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Valley systems outsourced


3 cities' tax setups bought from India

Edythe Jensen and Alia Beard Rau
The Arizona Republic
May. 17, 2004 12:00 AM


Shop locally and keep those sales-tax dollars at home has been a routine
pitch made by Valley cities dependent on the penny or two of municipal sales
tax charged on every dollar spent within their borders.

But three Valley cities are spending more than $2.8 million in tax dollars
abroad to collect those sales levies.

Tempe is spending $1.3 million, Peoria $830,000 and Chandler $727,995 to an
Indian conglomerate called Tata Infotech to create city sales-tax collection
and business-licensing systems.

The Chandler City Council voted 5-2 Thursday to make the deal. Peoria and
Chandler are using Tempe's 2001 contract; neither sought public bids or
proposals.

"We live in America. If at all possible, we should do business in America,"
Chandler Councilwoman Patti Bruno said before she voted against the deal.

The contract with the India firm is only the most recent example of Valley
cities spending money abroad.

Tempe bought bulletproof glass for a court building from Italy and is buying
light-rail cars from Japan.

Chandler buys filters for its wastewater treatment system from Denmark.
Neither city tracks how much government money is spent overseas, officials
said.

Last month, Gov. Janet Napolitano announced that all future state contracts
will require work be done in the United States. The announcement came after
she learned that telephone inquiries from state welfare and food-stamp
recipients were being routed to call centers in India and Mexico.

The reason for her decision, she said in a memo, was "due to security and
identity protection concerns."

Some city officials say they are simply looking for the best deal by taking
their business abroad.

"It makes me feel better that it's a product, not a service," Chandler Mayor
Boyd Dunn said of the tax-collection system contract. "Chandler has always
been focused on the customer, on doing things more efficiently."

Scottsdale also is looking for a new tax and licensing systems but decided
to seek public proposals and not use Tempe's Tata contract, "because we did
not feel that was in the best interest of our taxpayers," purchasing
director Warren Monroe said.

Tata's location in India was a factor, he said, although the firm will be
allowed to submit a proposal.

Monroe said sales taxes will generate about $1 billion for Scottsdale over
the next 10 years, "and we're looking for the best sales-tax system we can
find."

Chandler's decision to hire Tata without seeking other proposals drew e-mail
complaints to the city Purchasing Department from Chuck Greenlief, who
identified himself as a consultant.

Greenlief, who declined requests for an interview, said in an e-mail:

"It really gripes me when government employees don't think of the best
interest of their citizens. If they buy a U.S.-based system for the same
price, the money will come back to them or other U.S. governments in the
form of tax dollars. If they send it to India then no one in the U.S. will
get the tax-dollar benefit."

Laurie Stevens, Chandler's tax and utility services manager, said her city
would be saving time and money by using the program Tata is developing for
Tempe. She expects the system will allow the city to eliminate a technical
position in the department, collect more tax dollars and process business
licenses and tax payments electronically.

But she said she is worried about "bad timing" in getting approval for a
contract in India when outsourcing of millions of jobs to India has been the
subject of a national debate.

"It's kind of a global economy," Tempe City Manager Will Manley said. "It's
hard not to purchase products and services globally."

The contracts call for cities to work with Tata consultants for months
before the system is up and running. Tempe's system started operating in
October; Peoria's will work by June.

Unisys, based in Blue Bell, Pa., sought the Tempe contract but was not
selected. Company officials did not respond to requests for interviews. The
company Web site shows Unisys has done work for Chicago and Minneapolis and
California.

Jeff DeWitt, assistant finance director for Phoenix, said he is aware of the
suburban cities' contracts with Tata but said the Valley's largest
municipality "has made no major software purchases out of the country."