Seoul Metropolitan Government’s debt used to be on a sharp uphill trend. Since Mr. Park Won Soon’s inauguration as Mayor in October 2011, however, the city’s debt has started decreasing.
At present, 388 public businesses affiliated with local governments have accumulated deficit amounting to 1.500 trillion won. The accumulated deficit of Seoul Metropolitan Government is pegged at 875.5 billion won, and its accumulated debt reaches 26.500 trillion won. The city’s debts include the 23.600 trillion won owed by public businesses affiliated with Seoul Metropolitan Government. SH Corporation alone has debts amounting to 18.335 trillion won.
In 2012, Seoul Metropolitan Government carried out due diligence of assets of SH Corporation to check the status of the project financing program recklessly implemented in the past and came up with the following: allowance for bad debts for trade receivables related to Eunpyeong Alpharos (300.2 billion won); valuation loss for marketable securities related to Dream Hub in Yongsan (49 billion won), and; allowance for loss on valuation of inventories (1.011 trillion won). The debts of SH Corporation are attributable to large-scale development projects carried out in Eunpyeong, Magok, and Munjeong and increase in security deposits paid in connection with the continued supply of rental apartments for low-income households.
The deficit recorded by Seoul Metropolitan Subway Corporation and Seoul Metropolitan Rapid Transit Corporation is attributable to the fare set at a lower-than-cost level (69.5% of cost) and free rides for senior citizens and handicapped (267.2 billion won in 2012 alone).
The city’s debts stood at 20 trillion won at the time of Mr. Park Won Soon’s inauguration as Mayor. Thinking that the situation would be uncontrollable if unchecked, he started striving to reduce the debts of the city. As a result, debt decreased by 1.127 trillion won to 18.861 trillion won by the end of May 2013, showing an improvement in the city’s financial soundness.
Seoul Metropolitan Government keeps an eye on its debts and makes multi-directional efforts to secure higher tax revenue, reduce expenditure, and push through with management innovation for its affiliated institutions. Since there are limitations to what it can do alone, Seoul Metropolitan Government asks the central government for large-scale support in conjunction with areas such as operation of free childcare facilities and free rides for senior citizens and handicapped.