CONFIDENTIAL
XCX(92)1
(b) Airport support facilities - land for airport support facilities should be valued on the basis of an industrial plot ratio of 2.5 in accordance with the policy currently used at Kai Tak and the AA should be required to pay the premium for such land.
(c)
Airport related uses - the AA should be required to pay full market value premium, appropriate for the various uses, for such land.
10
In valuing these various elements, current figures for comparable types of land in other parts of Hong Kong have been taken on the assumption that the Airport Island is formed and serviced and the road and railway are open. As this situation will not occur for about six years, it is necessary to discount these figures to reflect this. This produces a total premium of about $10 billion. While the cost and revenue figures are still being refined, it appears that the revenue will be less than the estimated cost of the land formation and servicing works to be undertaken by the AA. In view of this, the whole of the Airport island should be granted to the AA at a nominal premium in 1992.
Financial Implications for the Airport Authority and Government
11
As mentioned in paragraph 5, the airport financing plan currently being taken as a 'base case' by Government's consultants, Wardleys, assumes that the AA pays no premium to government for the land grant. In the crucial early years of the project, up to 2004 (when it is expected that the first major tranche of the Authority's borrowings will be fully paid off), revenues expected from the development of the airport- related and airport-support facilities would represent 24% of all AA revenues.
12
Any approach to the assessment of premium which resulted in the AA paying a large premium to the Government would have a potentially serious adverse impact on the financial viability of the project in its early years. If, for example, it were to be argued that, in the case of the airport- related and airport-support areas, premium should be assessed and the cost of forming the land be deducted pro-rata (as opposed to the cost of forming the whole airport island being deducted) there would be a premium of about $8.2 billion due from the AA in 1992 on this part of the island.
Executive Council