Drivers could be spared Eastern crossing toll rise
Motorists would be spared a proposed toll increase for the Eastern Harbour Tunnel, and could even pay less, if the owner accepts projections that the crossing would carry extra traffic after the government increased charges for the congested Cross-Harbour Tunnel.
The Transport and Housing Bureau has yet to release the study on toll rationalisation for the three harbour tunnels, but people familiar with the report said the government was inclined to adopt a model that would see a toll rise for the cheapest Cross-Harbour Tunnel and toll cuts for the other two crossings.
For example, an increase of HK$5 for private cars in the Cross-Harbour Tunnel - where the toll is now HK$20 - would be used to reimburse a toll cut of HK$5 for the same type of vehicle in the Eastern Harbour crossing, so the latter would not suffer any loss.
Officials have been trying to persuade the New Hong Kong Tunnel Company, the operator of the Eastern Harbour crossing, to drop a toll rise proposal in favour of the rationalisation plan by the government, which they said may give the company just as much, if not more return.
The plan's feasibility depends largely on whether the company accepts the government's projections.
However, financial expert Raymond So Wai-man is sceptical about such a projection, saying the Eastern Harbour Tunnel has failed to absorb the queues for the Cross-Harbour Tunnel even when it charged less than the more popular government-owned tunnel.
New Hong Kong Tunnel applied for a toll rise of 40 per cent this month. If approved, private car and taxi drivers will pay HK$10 above the HK$25 currently charged. The increase is expected to bring the company extra income of about HK$250 million a year, after taking into account a 13 per cent drop in patronage.
But people familiar with the government-commissioned report said a toll rise and rebate model could divert up to 40 per cent of the Cross-Harbour Tunnel's 121,422 daily trips to the other two crossings. The Eastern Harbour Tunnel would get a bigger share because its charges were closer to those of the Cross-Harbour Tunnel.
If that happened, New Hong Kong Tunnel will see its revenue double from HK$691 million last year to HK$1.24 billion without imposing any rise.
Traffic expert Hung Wing-tat, of Hong Kong Polytechnic University, said that was not impossible.
'A majority of the Cross-Harbour Tunnel's users are professional drivers, who are most price-sensitive. If the Eastern Harbour Tunnel is cheaper and less congested, why wouldn't they use it?' he said
A calculation by the South China Morning Post found that even if only 15 per cent of the Cross-Harbour Tunnel's traffic was spread to its eastern counterpart, the latter would still earn about HK$920 million a year - similar to what it would have made if its toll rise application was approved.
If the Eastern Harbour Tunnel can only attract 10 per cent more traffic from the Cross-Harbour Tunnel, it would still make more than HK$853 million a year - about 10 per cent below its expectation.
The government may have to allow the operator some sort of rise to bridge the shortfall, although the increase would be much smaller - between HK$2 to HK$3 for private car users.
Financial expert So was not optimistic, even of the 15 per cent projection. 'The Eastern Harbour Tunnel could not divert any traffic from the Cross-Harbour Tunnel back when it charged less, why should there be any difference now? Most of the drivers will use the Cross-Harbour Tunnel anyway because of its geographical convenience. Money is not always their biggest concern,' he said.
The Cross-Harbour Tunnel last increased it toll for private cars to HK$20 in 1999, HK$5 more than that for the Eastern Harbour Tunnel. But the price adjustment failed to cut its queues, with the number of trips continuing to rise in both tunnels.
'If I were the operator of the Eastern Harbour Tunnel, I would definitely go ahead with the toll rise. That is the real money. Why should I risk adopting a plan that may or may not give me as much?' So said. 'Their franchise will expire in six years - not favourable for much risk-taking.'
This is why the operator applied for the rise in the first place, a senior executive of New Hong Kong Tunnel said. 'If the government will not extend our franchise, why don't we seize this last chance to maximise our profit?'
The operator requires government approval to raise tolls, but it is guaranteed by law 'reasonable but not excessive remuneration' which means it can opt for arbitration when the outcome does not go its way.
It has been successful - once in 1995 and again in 2005 - in obtaining 50 per cent and 66 per cent toll rises respectively. When the government rejected the application, the arbitrator ruled that the company should be entitled to an internal rate of return of between 15 per cent and 17 per cent. It also said that, to maintain such a rate, a similar increase should be imposed again in five years.
The company said in its annual report last year that its internal rate of return on equity until then was only 12.8 per cent, although it has accumulated HK$4.69 billion since it received the 30-year franchise in 1986 - more than double the shareholders' investment of HK$2.2 billion for the tunnel's construction.
The executive said the company may consider lowering the amount of increase if the government extended the franchise. But an official said that was highly unlikely because the public wanted the government to buy back the tunnel, which is not plausible either as neither parties are able to agree a price.
Officials said earlier that owning two of the three harbour crossings would allow the government to exert much better control over toll levels at the Western Harbour Tunnel - the city's most expensive tunnel.
Its gazette toll of private cars more than tripled from HK$30 in 1997 to HK$100 at present, although the actual charge, or the so-called concessionary rate, was HK$45. Citic Pacific is the largest shareholder of the Western Harbour Tunnel, it also has stakes in the Eastern Harbour Tunnel.
If the owner's proposed 40 per cent toll increase is approved, the Eastern Harbour Tunnel would make annually: $941m