CONFIDENTIAL
Given the scarcity of land and the Government's duty as head
landlord to marshall these resources carefully, it would meet the situation adequately if the Urban Council were simply
allowed to enjoy the occupation and use for Council purposes of land allocated by Government for such purposes, on the
understanding that once any land ceases to be required by the Council for such purposes then it will revert free of charge
to Government.
9.
There are two ways of financing Urban Council expenditure on buildings and works. One is to determine an appropriate level of expenditure in Year One, and adjust the initial rate to meet these (as well as recurrent) outgoings; the difficulty would
be to determine the appropriate level of expenditure at this early stage of the scheme. The second (and preferred) way is to
require the Urban Council to finance its buildings and works from
borrowings in the open market; this would put the Urban Council
in the same position as Local Authorities in Britain which are
required to raise loans in the open market (with the Public Works Loan Board's authority) and to seek loans from the Public Works
Loan Board only as a lender of last resort. In Hong Kong of course
the other reason for having a Public Works Loan Board, i.e. to
ensure that Local Authorities do not compete with the Government in the money market, does not exist.
10.
Since the Urban Council will not have any assets (other than its rate income) to offer as security for market borrowings,
the Government may have to be prepared to guarantee such loans; a precedent exists in the Hong Kong Building & Loan Agency who se borrowings (at 8%, repayable in 5 years) are guaranteed by Government. Such schemes would of course be included in the
annual budget to be tabled in Legislative Council. Legislative Council's approval would be needed in any case since such borrowings might lead to a request for a higher rate to enable
the loans to be serviced.
CONFIDENTIAL
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