XN000022-1975-11-05 — Page 17

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WEDNESDAY, NOVEMBER 5, 1975

PROPOSED FAND KEVISION FOR STAR FEDRY AND TRAWAYS

PAID TH LECCO

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THE SECRETARY FOR THE ENVIRONMENT, THE HON, JAMES RODSON, TODAY INTRODUCED LEGISLATIVE MEASURES AIMED AT ÎNCREASING THE FARES, AND WAIVING ROYALTY FOR THE STAR FERRY COMPANY AND THE HONG KONG TRAMWAYS COMPANY.

ANOTHER BILL WHICH SEEKS TO CHARGE ONLY A NOMINAL PERMIT. FEE FOR THE PEAK TRAMWAYS WAS ALSO INTRODUCED, THE FARE INCREASE FOR THIS COMPANY IS BEING MADE DY AN ORDER OF THE GOVERNOR IN COUNCIL.

IN THE CASE OF THE HONG KONG TRAMWAYS IT IS PROPOSED THAT THE NEJ FARE STRUCTURE OF 30 CENTS AND THE MAIVING OF THE ROYALTY FOR THE FUTURE SHOULD BE COUPLED WITH A REQUIREMENT THAT THE COMPANY ESTABLISH A PROFIT EQUALISATION FUND,

MR. ROBSON EXPLAINED THAT PROFITS IN EXCESS OF 15 PER CENT PER ANNUM ON THE FIXED ASSETO EMPLOYED WOULD BE PAID INTO THE FUND. WHEN PROFITS FELL DELOW THE PERMITTED LEVEL, FUNDS COULD BE DRAWN, WHEN NECESSARY, TO FRING THE COMPANY'S PROFITS BACK UP TO 15 PER CENT.

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HE SAID NEGOTIATIONS WITH HONG KONG TRAMWAYS ON THE FORM OF THE PROFIT EQUALISATION. FUND, THE VALUATION OF THE ASSETS AND OTHER RELATED MATHERS WOULD TAKE PLACE IF THE BILL BEFORE THE LEGISLATIVE COUNCH. VERE PASSED.

MR. ROBSON INDICATED THAT THE NEW FARE STRUCTURE FOR THE TRAMWAYS COMPANY AND THE WAIVING OF THE ROYALTY SHOULD "'AVOID FURTHER FARE INCREASES IN THE FORESEEABLE FUTURE* *

IN INTRODUCING A RESOLUTION TO WAIVE ROYALTY FOR THE STAR FERRY COMPANY AND TO INCREASE THE FIRST CLASS FARES TO 30 CENTS AND SECOND CLASS TO 15 CENTS, MR. ROBSON SAID IT WAS INAPPROPRIATE IN THE CASE OF THIS COMPANY TO ASSESS A FAIR RETURN BASED ON A PERCENTAGE OF FIXED ASSETS.

THIS IS DECAUSE THE COMPANY'S ASSETS ARE BASICALLY THE FERRIES IT OWNS AND DUE TO PAST DEPRECIATION THESE HAVE A VERY LOW ASSET VALUE. THIS VALUE IS DIMINISHING RAPIDLY AND THERE IS NO NEED AT PRESENT FOR FURTHER CAPITAL INVESTMENT AS THE SERVICES PROVIDED BY THE COMPANY ARE PERFECTLY ADEQUATE.

MR. ROBSON ADDED THAT IF THE RETURN WERE BASED ON A PERCENTAGE OF FIXED ASSETS IT WOULD LIMIT THE ALLOWABLE PROFIT TO LOWER AND LOWER LEVELS HARDLY JUSTIFYING THE MANAGERIAL EFFORT REQUIRED TO RUN THE COMPANY.

''A PROFIT BEARING SOME RELATION TO THE AVERAGE PROFITS OVER THE PREVIOUS FIVE-YEAR FERIOD IS PROBABLY A MORE REALISTIC MEANS OF ASSESSING FAIR RETURNS," HE SAID.

/ULDER MIS METHOD