C.S. 166
CONFIDENTIAL #2
XCC(78)8
Copy No Page 9
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Corporation stated that the Corporation should be treated for this purpose as if it were a profit-distributing public utility company, i. e. the terms for land grants should not be more favourable to the Corporation than they would be to other such companies, simply by reason of the specific relationship between the Corporation and Government. In accordance with this principle, the Corporation would be expected to pay the standard rental for short term tenancies for its works areas. In the case of the Modified Initial System, the standard rate was $3 per square foot per annum, (the metric equivalent of which, at $32.29 per square metre per annum, was charged to the Corporation); but since then the open storage rate has been revised to $6 per square foot per annum (now $65 per square metre per annum). (The recent Executive Council Information Note XCRI(77)19 refers). The Corporation is, however, a very large user of land for works areas, the Modified Initial System requiring approximately 564, 000 square metres and the Tsuen Wan extension 364,000 square metres for this purpose. If these areas were to be leased on short term tenancies to other parties the total net revenue would be considerably reduced by defaults of payments, fragmentation of areas, intervals between tenancies and by the expense of management. In these circumstances, it is considered that it is appropriate that some of the advantage of letting such large areas to a single and certain tenant should be passed back to the Corporation. It is extremely difficult to estimate precisely the amount of this advantage, but it is considered that the overall revenue derived from all the short term tenancy agreements with the Mass Transit Railway Corporation is probably at least 50% higher than it would be if the areas involved were let separately. It is accordingly proposed that the Corporation, as a bulk and certain tenant, should be permitted to pay only two-thirds of the standard rates in respect of tenancies, both for the Modified Initial System and for the Tsuen Wan Extension, and that the approved principles as set out in memorandum XCC(75) 45 should be amended to this effect.
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The actual practice of how this discount is to be passed on to the Corporation has yet to be worked out, and it may be easier adminis- tratively for the whole of the discount to be deducted from the accounts rendered in respect of tenancies for the Tsuen Wan Extension than to seek to change the rates for existing tenancies of the Modified Initial System. The matter is, however, raised in this memorandum as a matter of principle in that it differs from the policy originally agreed by Council.
Advice Sought
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Honourable Members will be asked to note that, subject to
the approval of the Finance Committee as appropriate:
CONFIDENTIAL #