The success or failure of its overhaul of the Kansas Revenue Department is a key to future contracts for a Virginia company being sued by Mississippi for $1 billion.
For American Management Systems Inc., a $53 million contract to improve service to Kansas taxpayers through computerization is "the key" to winning further work in other states.
"Kansas is the key," said Ross Kory, the AMS vice president in charge of the Kansas project. "We are involved in the most extensive, the most important implementation."
The automation plan is called Project 2000. It involves a software and hardware package for collection of individual and business taxes. It's meant to improve customer service and increase state revenue by encouraging compliance with the tax code. Officials say it also will require a change in the culture at the Revenue Department.
The progress of Project 2000 is one of the issues to be scrutinized during an audit of the Revenue Department that was ordered Aug. 30 by legislators.
The tax agency overhaul AMS was hired to help make happen began under former Revenue Secretary John LaFaver. But even then, Project 2000 was headed up by current Revenue Secretary Karla Pierce, a former LaFaver underling.
The chairman of the Utah State Tax Commission said he is closely watching the results of AMS work in Kansas.
"I know people are looking critically at Kansas," said Rich McKeown, chairman of the Utah State Tax Commission. "I don't mean critically in a negative way."
Utah is already re-engineering parts of its tax system with AMS. But it has put on hold its plan to use the company to overhaul, as Kansas is doing, its individual income-tax and business-tax collection.
Utah officials say they are waiting to see how the AMS system works in Kansas.
"We want to see it work somewhere else" first, McKeown said.
In June, Utah legislators raked state tax officials about delays in the AMS overhaul.
McKeown said it was impossible to simultaneously overhaul Utah motor vehicle registration and the income- and business-tax collection system. Utah is proceeding with the motor vehicles program with AMS, and McKeown said he is happy with the job AMS is doing but is waiting to see how the Kansas overhaul shakes out.
Kansas tax officials "are the ones cutting the path," McKeown said. "We're only taking transferred solutions."
Utah is not the only state where complaints about AMS work on the tax system have arisen.
In April, the Mississippi State Tax Commission filed a $1 billion lawsuit against AMS. For Mississippi, AMS was to deliver software but not a comprehensive overhaul such as it's doing in Kansas.
The company has said it was on track to fulfilling the Mississippi contract when state tax officials there pulled the plug on the project.
At least one state isn't waiting to see results of an AMS system overhaul.
On Aug. 23, AMS announced an agreement with Hawaii to overhaul its tax system. Like Kansas, Hawaii will pay AMS for the overhaul from increased revenues resulting from improved collections.
Kansas revenue officials have said they expect to reap $200 million from increased Project 2000 collections. AMS is being paid from those increased collections. Of the expected ultimate price tag of $53 million, AMS so far has been paid $44.4 million.
Ross said his company is not paid until agreed-upon benchmarks are reached.
As for the audit, like his partners in the Revenue Department, the AMS executive said he welcomes it.
"We will be focusing on the facts," he said.
AMS is based in Fairfax, Va., and had revenues of $1 billion in 1998.
In the first quarter of this year, the company reported revenues of $88.2 million from its state and local government section. The same section earned $282.1 million for the company last year.
Ross said the company specializes in big projects such as the Kansas job.
"That's the kind of project we take on," he said. "Highly visible. They all have their problems. We don't walk away."
-- Erwin Seba's phone message number is 832-7145. His e-mail address is eseba@ljworld.com.
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