1979 — Page 33

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HONG KONG URBAN COUNCIL

ADDRESS BY CHAIRMAN

CHAIRMAN (in English):-Good afternoon, Ladies and Gentlemen, Council is called to order.

MINUTES

The minutes of the meeting held on 8 May 1979 were confirmed.

STATEMENT BY CHAIRMAN

CHAIRMAN (in English):-There was a surplus of $40 million in the Council's workings at the end of the last financial year. Actual cash receipts were $44 million more than the approved estimates of revenue, being an increase of 11.87%. At the same time, payments were down $52.7 million or 9.91% less than the budget. Thus, the estimated deficit of $67.68 million gave way to another credit balance.

But these percentages do not reflect the actual narrow variation of receipts and payments from the original estimates. In reality, all normal revenue sources yielded only slightly more than anticipated; actually nearly half the increase was due to the $26.6 million refunded by the Government for adjustment of salary scales not previously notified to the Council for the preparation of the budget. While payments under most heads of expenditure were below the approved estimates, the difference on capital works alone was $25.6 million less or again almost half the total. Because accounts are kept on a strictly cash basis, they do not include building commitments entered into but not yet completed at the time.

The Council has accumulated $260 million in the last six financial years. It amounts to 51% of the current revenue estimates. It is mostly kept in two reserve funds. But, the main one, the Capital Projects Reserve Fund is hard-pressed enough for the heavy engagements the Council has entered into without choice, given the pressing need to improve the many physical facilities to discharge statutory responsibilities and also to make life happier and healthier for the people. Anyway, $200 million has now been put aside to help pay for building schemes in due time, with another $50 million in General Reserve and $10 million carried forward to the current financial year. Indeed, there were 42 projects under construction at 31 March 1979, costing $474 million but the Council will pay only $147 million as the Government is responsible for $327 million under existing arrangements. There were then another 316 in various stages of planning and development, calculated to cost $1,600 million at prevailing prices, presumably much more when built in the next decade.

HONG KONG URBAN COUNCIL

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In the current financial year there is an estimated deficit of $142 million. Particularly disturbing is the prospect of an estimated loss on recurrent accounts for the first time. There is little leeway for the Council to cut down on expenditure so the need to rationalize all income opportunities is critical once again. Levels of revenue from secondary sources should be raised on a rotational basis as standard policy until they absorb at least in good part the sharply rising direct costs of the functions they are intended to cover. Where the Council deems it proper on grounds of policy to underwrite an activity for community betterment, it should be done consciously for a specific and tenable purpose, and not to subsidize a commercial enterprise for private gain. The Council inherited a rigid financial situation from the time when its receipts and payments were part of the general revenue and expenditure of Hong Kong as a whole. There was then heavy cross-subsidization by the authorities, without the full extent being known precisely. The new Council cannot afford to carry on in this manner as it is now financially responsible for everything it does and builds, and there is no way that it can fall back on extraneous revenue firmly in Government hands. Therefore, the Council has been re-ordering with foresight its own separate financial structure but it has very few choices. Still, it must keep on doing so with political courage. The ultimate course might be to set up some locally viable form of indexation. This could be done by relating fees and charges, perhaps even the rate percentage, to an acceptable and pre-determined combination of relevant yardsticks, and not the cost-of-living index exclusively. This is ahead of thinking here for a while to come. Some hackles might go up in consequence.

For the present, it would be prudent to assess alternatives very closely when building projects and activity programmes are contemplated. The department should be required to make full financial disclosures right at the start, covering not only capital costs but also staff, equipment, maintenance, accommodation and all else, for the select committees to examine every proposition in its totality before committing public resources. There is also the need to fix the order of priority of implementation to forestall a hard run on reserves.

Certainly, a firm and realistic approach will be necessary all the time so as to keep up the present fast rate of progress for the good of all here. Otherwise, the Council might well slacken the pace and the community would suffer as a result. It need not come about though if the Council grasps the nettle firmly.

PAPER

The following paper was laid on the table:-Report to the Urban Council by the Director of Urban Services and Secretary, Urban Council, for the month of May, 1979.

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