West Kowloon Over-Budget HK$25.4b – Gov Keeps it Hush-Hush

AM730

13th May 2013

<West Kowloon’s HK$25.4b Over-Budget Kept Hush-Hush, Confidential Documents Show Government Delays Opera House’s Construction to Apply For Extra Funding>

西九低調超支254 董事局機密文件披露 政府啃工程拖建劇院

Since the Hong Kong SAR government approved the HK$21.6 billion budget for the West Kowloon Cultural District, the construction cost keeps climbing and it has shot well over-budget. Last month, the Legislative Council found out that the planned Chinese Opera House* has already gone over-budget by double, from HK$1.3 billion to HK$2.7 billion. Some lawmakers raised concerns last month saying the original funding was almost used up and that the government may have to provide extra funding to complete the project. This concern has now come true. At the latest West Kowloon Cultural District board meeting, a confidential document about the new budget estimate for the whole project was tabled. The total estimated cost went up from HK$21.6 billion to HK$47 billion, or HK$25.4 billion over-budget. To avoid being denounced by the Legislative Council, Carrie Lam Cheng Yuet-ngor, Chief Secretary for Administration, proposed at the board meeting to have government workers handle the majority of the construction works (instead of hiring contractors), and to delay the construction of the second phase of the Main Theater and the medium size theatre so that the total cost could be reduced to HK$28.9 billion, before asking for additional funding. Lawmakershave rebuked the government for playing games with the numbers and failing to manage the West Kowloon project, allowing it to be a bottomless black hole and ignoring the fact that the money spent on it belongs to Hong Kong people.

The West Kowloon Cultural District Project (West Kowloon Project) went substantially over-budget before the stadium construction began. A case in point being that of the Chinese Opera House. The West Kowloon board of directors and the government explained that the main reasons that causing the project to run over-budget are the increased construction cost and the additional park and parking facilities which were not included in the original plan. West Kowloon Authority said that they would seek donations and sponsorships to help complete the project, in order to control the cost.

Although the budget over-run for the West Kowloon project is irremediable, the government intends to keep the situation under wraps. The West Kowloon board of directors, chaired by Carrie Lam, released a report on the revised estimated cost of the project at a recent meeting held late last month. Since the numbers contained in the report are very sensitive, the report was only presented to the directors at the meeting without prior notice. The report’s circulation was also restricted to “eyes only” for the directors and they were restricted as to what notes they could take at the meeting.

Government to Handle Construction For Part of the Project

The most sensitive content of the report is that the total construction cost of the West Kowloon project is far over inflation, from original estimate of HK$21.6 billion to HK$47 billion – a 117% increase. This is even higher than the “Disclaimer for Building Works Tender Price Index (BWTPI)” which stands at 95.3%, an excuse the government has used to excuse multiple cost over-runs. Besides the Chinese Opera House, the construction cost of M+ Museum also went up from HK$4.7 billion to HK$7.7 billion. The government expects that the legislature will be furious should it request the extra HK$25.4 billion funding. Hence, the government came up with an under-the-table solution to allow it to keep a lid on the scale of cost over-runs: the government will handle all the construction for the road and basement parking system, as well as for the cooling system, which could reduce the total cost by HK$8 billion.

Since all the construction projects of the West Kowloon project are expected to have delays, with the completion day estimated at 2020 or later, West Kowloon plans to apply for funding from the next Legislative Council for the second phase of construction works, including the main theatre, medium size theatre and expansion of M+ Museum. These projects at the second phrase are estimated to cost HK$7.2 billion, plus all the various small scale construction works to be handled by the government, the total construction cost is estimated to be HK$28.9 billion. Should the government ask for extra funding from the Legislative Council, the amount would be HK$8 billion instead of HK$25.4 billion, which is the current estimated budget overrun based on the existing construction plans (hiring contractors).

The West Kowloon Cultural District representative refused to provide a direct answer on this paper’s enquiry into the budget over-runs. In an email response, the West Kowloon Cultural District Authority replied that “the West Kowloon Project is at its planning and design stage. The only facility that has an initial design is the Chinese Opera House, we have to get a more detailed design and confirmed construction schedule of the first phase of facilities before we could have a more accurate cost estimate.” The spokesperson also said that “the Disclaimer for Building Works Tender Price Index (BWTPI) went up from 751 in 2006 to 1467 in 2012, hence the key reason for a substantial increase of the estimated total cost is caused by the surge in construction costs.”

According to sources, Ma Fung-kwok, lawmaker and director of West Kowloon’s board, argued with another director of the board Ronald Arculli during a meeting because of the delay of construction of the main theatre and not relaxing plot ratio of the West Kowloon site. Responding to reports of this argument, Ma said “I was not upset, but merely expressing my view. I’m restricted by the confidentiality agreement so I cannot disclose any issues discussed at the board meeting. I cannot confirm nor deny if this quarrel happened. I have been fighting to relax the plot ratio in the past two years as I want to have performing art groups to stay in the West Kowloon District instead of paying for hotels.” Sin Chung-kai, another director of the board said, “it is only a matter of time until these numbers are exposed. I do not think this is over-budget: a HK$21.6 billion funding was given in 2008, only HK$1 billion was spent so far. Also, there are returns on investment, so far there is HK$23.6 billion in the account. I do not think that it is a problem to apply for additional funding from the legislature because of the project delay. The board only wants to apply for additional funding when the first phrase of the project is almost completed instead of applying for a smaller amount of funding now and demanding more later on. As for the basement and cooling, we have to be fair on this: The cost of these was not included in the original HK$21.6 billion funding. These are new projects. If the government pays for it, it is not the West Kowloon Cultural District’s responsibility, but a responsibility of the Civil Engineering and Development Department.”. Based on the document submitted to the Legislature’s Subcommittee on West Kowloon Cultural District Development by the Home Affairs Department on 26th May 2008, the HK$21.6 billion funding applied for covers all costs of the project, including planning, construction and design of core cultural facilities: “(i) it includes the 15 performing arts sites of the two phases of development (12 sites at the first phase and 3 at the second)… (iv) transportation facilities, including shuttle train system and public parking facilities.”

One factor in the budget over-runs for the West Kowloon Cultural District is the cost of the Chinese Opera House rising from HK$1.3 billion in total to HK$2.7 billion for just the first phase of the project. Mathias Woo Yan-wai, Artistic Director of Zuni Icosahedron, ran the numbers on the Chinese Opera House project: with 1,100 seats at the opera house, the average cost is HK$4 million a seat, double the average per-seat cost of Disneyland’s musical theatre in Los Angeles. “This means that the Opera House must have a full-house every night for 37 years in order to break even. This is way higher than the international standard.”

Gary Fan Kwok-wai, member of the Legislative Council’s Joint Subcommittee to Monitor the Implementation of the West Kowloon Cultural District Project, reprimanded both West Kowloon Authority and the Home Affairs Department for dragging their heels over providing clear answers when they were questioned about the construction cost of the project. “Of course we support the idea of developing the cultural industry in Hong Kong, but this does not mean we support pouring money into a black hole. We know that construction costs go up, but not having a cap on the budget is a big issue. It is even worse if the government plans to spend other departments’ money so that it does not need to go through the Legislature for additional funding. This is no different from taking money from the people of Hong Kong, and is a scandal. I would ask the committee to call a meeting urgently to understand the situation. It is the responsibility of Mr. Tsang Tak-shing, Secretary of the Home Affairs Department, to explain each item in the project to the committee. They must not be allowed to play with numbers and fudge the facts.”

Mathias Woo Yan-wai also said that the government is handling the West Kowloon project in a ridiculous way, “it is better not to build the West Kowloon Cultural District at all. It is a scam to claim that the construction costs increase so the cost will be doubled! West Kowloon is not about blocks of buildings, but about promoting the local cultural industry during the process of building the district, allowing local architects to participate in the design and planning of the project. However, at the moment, every aspect from construction, planning to consulting works are all being handled by foreign companies. Every consultant report costs a fortune! The Hong Kong SAR government are just like con artists: pay me more, it will all be better if you pay a bit more! I don’t believe the West Kowloon Cultural District can be completed, even if injecting an additional HK$20 billion, simply because new costs will arise day after day.”

A spokesperson from the West Kowloon project said that the original HK$1.3 billion estimated cost of the Chinese Opera House was based on advice from the Consultative Committee on the Core Arts and Cultural Facilities of the West Kowloon Cultural District. There was no detailed design in the original plan. At the moment, the revised HK$2.7 billion estimated cost is based on the first phase of the Chinese Opera House, including new facilities, parking, retail, F&B and entertainment facilities. Hence, one should not compare the new HK$2.7 billion estimated cost to the original HK$1.3 billion directly.

 

Spokesperson from the West Kowloon project said that the original HK$1.3 billion estimated cost of the Chinese Opera House was based on the advice by Consultative Committee on the Core Arts and Cultural Facilities of the West Kowloon Cultural District. There was no detail design in the original plan. At the moment, the revised HK$2.7 billion estimated cost is based on the first phrase of the Chinese Opera House, including new facilities, parking, retail, F&B and entertainment facilities. Hence, one should not compare the new HK$2.7 billion estimated cost to the original HK$1.3 billion directly.

Editor’s Note:
* The Chinese Opera House at the West Kowloon Cultural District is officially named “Xiqu Centre”. Xiqu is the Mandarin transliteration of Chinese opera. There was massive public outcry when the official name was first announced as the people of Hong Kong felt that the name does not (a) help any non-Mandarin speakers to understand what it means, (b) the translation “Chinese opera” is accepted through common practice; (c) even if transliteration is used, it should be based on Cantonese, the official language used in Hong Kong as opposed to Mandarin which is the official language used in China; (d) the sense of native consciousness is on the rise in Hong Kong, and the public has become more and more against Chinafication (or colonisation according to some commentators and significant numbers of the public). nI Hong Kong, language is one of the bridgeheads that needs to be protected before the people of Hong Kong loses all their roots and identity.

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