CONFIDENTIAL
機密
XCC(76)85.
start on 1st April of the second financial year following the year of borrowing, which would give the Authority a grace period of between one and two years pending the letting of the flats.
Implications for the Authority's rent policies
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Acceptance of all the foregoing proposals means that the Authority will be able to introduce a more flexible rent policy. At the present time, rent is mainly determined having regard to actual operating expenses, depreciation and interest charges. These three elements are by no means notional, because operating expenses and interest charges are actual outgoings, while the inclusion of depreciation charges in the costings are an existing condition of the Authority's borrowings from the Development Loan Fund. The Authority's rents are thus largely cost- based. Because this is the case, the tendency is to fix rent levels in respect of each estate and, in some cases, in respect of individual blocks within the same estates, to reflect the variation in capital cost arising from the phasing of construction.
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A greater degree of flexibility is clearly necessary. If the foregoing proposals are accepted all costs would become notional except for operating expenses, and except that the Authority would be liable to repay its fresh borrowings from the Development Loan Fund. The Authority could then free itself from the requirement to fix rents for each estate having regard to the cost of that estate, and it is envisaged that the Authority would proceed, instead, to fix rents having regard to:
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tenants' ability to pay;
(a)
(b)
(c)
such factors as location, the quality of the
general price levels, and a fair relationship with rents in the private sector; and
accommodation, and other relative advantages and disadvantages.
But, having removed the need for rents to be cost-based, clearly the Authority should be required to show a reasonable minimum rate of return (After depreciation) on capital employed by the Authority. That is to say the Authority would be required to ensure that its total income from all sources is at least sufficient, after meeting all operating expenses, to provide a positive cash flow sufficient to achieve the agreed rate of return after provision for depreciation (from which loan repay- ments would be made). What that rate of return should be is subject to further examination of the Authority's projected cash flow and the amount of capital employed, but it is envisaged at this stage that:
機密
CONFIDENTIAL ##