A STUDY ON THE RESTORATION OF DEVELOPMENT VALUE FROM URBAN RAILWAY PROJECTS

Solving the financial problems of urban railway projects has become a very important issue. The existing financing system cannot cope with the increasing construction that has resulted from rising land values in urban areas. Funding has depended on increasing local bonds and national subsidies. However, considering the financial problems of the national and of local governments, there is a limit to public financing. Thus, the restoration of development value should be considered. Therefore, this paper proposes the restoration of development value as a means of financing urban railway projects from the viewpoint of the imbalance between beneficiaries and payers. Also, it examines the effects of the amount of money restored on the cash flow of railway operation and the financial burden of construction on local governments in Seoul and Osaka. For the restoration, it is important to concisely capture the development value of urban railway projects. Thus, we develop new accessibility indices that have been playing a vital explanatory role in estimating the Hedonic price functions. Using these indices, the effects that have been capitalized into the land values by Subway Line 5 in Seoul and JR Tozai Line in Osaka are captured. With the application of a fixed assets tax and a land transfer tax to the results, the amount of money restored is identified. Then, in order to examine the validity of the proposed method, a cash flow analysis to determine the effects of the amount of money restored on operator's revenues and the financial burden of construction on the local governments is conducted. Empirical results indicate that the amount of money restored from the impact area is not effective in developing revenue for operators, but reduces the financial burden of construction on local governments in two areas. Section 2 discusses the concept of development value by explaining the imputation to land values and the mechanisms of restoration. Section 3 discusses strategies for the restoration of development value, based on the land tax system. Section 4 deals with the estimation of the benefits of urban railway improvement by using the Hedonic Approach. Section 5 identifies the amount of money restored by means of using the results from section 4. Then, the effects of the amount of money restored on the cash flow and the financial burden of construction are examined. Finally, section 6 offers concluding observations of the findings are presented.