Even Though The Deal Isn't Going As Planned, Will Tucson HonorIts Promise To Subsidize The Giant Corporation? By Dave Devine WHEN IT WAS announced last year that Microsoft was considering opening a national call-in service center in Tucson, many people were enthusiastic about the much-publicized possibility of having 500 employees in the first year of operation, and eventually 1,200 high-paying jobs in a high-tech industry. It was just what the community needed, according to our daily newspapers. Well worth making some governmental concessions to the giant company, they said. But now that Microsoft is here, disagreements and disputes over the promises made to bring them to Tucson are beginning to surface. Microsoft, controlled by America's richest nerd, Bill Gates, has located on the far-far-southeast side, at the former IBM site now known as the Science and Technology Park. The place is operated by the Rita Road Campus Corporation, a creation of the Arizona Board of Regents. To finance Microsoft's move, officials of the University of Arizona proposed that city, county and state governments contribute funds to offset operating and maintenance expenses the Campus Corporation would incur in the first few years of Microsoft's occupancy. UA officials explained the University itself could not expend funds on economic development activities due to state legal restrictions. Plus, they said, the Campus Corporation didn't have the money to re-roof the building where Microsoft would relocate, pave a new parking lot, nor remove asbestos. According to economic projections produced at the time by UA officials, the financial benefits of Microsoft's move to Tucson would greatly offset any outlay of tax funds. Based on these projections, both city and county governments agreed to pay $1 million over four years, with the state kicking in another $2 million. But in the rush to bring Microsoft to town, some well-publicized details were overlooked. First, there was the question of just how much Microsoft's Tucson employees would actually be paid. Then it was revealed temporary workers would make up a sizable portion of the work force, not a popular move locally. Based on this confusion, the Tucson City Council tied its contribution to the actual expenditures the Campus Corporation made for needed improvements and the size of Microsoft's direct payroll. But now that the company has begun operating in Tucson with 100 employees, which might grow to 200 later this year, where does the city's agreement for payment stand? In the same state of confusion this entire process has experienced from the beginning. City and UA officials now disagree over what must happen before the city makes its 1996 contribution to the deal. Bruce Wright, a senior UA official, expects the city to make a payment in the next few months. He said the Campus Corporation desperately needs the money to complete improvements promised to Microsoft. But both city staff and the City Council may see it differently. The council pegged the city's contribution to the UA's economic impact projections. Of course, the accuracy of these projections for a given year won't be known until the end of that year. Apparently then, the city shouldn't make any payments until sometime in 1997. Kendall Bert, director of the city's Economic Development office, has said he expects the UA to submit an agreement within a few months specifying how the city's contribution is to be determined. Then, data would be collected on the actual expenditures--by the Campus Corporation for improvements, as well as by Microsoft to its employees--and this would be used to determine the amount of payment. Wright agreed there's confusion over how the city's payment is to be made, but he says he hopes to work out the differences in a meeting later this month with Tucson Mayor George Miller and City Manager Michael Brown. Wright said there needs to be an understanding on how to proceed, as well as on what information the City Council can expect to receive from Microsoft. Since employee salaries and other information is confidential, how the adopted City Council motion will be implemented needs to be determined, according to Wright. The Council's adopted motion, however, is quite clear. It states agreements are to be negotiated on economic impact with the appropriate agencies, and the City Council is to approve them. Once that happens, and the actual benefit of Microsoft's move to Tucson is determined, payments can be made. What happens if the city's contribution is short of its $250,000 promise? It's a likely occurrence, since the number of Microsoft's Tucson employees for this year will hit only 40 percent of the number projected by the UA. According to Wright, it will cause a severe problem, because some of the required work is already being done. Not only is there confusion over how the city's contribution is to be determined, but there's difficulty in determining how temporary workers are to be factored into the UA's projections of benefit to the community. City Councilman Steve Leal said he'll oppose including the salaries of temporary workers and others who do not receive benefits in the equation. He also wants to see an annual audited statement on Microsoft's impact on Tucson's economy. And while confusion reigns at the city level, what will happen with the county and state contributions? Pima County's expenditure was not tied to the same type of standards, so disagreements over promises versus performance should not be a problem. The state contribution apparently will come through the Community Economic Development Commission, and will not require approval by the state Legislature. This is fortunate for the UA, since at least one high-ranking Republican opposes this type of financial arrangement. State Sen. Carol Springer of Prescott, chair of the Appropriations Committee, said this type of program penalizes small businesses and Microsoft's competitors. She argues a good state tax structure is the best inducement for economic development, not this type of incentive package. So while Microsoft employees are busy way out there in the sticks at the old IBM plant, city politicians and bureaucrats are discussing just what they agreed upon to get the company here. It'll be interesting to see if the City Council sticks to its guns, or whether, as it so often does, it conveniently finds circumstances have changed, and thus waters down the tough talk of the past.

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