HDB CAR PARKS (Construction cost and car park charges)

Mdm Cynthia Phua asked the Minister for National Development (a) what is the composition of the cost of construction of HDB car parks and (b) what are the years of depreciation used by his Ministry in the consideration of the car park charges.

The Minister of State for National Development (Dr Vivian Balakrishnan) (for the Minister for National Development): Mr Speaker, Sir, the construction cost of HDB car parks consists of land and building costs. The building cost can be sub-divided into the cost of the foundation; the cost of the car park structure itself which includes the car park decks, ramps and staircases. Other costs under the building cost would include things like the cost of the drainage system, the water and electrical supply.

These land and building costs of the car parks are depreciated over their estimated useful life based on standard accounting practices. The land cost is depreciated over 99 years, while the building cost is depreciated over 60 years.

Dr Teo Ho Pin (Holland-Bukit Panjang): Mr Speaker, Sir, may I ask the Minister of State how many years have the HDB Car Park Section been suffering from a deficit? What is the difference between a structural deficit and an operating deficit? I would also like to know whether there is any change in accounting basis over these years in the Car Park Section.

Dr Vivian Balakrishnan: Mr Speaker, Sir, I only have the figures going back to 1995 and I can assure the House that it has been in a deficit entirely over the period except in Financial Year 1997. On Dr Teo's next question, I am not sure whether I understood his question on the difference between a structural deficit and an operating deficit. The deficit that I have referred to, in the case of the car parks, is an operating deficit which takes into account the building cost, land cost and these costs are then depreciated over their useful life. There is no separate sinking fund and other accounts.

Mdm Cynthia Phua (Aljunied): Mr Speaker, Sir, looking at the Annual Report 2001, there is this cost of interest expense which constitutes about 42% of the operating expenditure. Could we know what is this interest expense?

Dr Vivian Balakrishnan: Mr Speaker, Sir, this, in a way, is related to Dr Teo's point. When we put up car parks, we have to purchase land and incur costs to build those car parks. The money to buy land and to build car parks does not come out of nowhere. In the case of HDB, it borrows money in order to fund the purchase of land and building costs. In order to sustain the borrowings, this will attract interest and will have to be repaid.

Dr Teo Ho Pin: Mr Speaker, Sir, the Minister of State has not answered my question on whether or not HDB has changed the accounting basis for car parks over the years. In the Budget Debate, the Minister mentioned that HDB had a structural deficit of $100 million last year.

Dr Vivian Balakrishnan: Mr Speaker, Sir, I said that, the figures that I have from 1995 to last year show that there has been a deficit throughout except in FY 97. As far as I know, from 1995 to now, there has been no change in accounting basis. When we tell Members that the deficit has been growing in the last six years, this is a real deficit and it is an operating deficit. The quantum for last year was $115,288,000.

Mr Low Thia Khiang (Hougang): Mr Speaker, Sir, the Minister of State has mentioned the construction cost of the car parks. There are two parts, ie, the building cost and land cost. Can he tell us exactly what are the figures for the land cost and building cost for a typical multi-storey car park and, secondly, for an open car park?

Dr Vivian Balakrishnan: Mr Speaker, Sir, I presume Mr Low is asking for a breakdown. For a typical multi-storey car park, the land cost would be slightly less than half of the total cost. Let me give you an example. My Minister, at the last Budget Debate, said that the total cost of an equivalent car park lot in a multi-storey car park is about $20,000. The land cost would be about $9,000 and the construction cost would be about $11,000. In the case of surface car parks, my Minister has given the figure of $11,200. In the case of surface car parks, obviously the bulk of the cost would be land cost. There would still be some construction cost because we need to surface the lots and do the markings and all that. There would still be some costs involved but obviously, because we do not have to put up a foundation for the whole structure, the cost would be lower in that respect.

Mr Low Thia Khiang: The Minister of State, in an earlier answer, said that the depreciation was based on accounting practice, ie, the life of the car park would last for as long as the flat, ie, 99 years. But what would happen to the remaining car park after the depreciation?

Dr Vivian Balakrishnan: I mentioned that the cost of land is depreciated over 99 years and the cost of building is depreciated over 60 years. These are accounting norms based on what we think would be the estimated useful life of that building or land. In the case of land, it is quite clear because the entire land is sold on a 99-year lease. In the case of a car park, I think we can argue whether it should be 60 years or 50 years, or so on. But the point is this is what we feel and the accountants feel is a reasonable target to be depreciated over. I would like to caution Members that if we were to increase the rate of depreciation, it would increase the cost on an annual basis.