The Seoul Metropolitan Government’s Adjustment Grants allocate 22.6% of the city's general tax revenues to its districts, aiming to ensure adequate administrative services and reduce financial disparities among districts. For 2024, these grants total 4.244 trillion KRW, representing 16.8% of the total revenues of districts, a higher proportion compared to local tax revenues (14.6%). Post-allocation, the average fiscal need fulfillment rate for 24 districts (excluding Gangnam) improved from 69.9% to 96.2%.
Due to recent changes in district revenue conditions and administrative demands, reform of the Adjustment Grants system has become necessary. Significant decreases in property tax revenues, triggered by declining real estate markets and government tax reduction policies, have widened fiscal disparities among districts, necessitating systemic adjustments. Additionally, new administrative demands have emerged, including increased social welfare expenditures and waste management costs driven by the rapid growth of the food delivery industry post-COVID-19. Consequently, the city reviewed measurement items based on district feedback and examples from other metropolitan cities, updating fixed and unit costs through regression analysis. This revision increased districts’ basic fiscal needs by 18.6% (1.6592 trillion KRW), with notable growth in social welfare-related expenses.
The Balanced Development Compensation Indicators were also revised to include new measurements reflecting quality of life differences, such as library area and healthcare facility availability. This update is expected to partially mitigate financial disparities based on variations in district fiscal autonomy.
Additionally, to incentivize districts' efforts in addressing social issues, the implementation of flexible working arrangements will be incorporated into Adjustment Grants assessments. Seoul plans to measure districts' activation and utilization efforts of its "Seoul Work-Life Balance Flexible Working System" and reward proactive districts. Moreover, indicators to assess sound fiscal management efforts were developed to encourage districts to enhance revenue collection and reduce unnecessary expenditures.
Although districts have requested an increase in the Adjustment Grant allocation rate due to recent revenue declines, it has been concluded that any increase should be approached cautiously, considering the significant decrease in Seoul’s financial capacity and comparisons with other metropolitan cities. A thorough analysis of district finances and additional research are advised before deciding on any rate adjustments.