CSAs to address members concerns at a later stage. He further proposed that no restriction on the use of the tunnel link should be imposed under the Bill and that the tunnel company and residents of Discovery Bay (DB) should be allowed to decide on types of vehicles to be allowed. This would obviate the need to impose higher royalty when the restrictions were lifted in the future.

6. As to whether the tunnel would operate under a "build, operate and transfer" agreement, PAS/Tsy/R advised that as stipulated in the provisions which had been discussed and agreed with HKR, the tunnel company was given the powers to build, maintain and operate the tunnel at its own costs, and ownership of the tunnel would be retained by the company. The Assistant Legal Adviser pointed out that powers given to the tunnel company would expire on 30 June 2047 and that all its rights and obligations should cease on that date in accordance with clauses 12 and 37 of the Bill. However, the tunnel company might apply to the Governor in Council for an extension of the powers according to clause 12(2). The Senior Assistant Law Draftsman confirmed this understanding. PAS/T supplemented that clause 12 was a general provision relating to land grants and leases which would normally expire not later than 30 June 2047 in accordance with Annex III to the Sino-British Joint Declaration. He also advised that clause 37 mainly provided for cessation of rights and obligations of the tunnel company on the happening of the events described in that clause such as in the event of its winding-up.

Access to North Lantau Expressway and the urban areas

7. Noting the arrangement that vehicles from DB through the tunnel could only travel towards Tung Chung Interchange via a utility service road alongside the North Lantau Expressway (NLE), the Chairman was concerned about the inconvenience caused to DB residents who wished to gain direct access to NLE for passage to the Lantau Link (LL) and the urban areas. He proposed that HKR should consider the provision of a right turn link from the tunnel link road to NLE.

8. In response, PAS/T explained that the proposed tunnel link aimed to provide more direct and convenient road access for DB residents to the new airport and the public transport interchange at Tung Chung New Town. He stressed that the proposed arrangement had been discussed and agreed with HKR taking into account the traffic and transport implications of the road network for North Lantau. Dep S for T supplemented that it would take considerable time to study the implications of various aspects of the Chairmans proposal, in particular, the possible effects of the traffic flow from DB on NLE and LL. At members request, the Administration undertook to ask HKR whether the provision of a right turn link at NLE had been considered before, and if so, what the estimated cost was.

Consultant report on Discovery Bay Road Tunnel Link

9. Referring to the report prepared by HKRs consultant on projections of revenue and operating costs, members requested the Administration to provide further information on the following:

whether the operating and maintenance cost forecasts in paragraph 8 on page 6 of the report were done by HKR or the consultant;
a comparison of the tunnel maintenance costs with the average maintenance costs of other tunnels on a per mileage basis; and
whether the cost of any major cyclical maintenance had been included in the estimated operating and maintenance costs in table 6 on page 9 of the report.

At members request, the Administration also agreed to invite representatives of HKR and the consultant company to the next meeting to discuss issues relating to operation of the tunnel link.

Other issues

10. Referring to the Administrations response in relation to the safeguard against abandoning of tunnel operation by HKR, members expressed that it would be desirable for the Secretary for Transport to mention at the Second Reading debate that efforts would be made to maintain tunnel operation in the interest of DB residents.

11. As to enforcement of the restriction on vehicles confined to Lantau Island, the Chief Transport Officer proposed the use of a coloured permit, which would be easily distinguishable from that for a vehicle not subject to such restriction, to facilitate identification. The Administration undertook to study the matter and sort out detailed arrangements in consultation with the Police.

II. Date of next meeting

12. The next two meetings were scheduled for 8 & 16 May 1997, both at 10:30 am.

III. Any other business

13. PAS/T advised that a set of revised CSAs was being prepared and would be submitted to members for consideration by the next meeting.

Post-meeting note :

14. The meeting ended at 9:25 am.

Provisional Legislative Council Secretariat
15 July 1997

Last Updated on 14 December 1998

Bills Committee on Discovery Bay Tunnel Link Bill

Minutes of meeting held on Wednesday, 23 April 1997, at 8:30 a.m. in the Legislative Council Chamber