Public contribution fees for the first-phase new town lead districts will be recalculated. After it was confirmed that the standard floor area ratio to be applied when calculating public contribution fees had been misinterpreted in parts of Bundang, Jung-dong, Pyeongchon and Sanbon—resulting in overestimation of the charges—the Ministry of Land, Infrastructure and Transport asked local governments to correct them. Because public contribution fees are a key variable that determines the profitability of redevelopment projects, the recalculation is expected to affect the pace of projects by lead district and the burden on association members.
On the 23rd, according to the Ministry of Land, Infrastructure and Transport (MOLIT) and local governments of the first-phase new towns, the lead districts of Bundang, Jung-dong, Pyeongchon and Sanbon, excluding Ilsan, have entered procedures to recalculate public contribution fees after reviewing the calculation method. This follows MOLIT's action last month sending an official letter to each local government to review how public contribution fees are calculated under the special maintenance plan for aging planned cities and to promptly correct any shortcomings in interpreting the basic policy or applying relevant laws.
A Ministry of Land, Infrastructure and Transport (MOLIT) official said, "Early this year, through on-site town halls and civil complaints, issues were raised over how public contribution fees are calculated, so we conducted a full survey with local governments," adding, "In the process of establishing special maintenance plans for the first time since the Aging Planned City Act took effect, we checked whether any parts of the basic policy had been misinterpreted, and because some fees were overestimated, we sent an official letter asking for prompt corrections."
Public contribution fees are burdens that project operators must return to the public in redevelopment and reconstruction projects for aging planned cities as profitability improves through measures such as easing floor area ratios. They can be fulfilled by supplying public housing, installing infrastructure, providing sites, or paying cash. Because larger public contribution fees can increase association members' shares or reduce profitability, they are considered a key variable in maintenance projects.
The issue this time is the floor area ratio standard applied when calculating public contribution fees. In maintenance projects for aging planned cities, local governments must calculate the scale of public contributions based on the maintenance floor area ratio, but it is said that in some districts the floor area ratio standard under the Urban Redevelopment Act was applied, leading to overestimation of public contribution fees. In the case of Bundang New Town, the overestimated public contribution fees are said to exceed 900 billion won. Ilsan avoided the overestimation controversy this time because no area had established a special maintenance plan at the time.
A Ministry of Land, Infrastructure and Transport (MOLIT) official said, "It is not an issue across all districts; problems were identified in eight specific districts regarding the calculation of public contribution fees," adding, "It is a matter of recalculating areas and reflecting them in the special maintenance plan." The official went on, "Local governments can correct them immediately at the stage of establishing the special maintenance plan, or if the project implementation plan proceeds faster, they can change them at that stage together."
To reduce confusion in the process of calculating public contribution fees, the Ministry of Land, Infrastructure and Transport (MOLIT) also prepared a recent amendment to the "guidelines on calculation and operation of public contribution fees." Rather than a direct measure against the overestimation controversy, the amendment is a supplement to prevent differing interpretations of calculation standards in the field.
The amendment includes wording changes to reduce confusion in which some in the field treated the example weights by type of public contribution in the existing guidelines as if they were mandatory rules. Also, before a basic plan is established, details of the maintenance project site are uncertain, making examples using benchmark sites necessary to estimate land value, but at the special maintenance plan stage, as district areas and other details are specified, it allows estimation of pre- and post-project land values based on the maintenance project site itself.
With the recalculation of public contribution fees and supplementary guidelines, first-phase new town maintenance projects may gain momentum again. Currently, Bundang, Pyeongchon and Sanbon are proceeding with designation procedures for special maintenance districts and preparing to move to the designation of project operators and the project implementation plan stage. Ilsan and Jung-dong are going through initial procedures such as establishing draft special maintenance plans.