Background
According to records, the Policy on Private Recreational Leases(‘’PRL”) was first introduced in 1969 to promote sports development and provision of recreational and sports facilities (“the Goal”). In the early days under the British Administration, there was a shortage of public sports and recreational facilities in Hong Kong. In this connection, the Government granted sites at nil or nominal premium under PRL (“PRL sites”) to private clubs which were committed to promoting the Goal. This arrangement was subsequently extended to non-profit-making organizations such as social welfare bodies, religious organizations, uniformed groups, national sports associations (NSAs), district sports associations and civil service unions, which mainly run sports clubs for their members’ exclusive use.
The objective of the 1969 Policy was to provide sports facilities that were less popular or not provided by the Government at the time, so as to promote sports development and public participation. According to some archived documents, the British Administration took into account the interest of the “privileged class” in implementing PRL policy decision, as the PRL sites served as “an important outlet for the upper-middle class and business circles”. Without these PRL sites, Hong Kong could lose some of its attractiveness as an ideal place for such a privileged class to live and work in.
Present Situation
The current PRL policy is mainly based on the 1969 Policy approved by the Governor in Council more than 30 years ago. No major policy revisions have been made since 1979, except the “Opening-up Schemes” endorsed by the Executive Council in July 2011. Such “Opening-up Schemes” allowed more public access from the original maximum requirement of 3 sessions of 3 hours each week to a minimum of 50 hours per month (“the 1979 PRL Policy”).
At present, there are 66 sites under PRL; 27 of them are held by 24 private sports clubs and the remaining 39 sites have been granted to non-profit-making organizations. The total area granted under the PRL policy is approximately 4,077,323 square meters (407.73 hectares, ha.). The total area granted to private sports clubs is approximately 3,405,765 square meters (340.58 ha.), accounting for approximately 83.5% of the land area.
In essence, the current PRL policy results in heavy subsidies to the private sports club in occupying precious land resources through nil or nominal premium. The subsidies provided by the Government is disproportionate to the social benefits brought by some of the private sports clubs. In the past, the Audit Commission had pointed out that some lessees failed to meet the “opening-up” requirement and breached lease conditions by allowing the premises for commercial purposes, such as providing catering and beauty service. In view of the outdated policy and land shortage in Hong Kong, there is an urgent need for an overall review of the PRL policy.
Case study
By way of illustration, we have reviewed four private sports clubs, namely Hong Kong Golf Club, Hong Kong Craigengower Cricket Club, the Filipino Club, Jardine’s Lookout Residents’ Association, to show that there is room for improvement of the current PRL policy. We also studied the operation of a non-profit making organization, the South China Sports Association, in order to draw a comparison with the operation of private sports clubs.
(1)The Hong Kong Golf Club
The Fanling Golf Course (FGC) is situated at Lot No. 1 Fan Kam Road, New Territories, and occupies the largest piece of land under PRL (about 170 ha) among all other private clubs. It has approximately 2,660 members and only pays an annual rent of $1,000. FGC’s 21-year lease with the Government, signed in 1999, is due to expire in 2020. If FGC were required to pay market rates and Government Rent, it would have paid a monthly rent of over HK$6 million in 2016/2017, i.e., the Government is subsidising FGC approximately $80 million per annum. In other words, the Government has subsidized a private sports club with a small size of membership to take a piece of land of great value.
The Hong Kong Golf Club has frozen its membership since 1986 while the market price of its second-hand membership keeps rising (around $1.7 million). Applications for membership are subject to the approval of the Club, which will review the applicant’s background and has discretion in admitting members. Besides, the actual public usage is very limited. In relation to the Club’s function as a training base, and so far, it is noted that there is only one female golfer qualified for LPGA Tour. Some comments argued that there is still plenty of room for improvement on the support to professional golfers and amateur alike. In fact, FGC is not the only golf course which can provide such support to golf sports in Hong Kong. For instance, there are other golf courses, like the one at Kau Sai Chau, Sai Kung that also contribute to the development of golf.
On the other hand, there are other factors to be taken into account in evaluating whether to resume FGC. In fact, the Club, founded in 1889, is one of the oldest and the most prestigious golf clubs in Asia or even around the world. The Hong Kong Open, being the city’s oldest sporting event and having long been recognized by the European PGA Tour, has always been held at the Club’s Fanling course since 1959. It is worth noting that 2018 marks the 60th anniversary of the Hong Kong Open.
Moreover, there are some technical concerns regarding the resumption of the land leased to the Club, for instance, conservation of historic buildings, old and valuable trees and tombs. Any FGC development proposal will also involve widening the Fan Kam Road, large-scale tree removal and the relocation of aqueduct for Dongjiang water mains. It has recently been reported that Fan Kam Road was once blocked because of unexpected incidents, resulting in serious traffic congestion in the North District. Whether or not FGC will be developed, it is necessary to widen the Fan Kam Road.
In conclusion, the current situation with FGC is far from satisfactory. On one hand, the Hong Kong Golf Club carries unique historical and social values. On the other hand, there is an urgent need for the Government to redress the social wrongs asidentified above, since the relevant PRL is due to expire shortly in 2020.
(2) The Hong Kong Craigengower Cricket Club
With 3,190 members, the Hong Kong Craigengower Cricket Club (HKCCC) is situated at 188 Wong Nai Chung Road, Happy Valley, which is about 12,203 square meters. HKCCC’s 15-year lease with the Government, signed in 2011, is due to expire in 2026. HKCCC is bound to pay a nominal premium of $1,000 per annum. Under its Articles of Association, one of the objectives is “to promote the games of Cricket, Tennis, Lawn Bowls and other sports and pastimes, and social intercourse among the residents of Hong Kong irrespective of race, nationality or creed.”
It is said that HKCCC has not actively promoted the cricket sport. With over 10,000 square meters of area, HKCCC does not provide any competition venue for cricket games. According to records, there is no tradition of holding international cricket competition for HKCCC. Its Cricket Team only paid a few overseas visits in 2016 and 2017. Besides, only a few of its Fung Wong teammates attracted media attention, while it did provide a venue for hosting the Hong Kong International Bowls Classic 2012, 2014 and 2016.
There is also reservation as to whether it is necessary to provide bowling greens in central business areas like Wanchai and Causeway Bay, where HKCCC is located. Furthermore, most of the sports facilities provided by HKCCC overlap with the public sports centres operated by the Leisure and Cultural Services Department (LCSD) in the area. The entrance fee, the monthly subscription fee and the ordinary membership fee of $350,000 are on the high side. The general public can only have limited access to its facilities, and the actual usage might be far below the committed “opening-up” hours as the specific figures submitted to the Home Affair Bureau about the actual usage of by HKCCC cricket facilities (excluding other catering facilities) are merely calculated by reference to the total of open hours of all types of facilities. According to some reports, HKCCC has “outsourced” four restaurants to an outsider for more than 14 years. All in all, the Government subsidy to HKCCC, in the form of PRL, seems to be disproportionate as to its contribution to the community.
(3) The Filipino Club
The Filipino Club is situated at 10 Wylie Road, King's Park, Kowloon, which is about 2,819 square meters. Since the number of its members is very small, it has installed a mobile phone base station and leased a restaurant to an outsider in 2015, in order to support its operation, management and maintenance funds. Moreover, rarely have we seen international sports competitions being held by the Filipino Club, and we did notice a few competitions such as the Ronson Au Memorial Mixed Fours Competitions, the Tiger Bowls 2011 and the Filipino Club Invitation Tournament 2017 being held in recent years. Besides, the Club is intended for social intercourse among the Filipinos and holding sports events. However, according to the Club’s Company Information, its users or frequenters are mostly Hong Kong locals instead of the Filipinos. An applicant to membership must be recommended by two current members who hold Hong Kong permanent identity cards, and this increases the difficulty for the Filipinos to apply for membership. In addition, most of the sports facilities provided by the Filipino Club overlap with those provided by the public sports centres under the Leisure and Cultural Services Department (LCSD) in the district. Therefore, one may argue that the Club’s contribution to the promotion of sports development and provision of sports facilities in Hong Kong is very limited.
The Filipino Club should revisit its objectives and act accordingly. For instance, it may consider holding more activities to promote cultural exchange between the Philippines and the local Hong Kong community.
(4) The Jardine's Lookout Residents' Association
The Jardine’s Lookout Residents’ Association (JLRA) is situated at No. 2 Creasy Road, Jardine's Lookout. It covers about 12,406 square meters (about 1.24 ha.) and the average unit rate is $0.997. The “holding over” letter (which is a transitional arrangement to cover the period from PRL expiry to completion of renewal procedures) issued to the Association by the Government in 2011 is due to expire in 2018. It is bound to pay a nominal premium of $1,000 per annum. If the Association were required to pay all the rates and Government rent, it would have had to pay a monthly price over $338,000 in 2016/2017. The actual usage of club facilities is relatively low. According to the record in 2013, the usage rate of the tennis court was only 30%. The club facilities had not been used by any outside bodies for six months. Some of them were even abandoned. The basketball court and swimming pool are currently closed due to poor maintenance. Moreover, the ssociation has never hosted any major sports events. It is evident that the Club has not made good use of the granted land lease to contribute to Hong Kong sports development.
(5) The South China Athletic Association
The South China Athletic Association (SCAA) currently rents two pieces of land through PRL policy, namely, No. 88 Caroline Hill Road, So Kon Po (IL 9041) and Wylie Path (KIL 11218). SCAA’s leases with the Government in relation to the two pieces of land (renewed in 2011) is due to expire in 2026. It is bound to pay a nominal premium of $1,000 per annum. SCAA is one of the lessees with a relatively large number of members in Hong Kong. The application procedure for membership is simple. Membership can be applied in person, by an authorized representative or by mail. Anyone can obtain a membership as long as he/she submits the membership fee and required documents for proof of identity. The monthly subscriptions are also much cheaper than other private sports clubs, ranging from $20 to $120, which are affordable for the public. With a simple application procedure and low subscription fee, SCAA is known to have contributed to Hong Kong sports in general for many years.
Areas for improvement in lease terms
We are of the opinion that the following areas for improvement are needed.
(a) Insufficient Public Opening Hours
The opening-up arrangement is only applicable to outside bodies, not to the public. The actual usage may be far below the committed “opening-up” hours and the usage reported to the Government may be too general to fully reflect the actual public usage. In extreme cases, some club facilities have become desolate.
(b) Complicated Application Procedure
In some of the private clubs, the application for membership is complicated and is subject to Club’s approval, which has discretion to review the applicants’ background and compliance with the Club’s internal rules and regulations. The entrance fee may be very high.
(c) Expensive Charges
The hire charges of facilities are expensive and may not be affordable to the public.
(d) Abuses of the PRL policy for profit-making activities
Some lessees have repeatedly breached the lease conditions. In the absence of a clear definition of "recreation", we observe numerous abuses with some clubs even having mahjong rooms, barber shops and massage rooms.
(e) Overlapped Sports Facilities with Public Sports Centres
Most of the sports facilities provided by the private sports clubs overlap with those provided by public sports centres operating under the Leisure and Cultural Services Department (LCSD). The hire charges of LCSD’s facilities are far lower than that of private sports clubs. The opening hours of LCSD’s sports centres are also longer than that of private sports clubs.
Resumption Clauses of the existing leases to private sports clubs
According to the Resumption Clauses of the existing leases granted according to the 1979 PRL Policy, the Government, generally speaking, subject to the decision of the Chief Executive, is entitled to resume all or any parts of PRL sites for public uses without payable compensation, provided that 12-month prior notice is given to the lessee. The lessees must return the land on lease to the Government upon the expiration of the notification period.
It is noted that a Termination Clause is invariably included in all the PRLs. The Government, when renewing PRLs in 2011, had advised the lessees that there should be no expectation of any further extension of their leases to be granted. We are of the view that any Government decision not to renew the PRLs pursuant to the terms of the termination clause under the PRLs will stand a good arguable case against potential judicial reviews on the ground of “legitimate expectation”.
Response to Consultation Paper
We will now respond to the 5 major recommendations by the House Affairs Bureau.
(1) Practical Factors to consider
Whether to continue to allow the sites to be run by private clubs under PRL should be subject to practical factors, for example the related development plans. The Government should also consider other more flexible alternatives, such as granting special short term lease. We agree that significant modifications to the existing PRL terms can be made to better facilitate the purpose of the policy.
(2) Actual benefits & alternative uses
Whether to renew the current PRLs is also subject to the actual situation. The Home affairs Bureau suggested 4 considerations on the renewal of the leases: (i) whether the sites are providing sports facilities that are rare or not currently provided by the Government; (ii) whether the sites are “opening up” sports facilities to eligible outside bodies thus alleviating pressure on public sports facilities; (iii) whether the sites are providing essential training bases for NSAs and promoting sports in the community; (iv) whether the sites are providing essential facilities for hosting local and major international sports competitions. Other than the contribution to sports development, we suggest that the Government should renew the PRLs based on their actual benefits brought to the society as a whole, including alternative uses of land and other societal needs, and in order to balance the needs for sports development and optimization of land use.
(3) More open to the public
We recommend that the private sports clubs should further open up their facilities to the public, simplify the procedures for membership applications, adjust the hire charge to an affordable level and extend the access to the clubs’ facilities from “Eligible Outside Bodies” to the general public.
(4) Charges based on market value
The Home Affairs Bureau suggested to charge the private sports clubs one-third of the full market value (FMV). This may only be a transitional arrangement for clubs charging high membership fee and with large fund reserve, which should pay a premium of full market value in the long run. (See Recommendation 1 below)
(5) Monitoring the compliance
We agree to enhance the monitoring of the management of private sports clubs and their compliance with PRLs in order to better meet the purpose of the PRL policy.
Recommendations
Our recommendations are as follow:
Recommendation 1: Modify the PRL terms by enhancing public benefits
We note that some PRL sites are well-utilized and there are no immediate needs to resume such PRL sites. However, there is still plenty of room for improvement. We recommend four modifications on the current PRL arrangements and lease conditions:
(a) Enhance public access
We recommend that the private sports clubs should further open up their facilities to the public, adjust charges to an affordable level. In particular, the clubs should extend the access to the clubs’ facilities from “Eligible Outside Bodies” to the general public in order to better meet government general policy objectives to support sports development.
(b) Land premium at full market value
As a principle of fairness, we recommend charging private sports clubs land premium at full market value (“FMV”) in the long run, particularly for those with high membership fee and large fund reserve, and unless the clubs can demonstrate that they provide sports facilities which are less popular or not provided by the Government, i.e., in line with the original 1979 PRL policy. As a transitional arrangement, the clubs must improve their operations in accordance with the objectives of PRL policy. Meanwhile, the clubs shall be charged one-third of FMV land premium during the transitional period. That said, we are of the view that in determining land premium the Government should decide on a case-by-case basis taking into account the factors mentioned in our Response above.
(c) More activities for the public
As the private clubs utilize public resources in their operation we recommend that more social, cultural or community programs should be held to engage the general public.
(d) Proactive inspections and supervision
We recommend that the Government take the initiative to conduct more inspections and to strengthen supervision. If the lessee is found in breach of lease conditions, the Government should deal with the irregularities or non-compliances as soon as possible. If the lessee breaches the lease conditions again, the Government should consider terminating the lease to avoid abuse of PRL policy.
Recommendation 2: Resume some of the PRL sites for public purposes
Hong Kong is a small territory with land as its most valuable natural resources and land shortage has seriously affected our social and economic development. Therefore, contribution to sports development should not be the sole concern when evaluating the renewal of the PRL upon expiry. The Government should also take into account the alternative uses of land and other societal factors with a view to balancing the needs for sports development and for the optimization of land use. We recommend the following criteria be adopted to determine whether to renew the lease.
(a) Not meeting the objectives of the lease
If a PRL site fails to meet the 1979 PRL policy OR no longer fit for the purpose of sports development, we recommend enforcing the right of resumption. For PRL sites that are: -
1) No longer fit for OR having a negligible contribution to sports development, for example:
(i) The lessee no longer operates the sports facilities or the actual usage of the facilities is significantly low;
(ii) The sports facilities provided by lessee overlap with public sports centres or the number of facilities provided are extremely little.
2) Serious breach of lease conditions OR use for a non-recreational purpose (e.g., use of land for a profitable commercial purpose).
(b) Factors for consideration
If the renewal of PRL site is in conflict with other public purposes, the Government, in deciding whether to renew the PRL, should consider other factors, such as geographic ones, and should also consider the benefits of alternative use. We suggest the following factors for consideration:
1) Transport facilities: current transportation capacity and any need for further development of transport facilities.
2) Location: the distance from developed towns, business and residential areas.
3) Size: the impacts on total land supply.
4) Alternative use: the feasibility and geographic concerns in changing the use of land
Recommendation 3: Partially Resume Fanling Golf Course for Public Housing
The Fanling Golf Course (FGC) occupies the largest area among all other private sports clubs. In the consultation paper issued by The Task Force on Land Supply in February 2018, the Government listed two possible options for the development of FGC. With reference to the Singapore Government’s experience, we now respond to the two options and provide our recommendation.
(a) The Partial Development Option (32 ha.)
Under the “Partial Development Option” listed in the consultation paper, the Government proposes to develop the eastern part of FGC (32 ha.) on the assumption that the rest of the golf course (140 ha.) would be retained for hosting the international golf tournament. We are of the view that reserving 140 ha. is more than enough for hosting international tournaments. According to the American Society of Golf Course Architects, generally speaking, an 18-hole course occupies 48.6 to 80.9 ha. of land. We are fully aware that the area required for a standard golf course depends on the terrain and geographical circumstances. We note that the Hong Kong Open is mainly played on part of the New Course and the Eden Course while the Old Course would only provide supporting services. It seems to be a valid argument to increase the area of land to be resumed.
(b) The Full Development Option (172 ha.)
Under the “Full Development Option” listed in consultation paper, it is proposed that the entire FGC would be resumed for full development. Under this option, the Government would have to look for an appropriate location to relocate FGC. Given that FGC is the only golf course in Hong Kong which has hosted the international golf tournament, the Hong Kong Open might be suspended until the completion of relocation. Moreover, arrangement as to the historical buildings, old and valuable trees and ancestral graves/tombs in FGC should also be taken into account. Therefore, we are of the view that full development may not be the best option.
(c) The Third Option (100-120 ha.)
We think that part of FGC may be reserved for an 18-hole golf course (approximately 50 to 100 ha., depending on actual design), which should be sufficient for the purpose of hosting international tournament. The remaining land may be released for public housing. The Government may also consider utilizing the land on the eastern side of FGC (including the car park and the old site) to increase the available land area. It was estimated that after a resumption of about 70 to 120 ha. ,FGC could provide approximately 30,000 housing units for a population of about 80,000 at the maximum. We suggest the released land should be used mainly for public housing. This could strike a balance between the interests of the Hong Kong Golf Club and public housing needs. Meanwhile, the Government should consider building more driving ranges to promote golf in the community and support sports development.
Conclusion
To conclude, the current PRL policy urgently needs updating and some of the land may be better utilized. The current PRL policy of granting of sites at nil or nominal premium is too lenient and should be reviewed on a case by case basis. In the case of FGC, opinion polls show that 60% or more of the respondents support partial or full resumption of the land for housing purposes. The Government should at least consider the partial option of 32 ha., and then further explore whether more land from FGC may be resumed.
We do recognize the contributions by some of the PRL sites to sports development, but at the same time we are of the view that more facilities on PRL sites should be further opened up for the general public usage. A comprehensive review of the PRL policy is long overdue which should aim at balancing the objectives of supporting sports development and optimizing land use.
