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FAQs on the Refundable Capital Levy (updated 1 February)

Click here for the PowerPoint presentation of ESF's capital strategy

Q&A on the new refundable capital levy and ESF’s capital project funding
 
Updated: 2 February 2010
 
We have undertaken to update the FAQ list on the RCL section of the website with questions received by email. However, some of the questions received go beyond the scope of the consultation and may need to be edited to fit the purpose of the consultation.  
 
1.    How will the loans taken out against the property portfolio be repaid?
Any loans taken out by ESF to support the capital refurbishment of buildings will be repaid from operating cash flow. It is not expected that major borrowings will be required until 2013 or beyond, depending on the timing of any investment in Island School.
 
2.    What steps are required by ESF governing body to ensure and demonstrate that value for money is gained from the projects in hand which are to be funded from the levy? 
 
All ESF major building projects will be presented in detail to the Board of Governors for scrutiny and endorsement prior to awarding contracts and commencing construction works.
 
 
3.    What proportion of the funding required is to be sought from the government?  What will it cost? And how else will these works be funded?
 
There are 3 components to the funding of sustainability
 
        a. Government Capital Subvention
 
        b. Refundable Capital Levy
 
        c. Ongoing Surplus generation and Operating Cash Flow.
 
These three components all contribute to the necessary balanced approach to funding investment in building infrastructure. Please refer to the powerpoint presentation made at recent school meetings here. 
 
4.    Will the RCL funds be spent, invested in the short to medium term, or sit in a bank account; and is there an Investment Committee set up for this purpose? 
 
The RCL fund will be collected over a period of 6-7 years. During this time, there will be a requirement to spend the funds on the KJS and KGV projects. All financial investment decisions are overseen by the Finance Committee, made up of ESF board members and independent appointees
 
5.    Can you commit to a repayment date after the student leaves ESF, ie, 10 days, 1 month, 60 days, etc? We as parents have very strict guidelines set forth by ESF about payment deadlines - often on very short notice (less than 30 days).
 
When the refundable capital levy is paid, an official receipt will be issued, parents are required to re-present the official receipt when they apply for the repayment. The repayment will be made  in 30 days after the official receipt is submitted. Procedures to provide refunds where receipts have been lost will also be put in place.
 
6.    PIS students and parents are able to take advantage of at least some of the benefits of being part of ESF and vice versa. Should they not have to shoulder at least some of this burden? Especially if the rumors are true (I have not seen evidence supporting or denying this statement) that the PIS schools received ESF general funds to help build those 2 beautiful, modern campuses. Basically those students receive those buildings for “free” while we are forced to pay for projects that we will never see during our children’s academic lives at ESF. Is this justified?
 
ESF operates two Private Independent Schools (PIS), Renaissance College in Ma On Shan and Discovery College in DB. The HK Government provided capital funding for the construction of the schools equivalent to the cost of a standard HK government school with the same number of students. ESF provided funding for the balance between the HK government capital funding and the actual costs of the project in the form of a long term loan arrangement. Once the original loan is repaid, each PIS will continue to pay ESF an annual premium, recognizing the original investment made. In other words, the PIS are paying back the original loan to ESF and will eventually contribute back to the future of ESF via the annual premium.
 
7.    Before we are required to pay this levy, will we be able to see a breakdown of how this capital will be spent, with detailed plans, drawings of new buildings, etc? I think we need to know whether or not our money will be used wisely. The current “urgent capital projects” description does not give much detail into this.
 
Each individual school development project is discussed in detail with the stakeholder community as designs and plans are progressed.

 
Updated: 16 December 2009
 
Why has the refundable levy been introduced at this time?
It is clear that funding will need to come from a number of sources to meet the cost of urgent capital projects. While Government grants will be extremely important, we will use our own cash-flow, borrow against our property portfolio and seek to raise funds from donors. The refundable levy will make an important contribution to this overall effort.
 
If the levy is refundable, how can it make much of a difference?
The levy will eventually raise a total of about HK$300m. It will help us to reduce borrowing costs significantly.
 
Does ESF also plan to introduce debentures?
Debentures do not form part of our plans. Debentures usually confer a right to a place at a school, whereas admission into ESF depends chiefly on the student’s ability to access the curriculum.
 
I have a daughter in Year Two. Will I have to pay the levy for her?
The one-off levy will be payable when your daughter reaches Year Seven.
 
I have a son in Year Six. Will I have to pay the levy for him?
The levy will take effect from 2011-12 for students currently in Years One to Five. Students currently in Years Six to Thirteen will not be required to pay the levy.
 
Will any concessions be made for large families?
The levy will be charged in full for a family’s first two children and reduced to HK$10,000 for subsequent children.
 
I have two children who have already left ESF. Will my remaining son/daughter be counted as a third child (therefore paying a HK$10,000 levy)?
No. When calculating the levy for each child, we will only count children currently in the system. The refundable levy in this case would still be HK$25,000.
 
I have four children in the ESF system and this will present financial problems for me. What help can you offer?
ESF has a financial hardship scheme for families who experience a sudden change in their material circumstances. Further information on the scheme can be found here.
 
Will the levy be payable for the children of ESF employees, civil servants, etc?
The levy will apply to all students equally.
 
Will new students who join at some other point (e.g. Year 3) have to pay the levy?
Yes, they would normally be expected to pay the levy in their first term at ESF (if they have joined after August 2011).
 
Will I have to pay the levy again when my son reaches Year 7?
No, this is a one-off levy, normally paid in either Year 1 or 7.
 
When will the levy be repaid?
The levy will be repaid at the end of the student’s final academic year, net of any outstanding fees.
 
 
Why doesn’t ESF do more to meet these funding needs through fundraising from alumni?
ESF is putting a lot more effort into raising funds through its schools’ various alumni associations. However, they are likely to be only a small part of the solution given the large infrastructure requirements.
 
It seems that Government grants may help with the renovation of Kowloon Junior School and King George V School. Why not follow that approach with your other building needs?
We will always look to the Government for support in our major building projects.
 
Why don’t you sell your property portfolio to meet these costs?
This would be a one-off measure which would leave us with few options for the future. However, we do intend to use part of this portfolio as collateral for loans to help realise these projects.
 
Many of these projects won’t reach fruition for years. Why should I spend money on something my child won’t get to enjoy?
All ESF students currently enjoy facilities that were paid for by previous generations of parents. It is important to remember that the levy is refundable and we hope, therefore, that it gives parents a relatively manageable way to contribute to the sustainability of ESF education for future students.
 
Is the levy tax-deductible?
As the levy is reimbursable, it is not tax-deductible. As ESF is a registered charity, any gifts made to it are tax-deductible. Parents have the option of making this donation instead of having it refunded.
 
Can my employer pay the levy?
An employer can pay the levy in the same way that they can pay fees.
 
What are the implications for the subvention of introducing this levy?
The capital levy will go towards capital projects. We will still rely on the recurrent subvention to meet operating costs.
 
Will I get interest on my money when it is refunded?
No. The aim of the levy scheme is that ESF can make use of the interest generated to contribute towards the cost of capital projects.
 
Does this apply to the Private Independent Schools (Discovery and Renaissance Colleges)?
No, not at this stage.
 
How will the introduction of the levy affect any increase in fees in this or subsequent years?
It is important to keep these two issues separate. The main driver for fee increases is staff and curriculum costs. If we needed to increase salaries to attract and retain staff, that would put upward pressure on fees. The refundable capital levy is aimed solely at helping to meet the costs of capital projects.
 
 



 
Worked examples based on the 2009-10 school year.
 
“We have three children. Joe is currently in Year Seven and Candy is in Year Three. Our other daughter, Karen, is due to start Year One in August 2012. How much will I have to contribute and when?”
 
Joe is exempt from the levy, as are all children currently in Years Six to Thirteen. Karen will pay the HK$25,000 levy when she enters Year One in August 2012. You will be reimbursed for Karen’s payment in July 2025 if she chooses to stay with ESF until the end of Year 13. Candy will pay the levy when she enters Year Seven in August 2013. Although she is your third child in ESF, she is only the second to pay the levy, so she will also pay HK$25,000. This sum will be reimbursed in July 2020, assuming she studies with us until Year 13.
 

 Year

Joe

Candy

Karen

09/10

-

Year 3

-

10/11

-

Year 4

-

11/12

EXEMPT

Year 5

-

12/13

 

Year 6

Year 1 – pays levy

13/14

 

Year 7 – pays levy

Year 2

14/15

 

Year 8

Year 3

15/16

 

Year 9

Year 4

16/17

 

Year 10

Year 5

17/18

 

Year 11

Year 6

18/19

 

Year 12

Year 7

19/20

 

Year 13 - reimbursed

Year 8

20/21

 

 

Year 9

21/22

 

 

Year 10

22/23

 

 

Year 11

23/24

 

 

Year 12

24/25

 

 

Year 13 - reimbursed

 
 
“We have three children. Ann is in Year 5,  Chris is in Year 4 and Debbie is in Year 3. For family reasons, Ann is likely to do her final two years of study outside Hong Kong”.
 
The levy will be payable for each of your children when they enter Year Seven. Please note that Debbie’s payment is reduced to HK$10,000 as she is your third child in the ESF system at the same time.
 

Year

Ann

Chris

Debbie

09/10

Year 5

Year 4

Year 3

10/11

Year 6

Year 5

Year 4

11/12

Year 7 – pays levy

Year 6

Year 5

12/13

Year 8

Year 7 – pays levy

Year 6

13/14

Year 9

Year 8

Year 7 – pays levy*

14/15

Year 10

Year 9

Year 8

15/16

Year 11 - reimbursed

Year 10

Year 9

16/17

 

Year 11

Year 10

17/18

 

Year 12

Year 11

18/19

 

Year 13 - reimbursed

Year 12

19/20

 

 

Year 13 - reimbursed

 

 

 

* = HK$10,000

Please click here to send us an email if you have other questions about the Refundable Capital Levy.