Seoul and Gangnam gov’ts continue to clash

Seoul Metropolitan Government and Gangnam District Office continue to lock horns over the redevelopment of southern Seoul’s Apgujeong, as the city government announced early this month its plan to include commercial districts near the area while imposing a height restriction of 35 stories on apartment buildings.

“[The intention] is to improve the overall residential environment, traffic conditions and commercial districts,” the city government announced. But the district office criticized the move, saying “Not consulting with the district office in advance and violating residents’ property rights are typical of the city’s one-sided administration.” Apgujeong residents also complained about the restriction, as they have long hoped for luxury apartment complexes that reach up to 50 stories.

The disagreement lies in the different way each side perceives the issue, regarding who takes charge of the project and how its revenues be used. A Gangnam District official said, “The city government is heavy-handed in its effort to gain company contributions from the redevelopment of commercial districts.”

But the discord between the city government and the Gangnam District Office is just the tip of the iceberg when it comes to complaints the city government is receiving from some of its district offices, which collect relatively large amounts of property tax.

Jung District Office, for example, was rated an average of 97 percent in terms of fiscal independence in the mid 2000s, meaning it raised enough taxes to be exempt from a number of government subsidies. But its independence rate dropped to 52 percent this year as the city government implemented a property-tax sharing system by which the city government collects 50 percent of property taxes raised by its district offices and redistributes them to all districts equally.

“We’re experiencing a budget deficit as the city government allocates less than what we raised,” said Choi Chang-sik, head of the district office. “Our residents are experiencing inconvenience because projects related to their daily lives are being delayed due to the lack of funding.”

Experts say the conflicts between the two governments are similar to California’s Proposition 13 in 1978, when the Constitution of California was amended to limit property taxation by means of citizens’ initiative.

“In Korea, unlike the United States, individuals cannot amend the property taxation law by initiative,” said Jung Kwang-ho, professor of administration at Seoul National University. “But district offices, which represent their residents, take the lead in preventing profits from being used in other districts.”

Another case of Proposition 13 in Korea was the conflict between the city government and Gangnam District Office over the use of revenue from the development of Hyundai Global Business Center in Samseong-dong, southern Seoul. The city government planned to use some of the revenues for the construction of Seoul International Complex around Seoul Sports Complex in Songpa District, southeastern Seoul. But Gangnam District residents opposed the idea, saying they refused to allow the district’s money to be used elsewhere.

District Offices that collect large amounts of local taxes, including Jung, Gangnam, Seocho and Songpa District Offices, are likely to continue their fight against Seoul’s system to share property tax, as it leads to significant budgetary losses. Gangnam District Office last year received 37.3 billion won ($325,756) in return for 109.2 billion won, or 50 percent of property tax it transferred to the city government. Gangbuk and Dobong Districts, on the other hand, were given 37.3 billion won in return for 24.3 billion won.

“The government aims to develop Seoul city as a whole,” said Kang Tae-woong, director of administration at the Seoul Metropolitan Government. “The reality is that there are disparities in districts’ fiscal capacity,” commented Prof. Jung. “To solve this problem, the city government first needs to expand its financial power and support its district offices.”

BY CHO HAN-DAE [kim.yuna1@joongang.co.kr]