Employees in grade 5 and upward of the Yongin municipality are set to forfeit their pay raises this year ― a consequence of its ill-advised investment in a light-rail transit system. The municipality in Gyeonggi Province has also decided to cut perks for its employees and shelve big-ticket projects, including the replacement of dilapidated air-conditioning systems in school.

The savings are estimated to total 22.6 billion won if such efforts are continued during the next five years. Yet the amount is woefully small. Other self-help measures are needed if the municipality is to make good on its debt obligations.

Those decisions on savings were not made voluntarily but demanded by the central government as conditions for additional bond issuance. With the belt-tightening measures set to be implemented, the municipality, whose bond issuance was originally limited to 73.3 billion won this year, will be allowed to borrow up to 515.3 billion won.

Yongin’s debt obligations will rise to 694 billion won if it issues bonds successfully as planned. The amount is equivalent to 39.8 percent of revenues set for 2012 ― a rate perilously close to the perceived 40 percent threshold to financial crisis.

The trouble began in 2004 when Yongin launched a big-ticket project to build an 18.5 km light-rail transit system linking Everland amusement park to the Seoul metro system. When the project was completed in 2010 at a cost of 728.7 billion won, it was belatedly found that the average daily number of passengers was overestimated by almost five times to 140,000.

When a new estimate put the number at 30,000 and yearly losses at 55 billion won, Yongin put the new transit system on hold. The consortium holding a 35-year build-operate-transfer concession sued the municipality and won 515.9 billion won in indemnity.

The savings Yongin committed itself to making should just be the beginning. It will have to increase revenues and further tighten its belt if it wishes to avoid bankruptcy. It should consider putting some of its valuable properties on the block, including the 16-story city hall building it built at the cost of 162 billion won in 2005.

Yongin is not the only local government in serious financial trouble. Incheon recently delayed paying monthly perks when its coffers were nearly drained. The central government should keep those and other heavily indebted local governments under tight scrutiny.