Naju-si, Final Victory in Innovation City Development Charge Imposition Case

[Naju=Asia Economy Honam Reporting Headquarters Reporter Kim Yuk-bong] Naju City, Jeollanam-do (Mayor Kang In-gyu) announced on the 8th that it has won the final victory in the Supreme Court trial regarding the development charge case amounting to 66 billion KRW imposed on the three companies developing the Gwangju-Jeonnam joint innovation city (Korea Land and Housing Corporation, Jeonnam Development Corporation, Gwangju Urban Corporation).

The Supreme Court ruled on the 3rd with unanimous opinion of the justices in the case of 'Cancellation of Development Charge Imposition' (2019Du○○○○) filed by the three development companies against the city, stating that "the innovation city development project implemented based on the former Innovation City Act is subject to development charges," dismissing the appeal of the three companies and confirming the lower court's decision.

The city became the first local government to establish a precedent of final victory in lawsuits related to development charges for innovation cities developed in 10 locations nationwide.

This Supreme Court ruling is expected to serve as a guide for other local governments currently promoting the imposition and collection of development charges or involved in lawsuits related to development charges for innovation cities and planned cities.

The development charge system is a system where the state or local governments recover a certain percentage of the development gains generated from development projects involving land alteration or change of use from the developers.

It is one of the three land public concept laws introduced by the government in the late 1980s to proactively address land issues such as land price increases, rampant land speculation, and privatization of development gains.

Earlier, the city expressed the position that the three development companies, which generated enormous development gains from the innovation city development work started in May 2007 and finally completed in December 2015, must pay development charges according to the land public concept, and imposed and collected development charges amounting to 73.2 billion KRW on the three companies in 2016.

However, the three companies claimed there was no legal basis and filed an administrative appeal with the Central Land Expropriation Committee in October 2016.

The Central Land Expropriation Committee judged that the city's imposition of development charges was lawful and ruled that only 3.1 billion KRW imposed on rental apartments and relocation sites, which are exempted projects, be refunded.

Subsequently, the three companies filed a lawsuit for 'Cancellation of Development Charge Imposition' at the Gwangju District Court in October 2017.

However, the court judged that the imposition of development charges for the innovation city was itself legitimate.

Nevertheless, following the court ruling that corporate tax on income generated from the transfer of the subject land before the imposition of development charges should be recognized as development costs of the three companies, the city and the Ministry of Land, Infrastructure and Transport refunded 4.1 billion KRW to the three companies.

Displeased with this, the three companies appealed to the Gwangju High Court in September 2018, but the court once again ruled in favor of the city, affirming the legitimacy of the city's imposition of development charges.

The three companies submitted an appeal to the Supreme Court in July, seeking to overturn the lower court's ruling, leading the development charge lawsuit to the final Supreme Court judgment.

With the Supreme Court's dismissal of the appeal confirming the lower court's decision, the city achieved final victory in the five-year-long administrative lawsuit against the three development companies that had been ongoing since 2016.

Mayor Kang In-gyu said, "I thank the citizens for their continuous interest and support during the long litigation period, and the efforts of public officials," adding, "We will do our best to ensure that the victory results in equitable benefits for the citizens."