TNAG-0961-FCO40-1180-Legislation-for-piers-and-harbours-in-Hong-Kong-1980 — Page 14

XCR (64)128

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operations as a whole on a profits basis. After careful consideration of all the circumstances, it is suggested that the existing differen- tiation should be maintained and that a straight multiplication factor of 5 should be applied to the existing rents in determining the rent to be charged on renewal. This factor is a somewhat arbitrary one, but has been proposed after having regard to all the circumstances outlined above. It will result in an increase from 18 cents to 90 cents at the bottom end of the scale to an increase from 25 cents to #1.25 at the top end; the majority would lie in between, increasing from 22 cents to $1.10 in 11 cases and from 23 cents to $1.15 in 195 cases. Annex A contains comparative figures showing the effect of this proposed increase, both for individual piers and for the companies concerned.

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The views of the Port Committee have been sought on these proposals. The Committee has accepted that there is a case for an increase in the rentals payable in respect of the piers; but feels that an increase of the order proposed in one step is unreasonable; and suggests that the increase should be staggered, building up to the proposed figures towards the end of the 15-year period. In support of this view, reference was made, inter alia, to the rise in shipping costs in recent years and the possibility that wharf charges would have to be raised if these costs were further increased by the proposed rise in rents (this would, of course, only apply to a proportion of the piers); and to the free loading and unloading facilities at public cargo- handling prayas.

The Committee felt that the proposals would place the pier-owners at a competitive disadvantage vis-a-vis users of other loading/landing facilities in the port.

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With due deference to the views of the Committee, it is not felt that they provide sufficient ground for varying the proposal set out in paragraph 3 above. In general, the reassessment of Crown rent upon renewal of a lease is based upon a full up-to-date market valuation of the ground. Similarly the premium payable for the modification of lease terms is normally based upon full market values, as are premia for the regrants of non-renewable leases. The Port Committee is arguing for a concession to commercial organisations whose scale of operations does not appear to justify any special concession, if the revised Crown rent is to be impartially assessed as the fair and reasonable rental value. Whilst, therefore, the increase of 400% proposed for these pier leases appears high on a proportionate basis in relation to the existing low rents, nevertheless any special circumstances attending the fixing of the original Crown rent in the immediate post-war years have now passed and, taken absolutely, the evidence of recent tendered rents for other Government piers (ranging from $4.20 to $5.60 a square foot) indicates that the proposed maximum" rental of 1.25 a square foot is by no means excessive. In these circumstances, it is considered that the original proposal namely a renewal rent of 5 times existing rents to be charged upon renewal should be maintained.

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