Since 2020, the South Korean government allocated substantial budgets for metaverse-related projects, with all seventeen metropolitan local governments and other government entities initiating such projects. Despite a total investment of 106.4 billion Korean Won (72 million USD) from 2021 to 2023, many public metaverse projects failed to engage citizens and faced discontinuation within one to two years. This study analyzes the governance models of public metaverse projects to understand their failure. It addresses two research questions: (1) What are the government agencies’ operational models for public metaverse projects? (2) What challenges do agencies face in planning and implementing these projects, particularly in inter-agency collaboration? Using a multi-method qualitative approach, including semi-structured interviews, field observations, and document analysis, the research reveals three key factors that affect the operation of public metaverse projects: (1) phased-in approach in funding structure, (2) bargain-driven civic engagement, and (3) power-leveraged participation. In addition, this research examines two forms of multi-tiered governmental dynamics that influence the quality of public metaverse projects: (1) hierarchical deference and (2) lateral competition. These dynamics often result in metaverse projects that are driven by government entities’ political aspirations rather than existing citizens’ needs. To overcome these challenges, government entities must strategically identify unique services the public sector can provide through the metaverse and develop a master plan defining the roles and features of local governments’ metaverse to avoid service duplication.