For discussion FCR(96-97)2
on 12 April 1996

ITEM FOR FINANCE COMMITTEE

CAPITAL WORKS RESERVE FUND
HEAD 710 - COMPUTERISATION
Rating and Valuation Department
New Subhead “Annex III Rent Computer System”
HEAD 162 - RATING AND VALUATION DEPARTMENT
Subhead 001 Salaries

Members are invited to approve -

  1. a commitment of $29,307,000 for the development of a computer system to support the billing and collection of Government rent in accordance with Annex III to the Sino-British Joint Declaration; and
  2. an increase in the ceiling placed on the total notional annual mid-point salary value of all non-directorate posts in the permanent establishment of the Rating and Valuation Department in 1996-97 from $216,681,000 by $21,235,000 to $237,916,000 for creating non-directorate posts to develop, establish and implement the system.


PROBLEM

The existing computer systems of the Rating and Valuation Department (RVD) do not have sufficient functions to handle the billing and collection of Government rent in accordance with Annex III to the Sino-British Joint Declaration.

PROPOSAL

2. The Commissioner of Rating and Valuation (CRV), on the advice of the Director of Information Technology Services (DITS) and with the support of the Secretary for the Treasury, proposes -

  1. to create a commitment of $29,307,000 to develop a new computer system, for integration into RVD’s existing systems, to handle the billing and collection work for the Government rent; and
  2. to increase the ceiling placed on the total notional annual mid-point salary (NAMS) value of all non-directorate posts in the permanent establishment of RVD in 1996-97 from $216,681,000 by $21,235,000 to $237,916,000 for creating additional non-directorate posts to develop and establish the proposed system.

JUSTIFICATION

A new computer system for the billing and collection of Annex III Government rent

3. Paragraphs 2 and 3 of Annex III to the Joint Declaration (Enclosure 1) set out the circumstances in which we will charge an annual Government rent at 3% of the rateable value of the properties concerned (hereinafter referred to as the Annex III Rent). We are already collecting the Annex III Rent for a small number of non-renewable leases (in the urban area) which we have extended in past years. However, most of the Annex III Rent is attributable to the extension of other non-renewable leases in the New Territories and will therefore only be payable from 28 June 1997 (as the leases will expire on 27 June 1997). It is essential to adopt a uniform and standardised approach in collecting the Annex III Rent for all leases to which paragraphs 2 and 3 of Annex III apply.

4. One of the main responsibilities of RVD is to assess the value of property for the purpose of collecting rates. Given RVD’s expertise, we consider it more cost-effective for RVD also to carry out the related work to enable the collection of the Annex III Rent rather than leaving the job to the Lands Department which is currently responsible for collecting Government rent. RVD will be responsible for providing up-to-date rateable values for the properties concerned and issuing demand notes for the collection of the Annex III Rent. The Treasury and the Sub-treasuries in the New Territories District Offices will be responsible for the physical collection of the Annex III Rent.

5. RVD has implemented an Information System Strategy (ISS) Plan consisting of 12 computer systems. This ISS Plan, approved by Members in November 1993, vide FCR(93-94)94, has not included a system to handle the Annex III Rent billing and collection work as we had not drawn up the detailed requirements at that stage. We have now completed a feasibility study of the proposed system to deal with some 1.2 million properties which will be subject to the Annex III Rent. We shall integrate this new system into RVD’s existing systems.

6. The proposed system will provide facilities for RVD to issue periodic demand notes for the collection of the Annex III Rent and to maintain the necessary billing and accounting records. As an integral part of RVD’s ISS computer systems, it will have access to information for the identification of the properties which are subject to the Annex III Rent, their valuation and the maintenance of property details.

7. The main functions of the proposed system are as follows -

    Prepare the Annex III Rent Roll in English and Chinese;
    issue demand notes;
    allow general enquiries;
    maintain rent billing records;
    maintain rentpayers records;
    maintain autopay records;
    maintain arrears records;
    maintain refund records;
    interface with other ISS systems; and
    generate management information reports.

Additional staff for RVD in 1996-97

8. RVD will require 91 additional non-directorate posts in 1996-97 and the early part of 1997-98 to develop and establish the proposed system, as detailed below -

Rank Number of post

Senior Valuation Surveyor

7

Valuation Surveyor

10

Senior Valuation Officer

22

Valuation Officer

49

Valuation Officer Trainee

2

Senior Accounting Officer

1

Total

91

9. We require the additional staff to carry out the following tasks -

  1. 11 staff for programme development work. These RVD staff will work with staff of the Information Technology Services Department (ITSD) to design, develop, test and implement the proposed system;
  2. ten staff for assessing urban area lots which are not subject to rates but will be subject to payment of the Annex III Rent;
  3. 24 staff for establishing the Annex III lot records in the proposed system. This will involve collecting data from the Lands Department’s lease records and integrating such data into the computer system for billing action;
  4. 21 staff for reviewing the Chinese rating descriptions compiled through computerisation in respect of properties not in the current valuation list but which are subject to Annex III Rent for the preparation of the corresponding Rent Roll;
  5. 13 staff for apportioning the rateable value of major special properties such as utilities for the purpose of assessment of Annex III Rent, for providing training to users within RVD and for general administration work related to the integrated system; and
  6. 12 staff for carrying out other supporting tasks, including entering rentpayers’ records into the system.

10. We need to complete all the above tasks before we can put the system into operation. Given the very tight deadline of June 1997, we have less than 15 months to carry out this work. Having examined his existing manpower resources and the department’s commitments, including the General Revaluation to be carried out in 1996-97, CRV has concluded that the provision of additional staff is essential. These additional posts will lapse when the system commences operation.

FINANCIAL IMPLICATIONS

Non-recurrent costs

11. CRV and DITS estimate that implementation of the proposed system will incur a non-recurrent cost of $91,982,000 over a two-year period from 1996-97 to 1997-98. This comprises $29,307,000 for the purchase of computer hardware and software, site preparation, implementation services etc. for which we are seeking Members’ approval of a new commitment; and $62,675,000 for in-house development staff of RVD and ITSD. Details of the non-recurrent cost are as follows -


1996-97
$’000
1997-98
$’000
Total
$’000

(a) Computer hardware

6,481

0

6,481

(b) Computer software

3,102

0

3,102

(c) Site preparation, delivery and installation

238

954

1,192

(d) Implementation services

12,594

3,274

15,868

(e) Contingency (10%)

2,241

423

2,664

Sub-total

24,656

4,651

29,307

Other non-recurrent cost

(f) RVD staff costs

47,948

11,990

59,938

(g) ITSD staff costs

2,365

372

2,737

Sub-total

50,313

12,362

62,675

Total

74,969

17,013

91,982

12. As regards paragraph 11(a), the estimate of $6,481,000 is for the acquisition of computer hardware including processors, controllers, disk drives, communication devices, terminals and printers.

13. As regards paragraph 11(b), the estimate of $3,102,000 is for the purchase of system software and database management software.

14. As regards paragraph 11(c), the estimate of $1,192,000 is for site preparation works including the expansion of RVD’s computer room, electrical installation and cabling, and the delivery and installation of the new computer system.

15. As regards paragraph 11(d), the estimate of $15,868,000 is for the hiring of services for system development and implementation.

16. As regards paragraph 11(e), the $2,664,000 is a 10% contingency on the cost items set out in paragraph 11(a) to (d).

17. As regards paragraph 11(f), the $59,938,000 is the cost for 91 additional RVD staff to assist in the development of the proposed computer system, as described in paragraph 9 above. The cost represents the efforts of 105 man-months of Senior Valuation Surveyor, 160 man-months of Valuation Surveyor, 310 man-months of Senior Valuation Officer, 765 man-months of Valuation Officer and Valuation Officer Trainee, and 15 man-months of Senior Accounting Officer. Creation of the 91 additional posts requires a total NAMS value of $30,198,300. CRV shall offset part of this by the NAMS value released from the scheduled deletion of 29 posts in 1996-97. Accordingly, he proposes to increase the establishment ceiling of RVD in 1996-97 from $216,681,000 by $21,235,000 to $237,916,000. Details are set out in Enclosure 2.

18. As regards paragraph 11(g), the $2,737,000 is the cost for ITSD staff to provide the necessary support in defining system requirements, conducting process re-engineering, performing project management and overseeing the implementation of the proposed system. This comprises the efforts of four man-months of Senior Systems Manager, 14 man-months of Systems Manager, 14 man-months of Analyst/Programmer I, four man-months of Senior Management Services Officer, and four man-months of Management Services Officer I. In terms of posts required, this involves a total of five additional posts, with a NAMS value of $2,827,320. ITSD will meet this requirement from within its establishment ceiling in 1996-97.

Recurrent costs

19. The proposed system will result in additional annually recurrent expenditure of $11,195,000, made up as follows -


$’000

(a) Hardware maintenance

551

(b) Software licence and maintenance

445

(c) Data communications

550

(d) Printing and postage costs

2,387

Sub-total

3,933

(e) Maintenance and support staff

(i) RVD staff cost

(ii) ITSD staff cost

5,124

2,138

Sub-total

7,262

Total

11,195

20. As regards paragraph 19(a), the estimate of $551,000 is for the maintenance of computer hardware.

21. As regards paragraph 19(b), the estimate of $445,000 is for annual licence and maintenance charges for the system and database management software.

22. As regards paragraph 19(c), the estimate of $550,000 is for additional telephone line rental for data communications.

23. As regards paragraph 19(d), the estimate of $2,387,000 is for stationery, printing and postage costs associated with the issue of demand notes for the collection of the Annex III Rent.

24. As regards paragraph 19(e)(i), the annual staff cost of $5,124,000 is to meet the cost of eight posts comprising one Senior Valuation Surveyor, two Valuation Surveyors, one Senior Computer Operator, two Computer Operators I and two Computer Operators II in RVD to provide on-going maintenance and user support to the proposed system from June 1997 onwards.

25. As regards 19(e)(ii), the annual staff cost of $2,138,000 is to meet the cost of four posts comprising 0.5 Systems Manager, two Analysts/Programmers I and 1.5 Analysts/Programmers II in ITSD to provide on-going maintenance and technical support to the proposed system from June 1997 onwards.

Revenue

26. We estimate that we will collect $3.4 billion from the Annex III Rent in 1997-98. We expect that this will increase to $4.8 billion in 1998-99 and to $5.1 billion in 1999-2000 .

Implementation plan

27. Our proposed implementation plan is as follows -

Activities Completion date

(a) System analysis and design

July 1996

(b) Site preparation, computer system delivery, installation and acceptance

February 1997

(c) System operation

July 1997

BACKGROUND INFORMATION

28. We briefed the Legislative Council Panel on Planning, Lands and Works about the proposal on 9 February 1996. Members of the Panel had no objection to the proposal.

29. Separately, we are also preparing legislation to lay down the principal mechanics for the assessment of rateable values and the collection of the Annex III Rent.

Finance Branch
March 1996


Paragraphs 2 and 3 of Annex III to the Joint Declaration

2. All leases of land granted by the British Hong Kong Government not containing a right of renewal that expire before 30 June 1997, except short term tenancies and leases for special purposes, may be extended if the lessee so wishes for a period expiring not later than 30 June 2047 without payment of an additional premium. An annual rent shall be charged from the date of extension equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter. In the case of old schedule lots, village lots, small houses and similar rural holdings, where the property was on 30 June 1984 held by, or, in the case of small houses granted after that date, the property is granted to, a person descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong, the rent shall remain unchanged so long as the property is held by that person or by one of his lawful successors in the male line. Where leases of land not having a right of renewal expire after 30 June 1997, they shall be dealt with in accordance with the relevant land laws and policies of the Hong Kong Special Administrative Region.

3. From the entry into force of the Joint Declaration until 30 June 1997, new leases of land may be granted by the British Hong Kong Government for terms expiring not later than 30 June 2047. Such leases shall be granted at a premium and nominal rental until 30 June 1997, after which date they shall not require payment of an additional premium but an annual rent equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with changes in the rateable value thereafter, shall be charged.


Proposed Increase in the Establishment Ceiling of Rating and Valuation Department

The ceiling placed on the total notional annual mid-point salary (NAMS) value of all non-directorate posts in the permanent establishment of the Rating and Valuation Department in 1996-97 will be increased from $216,681,000 by $21,235,000 to $237,916,000 for creating the following non-directorate posts for the development of the Annex III Rent Computer System -

Rank (a)
Number of post
(b)
Unit NAMS ($)
(c) = (a)x(b)
Total NAMS
($)

Senior Valuation Surveyor

7

807,240

5,650,680

Valuation Surveyor

10

565,620

5,656,200

Senior Valuation Officer

22

332,460

7,314,120

Valuation Officer

49

217,740

10,669,260

Valuation Officer Trainee

2

158,130

316,260

Senior Accounting Officer

1

591,780

591,780

Total

91


30,198,300

Less NAMS value of 29 posts scheduled for deletion in 1996-97

8,963,175

Net Total

21,235,125

Say 21,235,000


Last Updated on 2 December 1998