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The impact of public transport fare increases on inflation also needs to be seen in proper perspective The 8.3% now sought by KMB is expected to result in only a 0.1% increase in the Consumer Price Index. Some members have argued that because KMB shareholders pocketed $1.7 billion from last year's land sale, the company should not ask for a fare increase this year. It must be emphasised that the sites sold were bought years ago with their shareholders' funds in the open market. The sites sold became obsolete and were no longer required for bus operations. The proceeds from land sales is therefore not part of bus operating receipts and under existing law, such proceeds cannot be taken into account in the determination of bus fares. Therefore it would be improper for the Administration to regard land sale proceeds obtained by bus companies as one of the factors to be considered in the determination of a fare increase application.
Mr President, at this point I would like to inform this Council of the outcome of the Administration's study into the feasibility of setting up a "fare stabilisation fund". Following KMB's sale of their depot sites last year, and in connection with their application for a fare increase in 1994, the Governor in Council directed that, in processing future applications for bus fare increases the Administration should consider taking into account land sale proceeds of franchised bus companies. Indeed this is what I announced and of course this is what the Administration has done. Obviously the setting up of any fund must be subject to their being no insurmountable problems. At the very outset we recognised that there were complex legal and technical aspects that had to be addressed. Moreover wider philosophical and policy considerations have also had to be taken into account. We have now completed this exercise. The Governor in Council has advised that this proposal to set up a fund by pumping in proceeds from the sale of sites owned by bus companies should not be pursued. The reasons for this decision are as follows:
(a)
(b)
(c)
The proposal is tantamount to expropriation of private property without compensation. This would be against the rule of law.
A site bought in the open market using shareholders' funds can only be disposed of during a franchise period if the Commissioner for Transport agrees and accepts that the site is no longer required for bus operations. Once such agreement is given, the site then falls outside the ambit of franchise and as such, if it is sold, the proceeds have nothing to do with bus operations.
Past permitted returns on land and buildings are legitimate profits for bus companies under the terms of their franchise and the existing legislation.