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Mobtown Beat

A Taxing Dilemma

State comptroller cancels a tax collection program he touted during campaign

Photo: Frank Hamilton, License: N/A, Created: 2010:10:15 13:39:26

Frank Hamilton

Comptroller Peter Franchot, as photographed at City Paper in October 2010.

Maryland Comptroller Peter Franchot (D) in December quietly cancelled a $42 million technology contract he had touted just weeks earlier during his reelection campaign, a state audit revealed.

“I never liked the project, thought it was too expensive,” Franchot’s Republican opponent in the November 2010 general election, William Campbell, said on hearing the news. “If Peter cancelled the project because he found out the same thing he ought to get some recognition for that.”

The project, called Modernized Integrated Tax System (MITS), was announced in December 2008, when the giant consulting firm Accenture won a multi-year contract to develop a new computerized system to replace the state’s current automated tax-processing system, known as SMART. The project had two parts: a “data warehousing component” in which taxpayer information from all state agencies could be stored and retrieved, and an “integrated tax system,” which would have helped state tax officials proactively look for tax cheats by sifting through data about citizens, their possessions, and their businesses. Franchot pulled the plug on this second component.

The Office of Legislative Audits described the cancellation in an audit of the Comptroller’s Office released Feb. 22. “According to the [Comptroller’s] Office, this decision was based on several factors, including cost concerns and failure on the part of the contractor to meet deliverable deadlines,” the audit says. The cancelled program has already cost nearly $18 million, and would have cost at least an additional $24 million if allowed to continue into development.

In an interview with City Paper on Oct. 15, 2010, Franchot talked up MITS, defending its total cost ($87 million for both parts of it) against Campbell’s claim that it was too expensive (“The Collector,” Mobtown Beat, Oct. 27, 2010). Matching up economic activity—payments from governments, registrations of boats, whatever—against taxes owed “will generate hundreds of millions in previously uncollectible taxes,” Franchot said then. It’s all about going after “the small group of people that are deliberately cheating,” he said.

A few days later, Franchot, in a press release, called MITS the “focal point of his efforts to modernize the agency’s resources.” He said “MITS has exceeded expectations and nearly paid for itself already.”

Yet even then Franchot had doubts about the integrated tax system, a spokesperson says now.

“For a few months before December, we noticed that it was becoming a little too risky,” says Joseph Shapiro, director of communications for the Comptroller’s Office. “There was the chance of missing key implementation deadlines, and the possibility for cost overruns because of that. So we decided in the interest of good fiscal management to put a stop to the integrated tax portion [of the contract]. The good news is that the data warehouse part has already paid for itself two times over.”

The data warehouse has cost about $37 million so far, Shapiro says, and the state has collected about $82 million because of it. He says Franchot’s campaign boasting about MITS applied only to the data warehouse portion of the contract and suggests that the integrated tax system could be restarted later if the state’s fiscal situation improves. “We thought it was more prudent to save the taxpayers’ money now,” Shapiro says.

Campbell, who raised just a few thousand dollars to challenge Franchot and won 39 percent of the vote, applauds the move. “Most people—especially most politicians—unfortunately can’t admit that something isn’t going the way they planned and they just continue it,” Campbell says. “Looks like he did the right thing.”

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