For discussion FCR(96-97)79
on 6 December 1996

ITEM FOR FINANCE COMMITTEE

CAPITAL WORKS RESERVE FUND
HEAD 701 - LAND ACQUISITION
Ex-gratia zonal compensation

Members are invited to approve -

  1. the adoption of a new definition for Zone A under the system of ex-gratia zonal compensation used in the resumption of land in the New Territories, i.e. "New Town Development Areas (namely areas within the New Town boundaries as shown on gazetted outline zoning plans for new towns), and those areas that are affected by essential projects with territory-wide significance"; and
  2. the continuation of the current practice of applying a uniform rate across different compensation zones in the land resumption for a single project, barring any justified exceptions and with the decision on each case resting with the Committee on Planning and Land Development.



PROBLEM

We have completed a review of the system of ex-gratia zonal compensation used in the resumption of land in the New Territories. The review concluded that the system should remain largely unchanged, subject to a number of refinements.

PROPOSAL

2. We propose to -

  1. adopt a new definition for Zone A under the system, i.e. "New Town Development Areas (namely areas within the New Town boundaries as shown on gazetted outline zoning plans for new towns), and those areas that are affected by essential projects with territory-wide significance"; and
  2. continue the current practice of applying a uniform rate across different compensation zones in the land resumption for a single project, barring any justified exceptions and with the decision on each case resting with the Committee on Planning and Land Development.

JUSTIFICATION

3. The current system consists of four compensation zones, namely A to D, with ex-gratia compensation rates in descending order. We have adopted this system to facilitate land resumption in the New Territories for urban development and public purposes. As land in different parts of the New Territories varies in value, it is not appropriate to adopt an across-the-board ex-gratia compensation rate. We have therefore adopted differential rates. The rates for different zones are expressed in terms of varying percentages of the basic rates1 , taking account of the potential use of the land on the basis of its location and proximity to New Town Development areas. Land falling within New Town Development areas has the highest land value and attracts the highest rate under the system.

4. At present, Zone A covers New Town Development areas only. One of the findings of the review is that this definition does not entirely reflect the current policy intention. Since the ex-gratia compensation zones were rationalised into four (see paragraph 7 below), there were three recommendations on zonal upgrading which covered areas affected by essential projects with territory-wide significance, namely the New Airport at Chek Lap Kok, the Container Terminals at Kwai Chung and Black Point Power Station (in the Yung Long - Black Point - Lung Kwu Tan (YBL) case mentioned in paragraph 5 below). Although these areas did not fall within New Town Development areas, we considered the decision to upgrade the zoning of the areas to Zone A justified in view of the scale of development and importance of the projects to Hong Kong. To reflect this policy intention, we propose to refine the definition of Zone A accordingly. It is not practicable to lay down specific guidelines on what constitutes an essential project in this category. The Committee on Planning and Land Development, chaired by the Secretary for Planning, Environment and Lands, will consider each case on its individual merits. In its consideration, the Committee will make reference to precedent cases and seek the advice of the relevant policy branch.

5. We have also considered the current practice of applying one uniform rate across different compensation zones in resumption cases for individual projects. In his review of the YBL case2 , the Director of Audit said that the practice could not be justified under the concept of zonal rates, as approved by the Governor in Council in 1985. He observed that these zonal rates should reflect market values in different areas and not be directly associated with individual projects, except where such projects affect the value of adjoining land holdings. We have, however, taken the view that applying different rates for a single project would lead to charges of inconsistency and apparent unfairness. On these grounds, we propose that the current practice should be re-affirmed, but there can be justified exceptions - such as long stretches of a road across different compensation zones, e.g., in the case of the Route 3 project. The decision on each case should rest with the Committee on Planning and Land Development.

FINANCIAL IMPLICATIONS

6. Continuation of the current practice of applying a uniform rate across different compensation zones in resuming land for a single project will not give rise to additional financial implications. It is not possible to quantify the additional costs arising from the adoption of a new definition for Zone A as each case will have to be considered on its own merits. Any additional amounts will form part of our request for funds under Head 701 Land Acquisition of the Capital Works Reserve Fund, normally made on an annual basis to meet the necessary land resumption costs to be incurred in a particular year.

BACKGROUND INFORMATION

7. The current system has evolved from the pre-1978 system under which we offered exchanges of land by way of Letter B entitlement for resumption of land in the New Territories within layout areas and cash compensation for resumption of land in the New Territories outside layout areas. On 20 December 1978, Members approved, inter alia, the introduction of an ex-gratia zonal compensation system which consisted of seven zones and six rates of ex-gratia allowance for the resumption of land in the New Territories with effect from 1 November 1978 and noted that the then New Territories Development Progress Committee (now the Committee on Planning and Land Development) would be responsible for the determination and revision of the boundaries of the zones. On 9 March 1983, Members approved the enhancement of the rate for Zone A under the system to reflect the discontinuation of the issue of Letter B entitlements. On 18 December 1985, Members approved, inter alia, the rationalisation of the system by combining the seven zones into four as follows -

Zone

Definition

Compensation

A

New Town Development.

120% of basic rate for agricultural land. Valuation + 120% of basic rate for building land.

B

Areas which may be brought under urban development in the near future, either by extensions to the adjoining layout areas due to their proximity to such areas or by reason of their known potential for urban development.

75% of basic rate for agricultural land. Valuation + 75% of basic rate for building land.

C

Areas in which no urban development is planned and which are unlikely to be affected by later extension to layout areas, but where resumptions are required sometimes for purposes directly connected with urban layout development and sometimes for local improvement schemes.

50% of basic rate for agricultural land. Valuation + 50% of basic rate for building land.

D

Areas not included in other zones.

30% of basic rate for agricultural land. Valuation + 30% of basic rate for building land.

8. We completed a review of the current system following the Director of Audit’s review of the YBL case (see paragraph 5 above). The review concluded that the current system has worked satisfactorily and there is no need for major changes, though some refinements are necessary. The major findings and recommendations of the review are as follows -

  1. there are no new circumstances that justify changes to the number of zones under the system;
  2. it is justified to refine the definition of Zone A as set out in paragraphs 2(a) and 4 above;
  3. the Government’s internal procedures for reviewing zonal boundaries should be refined, including where the upgrading of an area does not accord with the prevailing zonal definitions, we will seek approval from the Executive Council and the Finance Committee of the Legislative Council for the upgrading in question and, where appropriate, for the necessary changes to the zonal definitions;
  4. there are no grounds for changes to the Government’s internal procedures for reviewing zonal rates; and
  5. the current practice of applying one uniform rate across different compensation zones in resumption cases for a single project is re-affirmed and should continue (see paragraphs 2(b) and 5 above).

9. We submitted the findings and recommendations of the review to the Governor in Council on 23 July 1996. The Governor in Council agreed that the system should remain largely unchanged, subject to the refinements set out in paragraphs 8(b), (c) and (e) above. The Governor in Council also noted the decision of the former Development Progress Committee (which has been replaced by the Committee on Planning and Land Development) in upgrading the YBL area from Zone B to Zone A.

10. We briefed the LegCo Panel on Planning, Lands and Works on 19 November 1996. The Panel did not have any adverse comments on the above proposals.

Planning, Environment and Lands Branch
November 1996


1 -- The current basic rates of ex-gratia compensation for the resumption of agricultural land and building land are $345 per square foot and $670 per square foot respectively.
2 -- The former Development Progress Committee (which has been replaced by the Committee on Planning and Land Development) approved the upgrading of the YBL area from Zone B to Zone A in March 1993. The Director of Audit carried out an audit review of this case. His report indicated that the upgrading had not been in accordance with the approved zonal definitions. The report was considered by the Public Accounts Committee in May 1995.


Last Updated on 5 August 1999