LegCo Panel on Planning, Lands and Works

Clerk in attendance :

Miss Odelia LEUNG

Chief Assistant Secretary (1) 1

Staff in attendance :

Mrs Mary TANG

Senior Assistant Secretary (1) 2

I. Confirmation of minutes of meetings
II. Date of next meeting and items for discussion
III. Information papers issued since last meeting
IV. Proposed charging and penalty system for road opening works
V. Ex gratia zonal compensation
VI. 1996-97 Water Tariff Revision Proposal
VII. West Kowloon Reclamation-remaining hinterland drainage works and sewerage network package 1

I. Confirmation of minutes of meetings

(LegCo Paper Nos. CB(1)168, 300 and 349/96-97)

The minutes of meetings held on 6 August, 8 October and 15 October 1996 were confirmed.

II. Date of next meeting and items for discussion

(List of outstanding items for discussion 1996-97 tabled)

2. Members agreed to discuss the following subjects at the next Panel meeting scheduled for Tuesday, 17 December 1996 -

1. Task Force (Black Spots);
2. Land exchanges under Helping Business Programme; and
3. Consultation paper on Town Planning White Bill.

3. Members noted that the Administration had provided supplementary information regarding the signing of the supplemental agreements with contractors for the Passenger Terminal Building works (information paper issued vide LegCo Paper No. CB(1)242/96-97). They agreed to hold a special meeting to further discuss this subject and the related issues.

(Post-meeting note: the special meeting was scheduled for 12 December 1996 at 8:30 am)

III. Information papers issued since last meeting

5. Members noted that no information papers had been issued since last meeting.

IV. Proposed charging and penalty system for road opening works

(LegCo Papers Nos. CB(1)289/96-97(01), 1970, 1982, 2009 and 2021/95-96)

6. Mr P J Berry explained that the proposed charging and penalty system was intended to tighten control over promoters and contractors in connection with road excavation works and was devised in response to the Director of Audit’s report in 1991 on the need for measures to reduce delays in the completion of public utility works on roads. The idea was supported by the Public Accounts Committee and the Finance Committee. The Lane Rental Scheme was tried out between July 1992 and July 1993 but the Scheme was found to be unviable in terms of costs and complexity of procedures involved. The proposed charging and penalty system was meant as a simple control mechanism based on the principle to recover full costs incurred by the Government for administering the Excavation Permit (EP) System.

7. The Chairman opined that members and the public were most concerned about the reduction in delay in completion of road excavation works which were the source of inconvenience to the public. There was also the concern about coordination among different utility companies and the need for them to adhere to EP conditions. His comments were echoed by some members who were of the view that a penalty system should be devised in such a way that it would effectively deter utility companies from violating EP conditions.

8. Mr Albert CHAN said that the Democratic Party basically supported a charging system but had reservations about the cost recovery principle underlying it. He pointed out that the original intention for the introduction of a charging and penalty system was to reduce unnecessary delays in road works. It was not intended that the system should be used as a means to recover costs and increase revenue. By combining the charging system with the cost recovery principle, the Administration had confused the two issues which should be dealt with separately. Furthermore, the low level of fee which was set at $60 per day for the duration of the validity period or of the extended period of the EP would not be a sufficient deterrent. He queried whether the charging system would equitably apply to Government departments.

9. In response to members’ concerns, representatives of the Administration made the following points -

1. The principle of cost recovery was in line with general policy that the user paid for the service provided (rather than the taxpayer) and this principle was applied in setting the different levels of fees under the proposed charging system. The Administration intended to recover the full costs incurred for vetting applications, issuing EPs and carrying out inspections to ensure compliance with EP conditions. The exact fee levels would be subject to review and adjustment as necessary. The total costs borne by 11 utility undertakings were estimated to be around $70 million per year.
2. The daily charge was not intended as a penalty, but was part of the cost reimbursement policy. (To impose a higher charge would result in a profit to Government.) A flat non-adjustable rate was proposed because any flexibility would result in the same problems found with managing the Lane Rental Scheme.
3. The proposed penalty system involved the setting up of a prosecution team to take actions against contractors for breach of any EP conditions, which was already an offence under section 8(4) of the existing Crown Land Ordinance (CLO), Cap. 28 and carried a maximum fine of $5,000 and six months’ imprisonment. As the maximum fine had remained unchanged since the enactment of the CLO in 1972, the Administration proposed to raise it to $30,000 to reflect the severity of the offence and a similar purchasing power by current standards.
4. Contractors who failed to take reasonable measures to complete their road works on time would be imposed with stricter requirements in their future applications. In extreme cases, the Administration would consider terminating the continuation of the road works.
5. The Administration would continue to require permittees to use plates to cover road openings where necessary as temporary measures to mitigate inconvenience caused to traffic and to pedestrians.
6. The Urban Services Department, the Regional Services Department, the Drainage Services Department and the Water Supplies Department would also be charged for EPs.

10. On the control over frequency of road excavation works, Mr T K TSAO explained that the Highways Department would not normally allow road excavation works within five years of the construction/reconstruction of road projects. Meanwhile, for roads which had been re-surfaced, road excavation works would not be permitted within one year of its re-surfacing. Prior to undertaking any road construction works, the Highways Department would arrange to inform all utility companies so that their road excavation works could tie in with the construction works, thus minimizing the frequency of openings. Only in cases of emergency repairs or of an urgent need to increase the capacities of utilities supply would subsequent re-openings be allowed within the five-year period. Detailed justifications were however required from the utility companies concerned.

11. As to the definition of permittees under the proposed penalty system, Mr C K NIP explained that both the promoter and the contractor would be deemed as permittees and prosecution action could be taken against either or both of them, as the case might be, if they were found to have breached any EP conditions.

12. Referring to the Computerized Utility Management System (UMS), members noted that the processing of EP applications would be shortened from 14 days to 6 days upon its implementation. The UMS would enhance coordination of road excavation works through the provision of more information on the location and progress of these works.

13. As regards the number of staff deployed to monitor the road excavation works, Mr TSAO stated that there were about 90 staff members who were responsible for different districts.

14. On the distance covered by an EP, Mr TSAO explained that each permit covered an area enclosed in a circle of 450 metres diameter. Should a project cover an area larger than this, the promoter would need to apply for more than one EP.

15. A member suggested that the Administration should consider the feasibility of constructing underground tunnels beneath major roads to house all utility ducts, thus dispensing with the need for road excavation works. In response, Mr Berry stated that there were practical difficulties as well as cost constraints in constructing these tunnels. Mr TSAO supplemented that consultancy studies had been conducted on the feasibility of constructing underground tunnels. The idea was dropped having regard to the immense traffic problems which would arise during construction, the high costs and the security risk involved. Besides, underground tunnels could not entirely eliminate road opening works which would still be required for utility installations in respect of newly constructed buildings.

V. Ex gratia zonal compensation

(LegCo Paper No. CB(1)289/96-97(02))

16. On the question as to whether additional resources were needed after refining the definition of Zone A under the ex gratia zonal compensation system, Mr KEEN stated that the additional costs would be project specific and included in the request for funds under Head 701 - Land Acquisition of the Capital Works Reserve Fund, which was normally made on an annual basis to meet the necessary land resumption costs to be incurred in a particular year. No additional manpower were anticipated as the proposal would not affect the workload of the Committee on Planning and Land Development.

17. As for appeal channels, Mr KEEN explained that land owners who were not satisfied with the ex gratia compensation could appeal to the Lands Tribunal under the statutory regime.

VI. 1996-97 Water Tariff Revision Proposal

(LegCo Paper No. CB(1)338/96-97)

18. Mr K K KWOK explained the justifications for the proposed increase in water tariff for 1996-97 by highlighting the salient points of the paper. He stressed that waterworks expenditure had been rising steadily as a result of the expansion of the supply network to serve new development areas and new housing projects, the contractual purchase of water from China, new and improved customer services and inflation in general. The proposed increase in water tariff was necessary to reduce the rate of growth in the level of Government subsidies and was broadly in line with inflation. He drew members’ attention to some of the measures being or to be adopted by the Water Supplies Department (WSD) in improving efficiency (Annex B to the paper).

19. Some members queried whether the Government had purchased from China more water than was necessary given that the amount of water consumption had been declining as a result of relocation of industries out of Hong Kong.

20. In response, Mr M S HU made the following points -

1. The water supply agreement between Hong Kong and the Chinese Government was signed in 1989 after a careful analysis of the need for water in the community. The agreement was made on a long term basis in order to ensure a guaranteed supply of quality water in the most economic manner up to the year 2000.
2. At the signing of the water supply agreement in 1989, water consumption over the past years was increasing at an average rate of 6% per year. With the relocation of industries outside Hong Kong in the nineties, the growth in water consumption rate began to decrease. The current rate of increase in water consumption was around 2% per year and the amount of water purchased from China was fixed at an annual increase rate of about 3% of the total demand. It was a matter of principle that the terms of water supply agreement should be adhered to despite of fluctuations in water consumption and in the amount of rainfalls.
3. The amount of water purchased from China was insufficient to meet the needs of the Hong Kong people. Rainfalls accounted for some 20% to 30% of the water consumed. The amount of water consumption reflected in the finance accounts prepared by the Treasury did not include flushing water and water lost through leakages, etc.

21. On the financial position of the WSD, Mr KWOK stated that discounting the contribution from rates and free water allowance, the WSD actually incurred a deficit of $1.9 billion in 1995-96. Even if the proposed increase in water tariff was approved, the deficit would still amount to $2.4 billion in 1996-97.

22. Members opined that given that water was a basic necessity, the Government should use its reserves to subsidize water supply instead of increasing water tariff to meet inflation costs. In reply, Mr KWOK stated that water supply had all along been heavily subsidized by the Government. Under the current tariff structure, the first tier of 12 units of fresh water and 30 units of flushing water were free. Presently, expenditures incurred for expanding supply network to serve new development areas and new housing projects were borne by the Government. The proposed increase would not have a significant impact on consumers as 16% of domestic consumers would continue to enjoy free water supply. Even with the proposed increase in water tariff, the Government would be subsidizing 48% of the operating expenses. Without the proposed increase in water tariff, the projected deficits would climb up to $4.7 billion in 2000-01, representing 63.4% of the operating expenses. If the amount of Government subsidies was to increase at a rate in line with the projected rate of inflation, it would still be necessary to increase water charges by 12.1% annually from 1997-98 to 2000-01.

23. Regarding the means to improve efficiency and reduce operation costs, Mr KWOK said that apart from the measures set out in the Administration’s paper, the establishment in WSD had been frozen for 1996-97. The implementation of new systems and facilities were managed by existing staff redeployed through savings in other areas. The water tariff in Hong Kong was low as compared with that in most developed countries.

24. A member pointed out that as the first 12 units of water were provided free on a per meter basis without regard to the size of the household, low income families living in crowded conditions and sharing a common meter would not benefit under the present tariff structure. In response, Mr Fred YU stated that recent studies undertaken jointly by the Census and Statistics Department with the Housing Department indicated that families comprising eight or more members constituted less than 1% of the total number of families and many of them were receiving public assistance. Public assistance recipients could claim allowances for utilities under the Comprehensive Social Security Assistance Scheme.

1. the projected annual water consumption from 1996 to 2000;
2. the amount of water purchased from China and its costs incurred on a yearly basis from 1996 to 2000; and
3. the reasons why no charges had been collected on 300 million cubic metres of water, which amounted to one-third of the total water consumption.

VII. West Kowloon Reclamation-remaining hinterland drainage works and sewerage network package 1

(LegCo Paper No. CB(1)323/96-97)

26. Mr S S LEE briefly explained the justifications for the proposal to increase the Approved Project Estimate under the West Kowloon Reclamation-remaining hinterland drainage works and sewerage network package 1. According to Mr LEE, the major difficulty encountered with the works was the numerous utilities uncovered during the course of construction. This had given rise to the need to divert the existing facilities, which was both costly and time-consuming. The adverse ground and weather conditions led to further complications. Additional expenses were needed to introduce programme recovery measures to expedite the works with the aim of completing the majority of them before the onset of the wet season in 1997. The Administration therefore considered it necessary to seek an increase in the Approved Project Estimate from $718 million by $280 million to $998 million in money-of-the-day prices.

27. On the progress of the drainage works, Mr Y C LO explained that most of the drainage works at reclamation sites had been completed. The remaining works yet to be completed involved utility diversion and drainage works across roads which were the most difficult parts of the project.

28. In response to the Chairman’s query on the responsibility of the utility companies for maintaining accurate records on utility installations, Mr LEE explained that all the available records of underground utility installations were provided by the utility companies at the design stage of the works. However, since most of the drainage works were done within old districts like Yaumatei and Mongkok, many of the utility installations were uncharted. The accuracy of the available records was far below expectation as most of the utility installations were laid several decades ago. As a result, a lot of excavation works were needed to expose existing facilities and to plan for their diversion. While the utility companies were responsible for diverting their own utility installations, however, if the diversion works took longer time than was normally allowed under the contract, any prolongation costs or additional works arising from the utility companies’ diversion works would have to be borne by the Government.

1. whether utility companies were required to ascertain the accuracy of their records of underground installations before furnishing them to the Government;
2. whether the Government would consider including the requirement at (a) in future agreements to be entered into or renewed with utility companies; and
3. whether the Government intended to make a claim against the utility companies concerned for the additional works needed to overcome utility obstructions in the present project.

30. As regards whether the contractors should bear the risk of inclement weather under the terms of the works contract, Mr LEE explained that in line with the normal practice, the contractors were allowed to extend the time for completion of the project if rainfalls should exceed a specified level.

31. The Chairman asked if the expedition of the project was necessitated by the advanced opening of the Western Harbour Crossing. Mr LEE replied that this was not the case. The project was intended to be completed by June 1996 but was delayed due to the difficulties encountered as mentioned in the paper. Programme recovery measures had to be introduced in order to complete the works before the onset of the wet season in 1997, given that rainfalls would hinder the progress of drainage works.

32. Concluding the discussion, the Chairman reminded members that the proposal to increase the Approved Project Estimate of the project would be submitted to the Public Works Subcommittee on 4 December 1996 and members who would like to obtain further information from the Administration on the project might wish to do so before this date.

33. There being no other business, the meeting closed at 12:45 p.m.

Legislative Council Secretariat
17 December 1996