Yongin, once South Korea’s most indebted city, is now officially debt-free, Mayor Jung Chan-min declared Tuesday.

The city of 1 million, located some 40 kilometers south of Seoul, will now embark on a mission to make the city a better place to live for its residents, investing in key sectors, including education and welfare, the mayor said.

“Thanks to the support of residents and burden-sharing by some 3,000 city officials, we could achieve the debt-free goal much earlier,” Jung said at a press conference held at the Seoul City Hall on Tuesday.

The city has paid off 812 billion won ($691.7 million) in debt principal and interest payments in the past 2 1/2 years under Jung’s administration. That was two years ahead of planned schedule, the city said.

Broken down, the amount consisted of 784.8 billion won in debt principal and 36.3 billion won in interest. Of the principal, 455 billion won was in city-issued bonds and the rest was owed by city-run institutions to lenders.

Accordingly, per-capita debt burden of Yongin citizens has reduced from 860,000 won in July 2014 to zero.

Now with sound financial health, the city can use some its money to speed up the much-anticipated investments in education, welfare and city infrastructure -- halted due to the debt burden, Jung said.

Painful restructuring efforts paid off

Upon taking office as mayor of Yongin in 2014, Jung declared his intention to finish the city’s debt crisis within his term and got to work, implementing a sweeping austerity program.

To start with, the city reduced operating costs across the board and trimmed down investment projects.

High-ranking civil servants returned the pay increase in their annual salary to the city coffers. Lower ranks joined in by contributing 50 percent for their welfare benefits to the city.

Belt-tightening measures also included a 25-50 percent decrease in office maintenance expenses, night shift allowances, annual leave compensations and business trip expenses. Secondhand office supplies were distributed and programs for cultural experiences abroad were minimized.

Businesses with large budgets, such as the construction of Citizens’ Sports Park, were halted or delayed after a thorough review.

While trying to reduce expenses, the city made equal efforts to boost the revenue base.

It collected delinquent taxes and sold off noncore city assets.

The mayor even visited potential buyers of city-owned land near Yeokbuk to aid in the sale.

Such efforts led to the early payout on bonds worth 297.4 billion won in September 2015 as well as 329.8 billion owed by Yongin Urban Corp. in the same year.

Financial management plan for future

Looking forward, Yongin City will strive to maintain a sound fiscal status, although several challenges are expected this year and next.

One of the challenges is a cut in financial support from the adjacent Seoul, the country‘s capital.

Seoul had shared some of its revenues collected within the city with other autonomous municipalities as part of its effort to support a balanced regional development of the country, but it started reducing the amount of subsidies last year.

With the cut, Yongin is expecting a reduction in revenue by 20 billion won this year, 50 billion won next year and up to 100 billion won in 2019.

Yet, the mayor is confident that the city will manage its finances soundly, having paid off over 800 billion won in such a short period of time.

With stringent fiscal policies and active fundraising efforts, it will focus resources on core projects.

They include renewing old school facilities and providing more extra curriculum activities for students. It aims to establish one-stop services for pregnant women, from pregnancy to delivery, which include childbirth grants and caretaker services for mothers and infants.

Basic infrastructure, such as replacement of corroded water pipes, is another area that the city will spend more on.

“Our city is finally debt-free, but we can’t expect everything to get better and to be perfect all of a sudden,” Jung said. “When we untighten our belt all too soon, the history will repeat itself. I won’t let that happen and will continue to watch our finances so that the citizens will not suffer again.”

By Bak Se-hwan and Park Joung-kyu (sh@heraldcorp.com)(fob140@heraldcorp.com)