The dispute between Seoul City and southern Gangnam-gu Office escalated Wednesday over the use of the public contribution fee offered by a conglomerate that purchased a large chunk of public land located in the heart of the district.

In a rare battle between the municipality and its subordinated district, Gangnam-gu Mayor Shin Yeon-hee held a press conference and warned of a legal battle against Seoul City, claiming that the city’s construction plan violated relevant administrative rules.

“The contribution fee is not subject to a ‘spending spree’ and it should be spent even more meaningfully than ordinary tax as it is paid painstakingly by a conglomerate,” Shin said. She added that she would seek to annul the city’s plan to use the revenue for a project encompassing areas outside Gangnam-gu without “due process of gathering opinions of the autonomous district.”

In June, Hyundai Motor Group offered the city 1.7 trillion won ($1.1 billion) as a public contribution fee after it bought the 79,345-square-meter site in Gangnam-gu from Korea Electronic Power Corp. for 10.55 trillion won.

The stakeholder must pay the public contribution fee to change the legal use of the land. Hyundai has requested the city to change the purpose of the land use from “general residential” to “commercial.”

Hyundai has proposed to build a 115-story headquarters and a 62-story hotel and convention, in line with Seoul City’s pledge to turn the neighborhood into a MICE zone, referring to meetings, incentive tours, conventions and exhibitions.

To further develop the project, the city has said it would expand the plan by developing the adjacent Jamsil Sports Complex area in Songpa-gu.

Gangnam-gu Office has opposed it, claiming that the use of contribution fee should be prioritized on Gangnam-gu, as the land comes from the district.

The city argues that the MICE project included both districts from the start regardless of the Hyundai’s contribution fee, and that the plan is not finalized.

Seoul City also stressed that the amount of the public contribution fee had not been settled as the talks underway with Hyundai are to be concluded by year-end.

By Lee Hyun-jeong (rene@heraldcorp.com)