Rising costs and changes to West Island Line boost cost from HK$8.9b to HK$15.4b, with taxpayers to bear brunt

PUBLISHED : Wednesday, 27 May, 2009, 12:00am
UPDATED : Wednesday, 27 May, 2009, 12:00am

Rising material costs and changes made for environmental reasons have helped to almost double the construction cost of the MTR's West Island Line. The latest estimate for the 3km, three-station extension to the Island Line has risen from HK$8.9 billion to HK$15.4 billion, the government announced yesterday.

Taxpayers will shoulder most of the additional cost, while the MTR Corporation's share has actually been lowered HK$2.9 billion to HK$2.7 billion.

But the Transport and Housing Bureau said the rail operator would have to repay any overestimated amount with an interest rate of up to 9 per cent and would have to pay the extra if the project cost rose further.

The government's share represents the funding gap between the rail link's construction, operation and maintenance costs and the projected income for the next 50 years.

When the project was first endorsed in 2007, the gap was estimated at HK$6 billion, or 67.4 per cent of the total cost, but in the latest review its share has surged to HK$12.7 billion, or 82.4 per cent.

The MTR Corp is paying a smaller share because its projected income for the next five decades is smaller than that made two years ago when the corporation expected a fare rise after its merger with the KCRC, which did not happen.

The bureau blamed the increase on a surge in construction material costs, along with a change in alignment, building methods and enlarged construction areas.

'The MTR only obtained the funds for detailed design in February 2008 and many changes were made after assessment of the environmental impact and surveying works,' a spokeswoman said.

The line, for example, was slightly lengthened to avoid passing under such historic areas as the former Upper Level police station in Caine Road and a tree wall in Kennedy Town.

A tunnel-boring method, instead of the cheaper explosion method, was adopted at a number of sites from Sheung Wan to Sai Ying Pun to minimise nuisance.

The soft soil in the area would also have to be frozen for the work.

In addition, certain passages need to be widened to accommodate automatic walking belts, and 20 high-speed lifts were incorporated because many of the stations will be 80 metres below ground.

The MTR Corporation will also receive funds to buy eight more carriages to avoid overcrowding and maintain the frequency of service on the Island Line.

The spokeswoman said the MTR Corp would be responsible for any further increase in construction material and contract sums.

And if the ultimate cost fell below the existing estimate, it would have to return the shortfall plus an interest rate of 6.8 per cent - the latest rate of return the government earns from investing its fiscal reserves in foreign currency funds - to 9 per cent.

The bureau said the project's social benefit outweighed its costs as the line would not only reduce travelling time between Sheung Wan and Kennedy Town by half, but also help revitalise the ageing district and encourage development. The project will create 5,500 jobs during and after the construction period.

Work is expected to begin within the next two months, after the Legislative Council approves the funding. The railway subcommittee will discuss the matter next Monday.