Troubled West Kowloon Cultural District to seek extra HK$11.7 billion for deficits next 15 years
Authority tells sceptical lawmakers loans or bonds needed to close funding gap at controversial arts hub
Hong Kong’s multibillion-dollar West Kowloon Cultural District was called a “fiscal abyss” on Friday as its board planned to issue bonds or borrow loans to fill a funding gap of HK$11.7 billion (US$1.5 billion) in the face of deepening deficits for up to the next 15 years.
The loan plan was revealed at a Legco panel meeting attended by former chief secretary Henry Tang Ying-yen, now chairman of the West Kowloon Cultural District Authority. For the first time since taking up his position last October, Tang delivered a report to lawmakers on the project’s latest financial situation.
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The chairman said the upfront endowment of HK$21.6 billion granted to the authority in 2008 would only cover the design and construction costs for Batch 1 and most Batch 2 facilities but not the remaining Batch 3 facilities. This would result in a capital funding gap of HK$11.7 billion based on 2016 prices to complete the rest of the project.
“We originally envisaged an investment return of 6 per cent every year but due to the financial tsunami in late 2008 the actual annual return only stood at 3 per cent,” Tang explained. “Also, the construction cost has soared by 136 per cent. Therefore, we need to borrow loans or issue bonds to cope with this funding gap for the medium term.”
The construction cost has soared by 136 per cent
However, Tang stopped short of disclosing the exact amount to be requested, noting a financial adviser would be hired to draw up the loan plan.
“The West Kowloon project will start to incur an operating deficit from 2018/19,” he said. “Thereafter, it will face a prolonged and increasing structural operating deficit for running Batches 1 and 2 of the facilities.”
