TOWN COUNCILS (AMENDMENT) BILL

Order for Second Reading read.

The Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Objective

This Bill seeks to amend the Town Councils' Act in several aspects. Apart from clarifying and expanding on some existing sections, the Bill also introduces a new section relating to the transfer of Town Councils' accumulated surpluses to their sinking funds at every General Election or By-election. I shall explain the rationale for the proposed transfer of surpluses before proceeding to explain the other amendments proposed in the Bill.

Rationale for Transfer of Surpluses

Mr Speaker, Sir, Town Councils (TCs) have to carry out both routine and cyclical maintenance works so that the properties within the Towns are always in good condition. An example of routine maintenance works is the daily cleaning and upkeep of the Town. Examples of cyclical maintenance works are the repainting of buildings, the renewal and replacement of roofs, water tanks, pumps and electrical supply system and lifts, and major repairs and maintenance of common property in the Town.

My Ministry has stipulated the appropriate intervals for various cyclical maintenance works. For example, booster pumps and hoisting ropes or sheaves of lifts should be replaced at 7-year intervals. Water pumps should be replaced once in every 12 years, re-roofing every 14 years and re-wiring every 20 years. The lifts should be totally overhauled or replaced every 28 years. Based on these guidelines, many Town Councils will need to carry out major cyclical maintenance works which require large expenditure in the next few years.

Town Councils use their sinking funds to finance the cyclical maintenance works. When Town Councils were established progressively since 1989, the Government gave Town Councils a one-time cyclical maintenance grant to build up their sinking funds. The total amount of cyclical maintenance grant given to all Town Councils was $264 million. This sum covered the cyclical maintenance works for the first seven years of the Town Councils' operation. After giving Town Councils this headstart, Town Councils are now on their own.

My Ministry observed that the costs for cyclical works increased by an average of 5% per year from 1991 to 1994. However, Town Councils' Service and Conservancy charges increased by an average of only 3% per year between 1989 (when the Town Councils were first established) and 1995. The contribution rate therefore lags behind the increase in maintenance costs.

My Ministry has conducted a study on the sufficiency of Town Councils' sinking funds to meet the cyclical maintenance works in the future. The study shows that many Town Councils, with their present sinking fund balances, would not have enough funds for the cyclical maintenance works. Without adequate sinking funds, the residents would have to fork out cash each time their Town Councils carry out major cyclical maintenance works. Therefore, Town Councils have to increase their sinking fund contributions now to increase their self-sufficiency. We have to find additional ways to build up their sinking funds.

Town Councils are required by law to set aside a minimum proportion of the monthly Service and Conservancy charges to their sinking funds. The proportion ranges from 30% to 40%, depending on the type of property. To boost the balance in their sinking funds, Town Councils should set aside a higher proportion of monthly Service and Conservancy charges over and above the minimum requirement. However, many Town Councils are currently running at a deficit as their Service and Conservancy income could barely match their operating expenditures. Town Council operations are also financed by annual grants-in-aid given by the Government. It is only with such operating grants that Town Councils achieve budget surpluses. So it is unlikely that Town Councils would voluntarily increase the proportion of their Service and Conservancy charges to be set aside in their sinking fund.

The surpluses accumulated by the Town Councils so far are primarily attributed to the Government's substantial annual grants-in-aid. In the Financial Year 1995/1996 alone, the grants given to all Town Councils amounted to $92 million. Government takes a keen interest in ensuring that the Town Councils' surpluses are put to worthy uses to maintain or enhance the value of the properties under their management. This is also in the long-term interests of the residents in the Town.

Presently, Town Councils are at liberty to deploy the surpluses that they have accumulated over the years. They can safeguard their surpluses by transferring them to the sinking fund for approved uses. They could also use the surpluses to carry out improvement works in the Town. The surpluses may also be used by Town Councils to subsidise the Service and Conservancy charges.

Of the three measures, the first is the most prudent way of managing Town Councils' surpluses. The last measure would certainly appeal to the residents and some Town Councils may be tempted to adopt it. However, we know that this measure would compound the problem because the residents' contributions are already lagging behind the increase in maintenance costs. The Government will not bail out any Town Council that runs into deficit. Ultimately, the residents are the ones who will suffer because they have to face the consequences of inadequate sinking funds.

The Government wants to help the Town Councils to build up their sinking fund as well as to avoid the need for residents to pay a lump sum contribution for the cyclical maintenance works. Therefore, my Ministry proposes to transfer Town Councils' surpluses to the sinking fund to safeguard them for approved uses. This is similar to locking up past budget surpluses at every change of Government so that our future will be more secure.

Clause 9 of the Bill proposes that a Town Council transfer to its sinking fund, all or part of its surpluses as shown in its audited balance sheet for the last completed financial year before the issue of a Writ of Election. It ensures that Town Councils' surpluses are safeguarded whether the Member of Parliament running the Town Council is or is not re-elected at a general election or by-election. The full amount of the surpluses is transferred to the Town Council's sinking fund if the MP is elected from another political party. If the MP is re-elected from the same political party, only 80% of the Town Council's surpluses will be transferred to its sinking fund. The successor Town Council can retain 20% of the surpluses for running its operations or carrying out town improvements.

A new MP from another political party should not ride on the sound financial management of the Town Council under the guidance of the previous MP from a different political party and use the surpluses to carry out the improvement works. The new MP should build up his own surpluses to finance his own improvement projects. He has to prove that he is capable of managing the funds to the residents who elected him into office.

The provision in this Bill will apply uniformly to all political parties. The proposed transfer of Town Councils' surpluses to their sinking funds would, in fact, depoliticise the use of Town Councils' surpluses. Rather than letting Town Councils use the surpluses for short-term benefits to win political favour, the surpluses are safeguarded for use on major but necessary cyclical works for the long-term benefit of the residents. The Government would like to make clear its stand that it will not bail out any Town Council, regardless of the political party which the MP belongs to, if it should run into financial deficit.

Amendments to existing sections

Sir, I shall go through the other amendments in the Bill. Clause 2 seeks to redefine "commercial property" and "residential property" so that Town Councils can perform specific functions with regard to each type of property.

Clause 3 amends section 3 to deal with post-election arrangements. First, Members of Parliament will have eight days after a general election to agree to have their constituencies declared as a Town, failing which each constituency will itself form a Town. Second, a Town Council, part of whose Town area now forms another Town, will have to manage and maintain the common property in that area without drawing on the surpluses until the new Town Council is formed for that area.

Clause 4 amends section 8 to clarify that the number of appointed members of a Town Council shall be determined according to the number of Members of Parliament required to represent the constituencies comprised in that Town.

Clause 5 amends section 12 to clarify the appointments of the Chairman and Vice-Chairman of a Town Council.

Clause 6 amends section 19 to clarify certain powers of Town Councils. These powers relate to the provision and maintenance of facilities only on common property within the Town, the imposition of charges for such use of the common property, the management of food centres and markets of the Housing and Development Board and the undertaking of agency works on behalf of public authorities or community based associations within the Town.

Clause 7 amends section 24 to empower Town Councils to make their own by-laws subject to the power of the Minister for National Development to disapprove any of them within a one-month period after the by-laws were gazetted. The clause also increases the maximum fine for breach of any by-law from $1,000 to $5,000.

Clause 8 amends section 33 to enable a Town Council to transfer moneys from the funds in the Town Council Fund relating to a privatised HDB estate to the management corporation for that estate.

Clause 10 amends section 43 to allow the employees and agents of a Town Council to enter any flat to estimate the value of any movable property so that it may seize and sell to recover outstanding Service and Conservancy charges.

Clause 11 amends section 43E to raise the maximum fine that a Town Council may offer in compounding an offence from $400 to $1,000.

Clause 12 amends section 45 to provide that penalties for late payment of Service and Conservancy charges and other fees may be recovered by a Town Council in a Small Claims Tribunal as if the penalties are moneys payable under a contract for the provision of services.

Conclusion

In summary, the amendment on transfer of Town Councils' surpluses to their sinking funds works on the same principle as the locking up of the country's past budget surpluses at every change of Government. It would enable Town Councils' surpluses to be safeguarded for approved uses. It also protects the residents so that they need not make big lump-sum contributions for cyclical maintenance works. This is another step to ensure a more secure future.

The other amendments proposed in the Bill are technical amendments to clarify and expand on some existing sections in the Town Councils Act. They would allow Town Councils to perform their functions more efficiently and effectively.

Sir, I beg to move.

Question proposed.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.10 pm

Sitting accordingly suspended at 2.42 pm until 3.10 pm. Sitting resumed at 3.10 pm