PLC Panel on Planning, Lands and Works
Future Funding Arrangement of the Sewage Services Trading Fund High Priority Programme
Introduction
This paper informs Members of the proposed future funding arrangement for the completion of the High Priority Programme (HPP) after the closure of the Sewage Services Trading Fund (SSTF).
Background
2.The SSTF was established by resolution of the Legislative Council made under the Trading Funds Ordinance on 11 March 1994. On 4 February 1994, the Finance Committee (FC) approved a capital injection of $6.8 billion from the Capital Investment Fund (CIF) to the SSTF. The capital injection and any interest on unspent balances were to enable the SSTF to meet the costs of the HPP, which comprises -
- Stage I of the Strategic Sewage Disposal Scheme (SSDS);
- Tsuen Wan/Kwai Tsing Sewerage Master Plan;
- Northwest Kowloon Sewerage Master Plan;
- North and South Kowloon Sewerage Master Plan (Stage I);
- East Kowloon Sewerage Master Plan;
- Chai Wan and Shau Kei Wan Sewerage Master Plan; and
- Tseung Kwan O Sewerage Master Plan (minor works).
3.We have substantially completed the Stonecutters Island Sewage Treatment Works under the SSDS Stage I. As regards the six deep underground sewage tunnels, we re-entered the work sites in December 1996 because of the contractor's failure to proceed with the works with due diligence. We awarded a completion contract in July 1997 for the two western sewage tunnels under the SSTF capital funds. We have invited tenders for the completion of the remaining four eastern tunnels. The Public Works Subcommittee (PWSC) has given its support for the funding of the four tunnels under the Capital Works Reserve Fund (CWRF) on 26 November 1997. Subject to the approval of the Finance Committee, we will award the contracts upon completion of the assessment of tenders. We have also made good progress in implementing the Sewerage Master Plans. A schedule showing the latest expenditure forecast for committed projects under the HPP is at
Annex A.
4.On 19 November 1997, the Provisional Legislative Council passed a resolution under the Trading Funds Ordinance to close the SSTF on 31 March 1998. From 1 April 1998, sewage services will be provided on a vote-funded basis. We will continue to implement the capital works projects under the HPP but will require an alternative source of funding.
Future Funding Arrangement
5.As the SSTF is funded by a capital injection from the CIF, the Director of Drainage Services (DDS) is required to return any residual capital of the SSTF to the CIF upon the closure of the SSTF. The resolution setting up the CIF prohibits the transfer of the residual capital from the CIF to the CWRF. Taking into account the payments to be made by the SSTF before 1 April 1998, we estimate that the balance of the capital funds as at 31 March 1998 will be in the region of $2,553.7 million. This is made up as follows -
| | $ million
|
|---|
| Initial capital injection to SSTF from CIF
| 6,800.0
|
| Interest earned on unspent balances to 31 March 1998
| 1,091.0
|
| | 7,891.0
|
| Less | payments made up to 31 March 1998
| (5,337.3)
|
| Balance as at 31 March 1998
| 2,553.7
|
6.With the closure of the SSTF, the DDS will not be able to make further payments to the outstanding works unless an alternative source of funding is available. To meet the contractual obligations and to enable the completion of HPP projects under construction, we propose to fund the outstanding works from the CWRF after 31 March 1998.
7.We propose to inject 24 new items into Category A and two items in Category D of the Public Works Programme, a list of which is at Annex B. We estimate the capital cost of the outstanding contractual commitments to be $3,011.3 million in MOD prices, made up as follows -
| | $ million
|
|---|
| Latest approved project estimates for all HPP projects
| 8,348.6
|
| Less | payments which will have been made by 31 March 1998
| (5,337.3)
|
| Outstanding commitment as at 31 March 1998 (MOD prices)
| 3,011.3
|
The outstanding commitment, if expressed in current prices, does not exceed the remaining balance of the SSTF capital funds as at 31 March 1998.
8.The Administration will seek the approval of the PWSC on 7 January 1998 to fund the outstanding works of the SSTF from the CWRF after 31 March 1998.
Works Bureau
11 December 1997
