Acquisition and redevelopment of bus depots: A Hong Kong land policy and planning case study PDF

Preview

Summary

Habitat International 39 (2013) 75e84 Contents lists available at SciVerse ScienceDirect Habitat International journal homepage: www.elsevier.com/locate/habitatint Acquisition and redevelopment of bus depots: A Hong Kong land policy and planning case study Lawrence W.C. Lai a, b, c, d, *, K.W. Chau ...

Description

Accelerat ing t he world's research.

Acquisition and redevelopment of bus depots: A Hong Kong land policy and planning case study Frank Lorne, Kwong Chau Habitat International

Cite this paper

Downloaded from Academia.edu 

Get the citation in MLA, APA, or Chicago styles

Related papers

Download a PDF Pack of t he best relat ed papers 

Repeat ed Planning Applicat ions by Developers under St at ut ory Zoning: a Hong Kong Case St u… Daniel C W Ho, Kwong Wing Chau FT DLV final hiroaki suzuki T he Coase T heorem and squat t ing on Crown Land and wat er: A Hong Kong comparat ive st udy of t he … Frank Lorne

Habitat International 39 (2013) 75e84

Contents lists available at SciVerse ScienceDirect

Habitat International journal homepage: www.elsevier.com/locate/habitatint

Acquisition and redevelopment of bus depots: A Hong Kong land policy and planning case study Lawrence W.C. Lai a, b, c, d, *, K.W. Chau a, b, c, Ken S.T. Ching a, b, c, Jason W.Y. Kwong a, Polycarp A.C.W. Cheung e, Frank T. Lorne f a

Department of Real Estate and Construction, University of Hong Kong, Hong Kong Royal Institution of Chartered Surveyors, China Hong Kong Institute of Surveyors, Hong Kong d Chartered Institute of Logistics and Transport, Hong Kong e Rating and Valuation Department, Hong Kong f School of Management, New York Institute of Technology, Vancouver, Canada b c

a b s t r a c t Keywords: Coase theorem Leasehold land system Bus garages Public auction Innovations

As a contribution to urban studies and economic geography, this multi-disciplinary paper, predicated on neo-institutional economics, estate surveying, and land use-transport planning, identifies, from an examination of public records, the spatial distribution of the bus depots (garages) of Hong Kong’s two biggest franchised bus companies on their leasehold sites from 1946 to 1998/2011. The research investigates the mechanisms the two companies used to obtain land for developing their depots during the period, the impact of the changes these mechanisms had on innovation, the efficiency of land use, and the locations of the depots resulting from changes in such mechanisms. Ó 2012 Elsevier Ltd. All rights reserved.

The need to ensure the provision of sufficient land for the development of an expanded transport system is a significant omission from the Core Strategy Preferred Options. Paragraphs 7.71e72 state that the option to identify and safeguard land for bus depots and stands was not selected because there was no significant support for it. The lack of significant support is not a valid reason for failing to promote a policy, and the lack of such a policy contradicts the Core Strategy’s intention to plan for improved transport and supporting new public transport facilities. The provision of new and improved public transport services cannot be delivered without adequate supporting facilities, such as bus garages and bus stands. Providing for improved freight facilities can also involve a land requirement. The consideration of such facilities should not be left to specific site policies or major development applications, as this would not enable opportunities to be maximised throughout the borough -London Borough of Hammersmith & Fulham Cabinet (2007: italics authors)

* Corresponding author. Department of Real Estate and Construction, University of Hong Kong, Hong Kong. Tel.: þ852 25030808; fax: þ852 25030808. E-mail addresses: [email protected] (L.W.C. Lai), [email protected] (K.W. Chau), [email protected] (K.S.T. Ching), [email protected] (J.W.Y. Kwong), qes_ [email protected] (P.A.C.W. Cheung), fl[email protected] (F.T. Lorne). 0197-3975/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.habitatint.2012.10.002

Introduction The public representation in the consultation process regarding transport facilities, quoted above, for the London Borough of Hammersmith and Fulham testifies to the significance of land requirements in transport planning, although the average Londoner may not have a keen interest in bus stands or depots, as in the case of Hong Kong. The economic geography of public bus termini and garages (the latter are called depots in Hong Kong) is a neglected area in transport planning and public administration research, not to mention in local land use studies, when evaluated under neo-institutional economic theories. In particular, the question of land supply was generally assumed away in transport engineering modelling research1 just like the firm is assumed away in neo-classical economic analysis, even though such research is often described as “spatial”. One of the salient features of geographical or land use-transport planning is to factor in land and how it is created, allocated, developed and redeveloped. Whereas “space” in the abstract mathematical quest of transport engineering is reduced to a point in a linear network, for space in a geographical or land use study to be operational, it has to refer to concrete and

1 See Kepaptsoglou, Karlaftis, and Bitsikas (2010) for a recent example of such research.

L.W.C. Lai et al. / Habitat International 39 (2013) 75e84

76

Table 1a Depot sites sold by government to bus companies in public auctions. Location (bus company)

Lot no

Method of allocation by government

Purchase price > Upset price?

Current property [redevelopment method]

Premium of lease modification or exchange paid?

1

Chai Wan (CMB)

Sale by public auction

No

Bus depot/car park

NA

2

North Point (CMB)

CWIL 88 (Ex-CWIL 33) IL 7550

Sale by public auction

No

Yes

3 4

North Point (CMB) North Point (CMB)

IL 5532 IL 7178

Sale by public auction Sale by public auction

No Yes

5

AIL 338

Sale by public auction

No

NA

AIL 339

Sale by public auction

Yes

Vacant

NA

7

Wong Chuk Hang (CMB) Wong Chuk Hang (CMB) Kwun Tong (KMB)

625 King’s Road (office building) [Modification Letter in 1997] Island Place IL 8849 [Land Exchange (C/E NO.12353) in 1995] Vacant

KTIL 192

Sale by public auction

Yes

Yes

8 9

Kwun Tong (KMB) Mong Kok (KMB)

KTIL 240 KIL 2111

Sale by public auction Sale by public auction

Yes No

10

To Kwa Wan (KMB)

KIL 6393

Sale by public auction

Yes

11

Camp Street, Sham Shui Po (KMB)

NKIL 2622

Unknown

12

NKIL 3602

13

Shun Ning Road, Sham Shui Po (KMB) Shatin (KMB)

Unknown due to war time loss of conditions of sale/grant, likely public auction Sale by public auction

Millennium City 1 KTIL 733 [Land Exchange (C/E NO.12421) in 1996] Vacant Pioneer Centre [No need modification nor exchange] Merit Industrial Centre [No need modification nor exchange] Manor Centre and Petrol Filling Station [No need modification nor exchange]

STTL 241

Sale by public auction

14 15

Tuen Mun (KMB) Tuen Mun (KMB)

TMTL 80 TMTL 81

Sale by public auction Sale by public auction

6

unique sites conditioned not only by such physical attributes as position, topography, and accessibility, but also to institutional parameters like tenure, ownership, and, above all, market values. Recommendations for depot locations without reference to site values are unrealistic.2 Given the above context and informed by “the corollary of the Coase Theorem” (Lai & Hung, 2008), this paper seeks to contribute to a greater understanding of the influence of the government’s land allocation mechanisms under a leasehold land system on resource use in terms of innovation, externalities, location, and distribution using a qualitative analysis that employs data extracted from government land sales records and Government (formerly Crown) Leases. The case of public bus transport in Hong Kong is interesting for economic geographers e not only because bus companies, as franchisees enjoying exclusive rights protected by the state in certain areas of providing public bus transport, have always been profit-making private enterprises, but also because they operate in a near universal leasehold land system. This means that the state exerts strong influence not just as the franchisor, but also as the landlord of all bus termini and depots. The allocation of leasehold land parcels by the government to franchised companies (which include a number of privately-owned and listed bus companies) has become a politically contentious issue. Many believe that land parcels for depots obtained cheaply by bus companies have been unfairly used for property development by developers who either

2 Transportation planning in North America usually does not face the same high population density conditions as those in Hong Kong. Bus depots in the USA are for connecting distant communities. A bus depot could be in the middle of nowhere where land value is close to zero. Therefore, the problem may be one of choosing a bus depot’s location to minimize transportation costs.

No No information on upset price shown in government gazette Yes Yes

Yes

NA NA NA NA

Merlin Centre and Park [No need modification nor exchange] Bus Depot

NA

Bus Depot Bus Depot

NA NA

NA

own or form joint venture partnerships with the bus companies. This view has been propounded by the popular book by Poon (2006) and underlay the recent query of a Legislative Councillor about bus depot allocation policy (Hong Kong Government, 2011). It also ignores the existence of zoning legislation that restricts the lessee’s common law rights to use land enjoyed under the land Lease by a public body the Town Planning Board (Lai, 1996). The recent work of Lai, Davies, and Cheung (2011), informed by Coasian economic thinking, argued that the state does not merely allocate kerb rights (Klein, Moore, & Reja, 1997), but also actively engages in the provision of implicit considerations by investing in road infrastructure and bus termini planned in tandem with franchised ferry piers, which were provided by the state as part of an implicit contract for the two privately-operated bus companies, China Motor Bus (CMB) and Kowloon Motor Bus (KMB), as franchisees. It revealed that until 1972, bus depots were sold, not granted, by the state as leasehold interests to bus companies. Informed by the ideas of the Austrian economist Schumpeter, Lorne and Lai (2012) further argued that bus depots were critical for innovation by franchised bus companies. They elaborated on the nature of innovation, distinguishing Schumpeterian innovations that shift the long run cost functions downwards by such means as a one-man operation (OMO) from a movement along a short run cost function, such as converting single deckers into double deckers and from a downward-sliding movement of a short run cost function along its associated long run cost function by such means as adding depots. Against this background, this paper examines the impact of alternative institutional mechanisms for the allocation of land parcels under a leasehold land system as inputs for both the bus industry and non-industrial uses on innovations in transport, land use efficiency, and the geographical distribution of depot sites. It focuses on the acquisition of bus depots and the use and

L.W.C. Lai et al. / Habitat International 39 (2013) 75e84

77

Table 1b Depot sites sold by private individuals to bus companies. Location (bus company)

Lot no

Method of acquisition by bus companies

Purchase price > Upset price?

Current property [redevelopment method]

Premium of lease modification or exchange paid

1

Lai Chi Kok (KMB)

NKML 3

NA

Manhattan Hill [No need modification nor exchange]

NA

2

Tau Lin Pei Road, Kwai Chung (KMB) Yuen Long (KMB)

KCTL 215

Privately acquired from Dairy Farm in 1955 Sale for Letters B

NA

Yes

DD120 Lot 3543

DD lots, acquired from other owners

NA

Kowloon Commence Centre [Modification Letter in 1996] Yuen Long Plaza YLTL 449 [Land Exchange (New Grant 3595) in 1989]

2

distribution of these depots from 1945 to the present. In 1972, the geographically segregated monopolies of the two companies (on Hong Kong Island south of Victoria Harbour for CMB and in Kowloon and the New Territories, which comprise the peninsula north of Victoria Harbour, for KMB) was eliminated with the introduction of cross-harbour “tunnel buses” jointly operated by both companies. However, more importantly, 1975 saw the geographic monopolies that had existed since 1953 formally replaced by franchises based on exclusive rights over exclusive routes under a new Public Omnibus (later Bus) Services Ordinance (Leeds, 1986: 57). Besides, the government land policy of selling leasehold land parcels for depot use was replaced by one of selling land lots through “private treaties” (“private treaty grants” (PTGs)). From PRO records, the land allocation process of a depot land sale commenced with the franchised company’s solicitor writing a formal letter to the Colonial Secretariat to apply for a certain site to be used as a bus depot. Then, a valuation of the target site was carried out by government estate surveyors and a set of the conditions of sale for public auction of the site was drafted with an upset price for the auction to be held on a certain date. It is not known how the upset price was ascertained, but from present Lands Department practices, we may infer that it was based on “comparables” such as comparable transactions in the vicinity of the site. The bus company had to bid for the site during the auction. If it won the bid, it paid the premium, signed the conditions of sale (as evidence of a binding agreement with the government) and obtained the land from the government. After the bus company developed the site and fulfilled all the positive covenants of the conditions, it applied to the government for a Crown Lease, which was a deed as the root of title for the property. A PTG is conditional on the payment of a premium and an annual rent, both of which are said to be assessed at the market level. As there is no competitor in a private treaty sale, the price agreed upon may not be a full market price. No published account of when exactly the change in the mode of bus depot allocation occurred exists, so one of the research tasks for the authors of this paper was to find out when the first bus depot was allocated by PTG. Research questions and propositions In economic terms, it can be said that the auction system was superior in terms of static efficiency, as all factors (land in this case) were obtained in a competitive manner. However, this is true only if information can be easily obtained, as in a perfect world of certainty with zero transaction costs (Cheung, 1987; Coase, 1988). If various transaction costs, particularly information costs, exist, the possibility of a winner’s curse would suggest that a winning bidder could be paying above the intrinsic potential value of a project. In situations involving unproven information, particularly in times of uncertainty, it is not uncommon for certain parameters of an auction to be fixed so that a higher incentive for obtaining information is

Yes

provided to the bidders. Examples of auctioning practices in trades of raw jade and diamonds are well-known, and conceptually, the same can be said for the allocation of bus depots or garages. Urban bus depots and the development of their surrounding neighbourhoods are obviously more complex and uncertain than uncut pieces of raw jade or mixed bags of diamonds. However, for the underlying economic reasoning, they are not much different from each other. The parameters that are fixed for the bus depot assignment problem may come off as rather inefficient at first impression. The PTGs, however, exhibit features resembling a case of a market tournament of innovation advanced in a paper by Kobayashi and Yu (1990). This proposition was not well-received by mainstream economists at the time that paper was written, perhaps due to a hitherto ideological bias in the economics profession; but Lai and Lorne (2012) essentially arrived at the same conclusion by demonstrating that a regulated natural monopoly, conventionally treated as a mere seeker of monopoly rent, can be viewed as a vehicle for innovation. There is no need for us to go into an elaborate mathematical proof of the advantages of fixed pricing in a PTG. Suffice it to point out the intuition that with fixed prices, the extra gains from developing routes (and area neighbourhoods) go to the winner, which is less likely to suffer from a winner’s curse. The transaction costs associated with alternative land allocation systems also can be argued to be different, suggesting allocative efforts will also be different, even if a Coasian theorem applied under zero transaction costs would imply an invariance of resource outcomes, per the socalled invariance theorem (Lai, 2007). This paper thus concentrates on the general application of the corollary of the invariance theorem by taking transaction cost considerations into account.3 The first set of research questions is factual: 1) 2) 3) 4) 5) 6)

Where are the depots? When where they acquired? How were they acquired? When was the sale by PTG put into practice? What are their present uses? How many routes were operated by the bus companies each year?

The second set of questions, which is stated in the form of several propositions below, deals with the effects of the shift of the means of leasehold land allocation from a public land auction regime to a private treaty grant regime. The design of this set of questions is set by the answer to Question 4 above.

3 For the background and formal structure of this invariance theorem, see Lai (2007) and Lai and Hung (2008). For the empirical application to land use inquiry using statistical techniques, see Lai et al. (2007), Lai, Wong, Ho, and Chau (2008).

L.W.C. Lai et al. / Habitat International 39 (2013) 75e84

78 Table 1c Depot sites granted by government to bus companies. Location (bus company)

Lot no

Method of allocation by government

Purchase price > Upset price?

Current property [redevelopment method]

Premium of lease modification or exchange paid?

1

Kowloon Bay (KMB)

NKIL 5801

NA

Bus depot

NA

2

Tuen Mun (KMB)

TMTL 82

Allocation by grant e tied in with franchise terms Allocation by grant e tied in with franchise terms

NA

Bus depot

NA

Informed by the corollary of the invariance theorem, we propose to examine three propositions (I, II and III) about the effects resulting from changes in the government’s land disposal method on: I Route development: there could have been significant growth in the number of bus routes. II The immediate environment around each depot site: there could be land use incompatibility in the context of the zoning leasehold and government land observed. III The number and spatial distributions of the bus depots:...