Checks Without Balances

Out of the spotlight, some NC public agency leaders make major money

dkane@newsobserver.com ccampbell@newsobserver.com draynor@newsobserver.comNovember 16, 2013 

  • How the pensions work

    State and local employees are included in a pension system that is administered by the Office of the State Treasurer. The government agencies and employees contribute a percentage of employees’ pay, and as an employee builds a career, the state guarantees a certain level of pension income.

    For example, a state employee who works for 30 years can retire at nearly 55 percent of the average of his or her top four consecutive years of income.

    For the most recent year available, the state treasurer’s office set the employer contribution, provided by taxpayers, at 14.2 percent of qualifying pay such as salary, overtime and bonuses for state employees and 7.1 percent for most local employees. State and local employees contribute 6 percent, and the system counts on investment returns to help build the fund and maintain its solvency.

    State law requires taxpayers to cover the difference if the pension system falls behind in its obligations.

    For fiscal 2012, the state pension system paid $4.6 billion in benefits, supported by contributions by taxpayers and employees.

  • The series

    Today: Among public employees, a salary gap

    Tuesday: Working around a salary cap

    Wednesday: Bonuses for the lucky few

  • By the numbers

    $271,812 2012 compensation for Steve Beam, executive director of Raleigh Housing Authority

    $167,382 Compensation for Robert Kucab, executive director of N.C. Housing Finance Agency

    $176,853 Compensation for Sarah Parker, chief justice of N.C. Supreme Court

    $248,400 Maximum 2012 compensation for Charles Woodyard, then-CEO of Chicago Housing Authority

  • How we did the series

    In 2010, The News & Observer published a series that exposed what was then one of the most restrictive state personnel laws in the nation. The law did not, for example, allow for the release of pay histories for public employees.

    As a result, legislators changed the law to make that information public. We discovered that much of the information exists in one place: The Office of the State Treasurer, which uses it to manage the pension fund for local and state government retirees.

    The N&O obtained four consecutive years of employee pay, which showed salaries, bonuses and other types of pay. While analyzing that data and asking questions about specific employees at their agencies, we found other types of pay not accounted for by the treasurer: housing allowances, car allowances and retirement supplements. We also found examples of unusually high pay for some employees at agencies that are not in the state retirement system.

    The treasurer’s records are incomplete. For example, they don’t include the position held by a given employee. In some cases, the type of pay has been mischaracterized by the agency involved; for example, we found a $56,000 payment listed as a bonus that was actually back pay after a litigated dispute.

    In all cases highlighted in our articles, we verified pay information with the agencies involved.

    Our reporting on this issue will continue. Send your questions and tips to dkane@newsobserver.com.

With an annual budget of $705 million, Raleigh’s city manager oversees 6,600 employees who police the streets, pick up the garbage and make sure homes and office buildings are properly sited and built.

Wake’s county manager administers a $982 million budget with 3,600 employees who help the poor receive food stamps and other public assistance, perform restaurant inspections and operate parks and libraries.

But last year, those administrators made roughly the same pay as an official whose sole responsibility is providing housing to the city’s poorest residents. During the past 17 years, Raleigh Housing Authority Executive Director Steve Beam’s annual compensation grew as high as $280,690 in 2011. He leads a staff of about 150 with a $50 million budget.

Beam belongs to a select group of public officials across North Carolina who receive big pay and benefits to run authorities, commissions or institutions that are overseen by political appointees and draw little public scrutiny.

This class of officials emerged in a News & Observer analysis of pay data for 435,000 employees from 1,216 state and local agencies; the officials with surprisingly high pay run housing authorities, community colleges, a city utility, and even a local tennis complex.

During the prolonged economic slump, many local employees have received meager raises, while state employees and teachers have gone five years with only a 1.2 percent raise from the state. But these public executives have done better:

• In Fayetteville, Steven Blanchard, general manager of the Public Works Commission, was paid more than $310,000 last year, about $100,000 more than either the city or county manager.

• In Greensboro, Tina Akers Brown, the Housing Authority director, received at least $242,000 in 2012, putting her among the top-paid employees in Greensboro or Guilford County government that year. Brown did not provide full compensation information despite numerous requests.

• In Charlotte, Tim Newman, the Regional Visitors Authority’s top executive until 2011, received as much as $334,520 a year. He resigned after scrutiny of his management practices that included inflated attendance projections for the NASCAR Hall of Fame. He had been demoted to a sales position, but when he quit, the bureau agreed to pay him severance worth about $142,000 and $29,000 for unused vacation time. His total for fiscal year 2012 was $350,165.

In many of these cases, the boards that oversee these executives say the pay is well-deserved. They say the institutions are well-run, with clean audits and few public complaints. They also cite pay surveys that show their executives’ pay is in line with pay of leaders at similar institutions.

“You can pay people less (in) salaries, but you end up with more turnover, and that’s more costly,” said Kyle Dilday, the Raleigh Housing Authority board chairman who has repeatedly supported raises for Beam and credits him with running a tight, clean operation.

‘Personnel matters’

The pay deals are often done behind closed doors, with little explanation afterward. That’s because the state’s personnel law considers evaluations private. In Beam’s case, board minutes for several years – recorded by Beam – merely noted a closed session about “personnel matters.” No pay details were provided.

In at least two cases, these local boards have maneuvered to get around salary restrictions set by a state agency and the U.S. Congress.

Public records provided to The N&O show these officials’ pay is often augmented by perks that rank-and-file employees never get, or receive in much smaller amounts. The chief executive officer of a government-created nonprofit that purchases electricity for municipalities, for example, has been receiving a $53,000 bonus each year just for staying on the job.

Some have received housing stipends exceeding $40,000 a year, and two have received payments of more than $40,000 toward an annuity in addition to public money invested in their state pensions.

At least one official has a car allowance topping $20,000 a year and is among others with additional health care coverage worth several thousand dollars a year. Some of these salaries are boosted by longevity payments that add as much as 7.5 percent.

The pattern of high pay for public officials in lower-profile entities emerged when The N&O obtained four years of data for every state and local employee in the state pension system. This information had not been available until 2010, when lawmakers made more information about employees’ pay available to the public in response to a series of reports in The N&O.

Jane Pinsky, director of the N.C. Coalition for Lobbying and Government Reform, a nonpartisan watchdog, was surprised to learn about the cost of salaries and perks in lesser-known government sectors. She said the findings show the need for officials to better publicize how much they are spending on compensation.

“It’s surprising that, one, they are making that much money, but two, that boards are finding ways to compensate people that’s outside of the normal procedure,” she said. “It’s not what I as a citizen would have expected.”

‘Out of whack’

The information on public pay is collected by the state treasurer’s office, which needs it to administer the pensions of 254,000 retirees. That’s because the pay rates determine the size of an employee’s pension.

State law requires taxpayers to cover the difference if the pension system falls behind in its obligations. So far, North Carolina has maintained one of the best-funded pension systems in the nation.

For Beam, Blanchard and others in the state pension system, the bonuses and longevity pay can be factored into their pensions if earned during their four highest consecutive years of pay.

Akers Brown’s agency is not in the state pension system, but the Greensboro Housing Authority contributes the equivalent of 8.5 percent of her pay into a retirement fund, while she and other employees contribute at least 6 percent of their pay. Authority records show she has also been provided with as much as $35,000 in additional retirement pay in one year, which pushed her total pay to more than $263,000 in 2010. She did not respond when The N&O asked whether that perk continues.

Board members who approved the salaries and benefits often cite compensation studies that suggest these officials have been or continue to be underpaid, or they point out that many of these officials are long-serving and that letting them go would be a great loss to the organization.

But Beam and Akers Brown, for example, make tens of thousands more in compensation than Congress and federal housing officials wanted. After reports of high pay for public housing directors in other cities, Congress voted in 2012 to limit the federal government’s share for a director’s salary to no more than $155,500.

The federal Department of Housing and Urban Development primarily funds local public housing authorities. It accounts for three-quarters of the Raleigh Housing Authority’s budget.

The cap did not result in pay reductions for Beam and Akers Brown. With little evidence of a public discussion in their board minutes, the boards pulled money out of funds not controlled by HUD to keep the pay up. The Raleigh Housing Authority’s minutes make no mention at all, while Greensboro’s noted the additional pay would be pulled out of a different fund.

U.S. Sen. Chuck Grassley, an Iowa Republican who drew attention to housing authority salaries, said housing authorities that continue to pay directors more than $155,500 “violate the intention of the caps.”

“The caps are meant to focus housing authorities’ spending on their essential purpose of providing safe, affordable housing to people in need,” Grassley said in an email. “And housing authorities that expend a lot of effort to circumvent salary caps have their priorities out of whack.”

Beam disagrees. “You’ve got to look at the longevity of the executive director,” he said. “You’ve got to look at what the agency has accomplished in that time.”

Beam said the pay cap doesn’t cover his pay because it only includes compensation from federal funding sources. “RHA has a diversified portfolio, and the federal funding is one of several sources,” he said.

Otis Wilson, chairman of the Greensboro Housing Authority’s board, said Akers Brown, 56, deserves her pay. The authority has been identified as a high performer in HUD audits, he said, and Akers Brown is a veteran “hands-on” leader who understands the challenges of managing public housing while seeking the money to sustain it.

“You don’t realize how complicated it is to run a housing authority,” said Wilson, a retired AT&T intellectual property specialist. “You’ve got everything from senior (citizen) issues to people who are dealing with a criminal element that’s part of their family that could deny them their residency.

“It’s a real widespread organization. ... That’s where she shines to be on top of it.”

In Fayetteville, a recent study commissioned by the city manager examined whether the city’s Public Works Commission, which is part of city government, has become too independent from that government. The study found that the commission paid its equivalent employees, on average, 15 percent more than the city, with a better benefits package.

Blanchard, 63, the general manager, has disputed the findings, but he has said he will work with the city to find ways to consolidate operations to save the commission and the city money. Unlike the public housing authorities, the Fayetteville commission rivals the size of the local city and county governments.

The commission provides water, sewer and electric service to 113,000 customers in Fayetteville and Cumberland County. Blanchard is a highly regarded 19-year leader of the commission and has kept electric rates among the lowest in the state.

State treasurer records show that in the past five years, his annual pay has increased 21 percent, or more than $53,000, to $302,000. He and other commission employees are in the state pension system. He is also paid a $7,660 annual car allowance, which is not considered income to be counted for pension purposes.

Pay beyond his peers

Beam, 55, rose through the ranks of the Raleigh Housing Authority, starting in finance and becoming director in 1996. Board members credit him with turning around a troubled agency in the wake of two residents’ deaths from carbon monoxide poisoning about 20 years ago.

Beam will be paid a salary of $240,000 this year. He routinely receives bonuses, the highest being $42,000, plus longevity payments and a car allowance that have brought his total compensation as high as $280,690. It dipped to $271,812 last year after the board gave him a smaller bonus.

Raleigh City Manager Russell Allen was earning a $232,800 annual salary when he was fired this year, plus $37,248 in deferred compensation and an $8,400 annual car allowance. He has received annual longevity payments equaling 4.2 percent of his salary, or roughly $9,800. All told, Allen’s pay reached as high as $288,248.

Wake County Manager David Cooke makes about $20,000 less than Beam. County records show Cooke receives $239,121 in annual salary, plus a $6,000 car allowance and $4,000 annually in a special retirement account. He has been county manager since 2000 and will retire at the end of the month.

Beam’s and Akers Brown’s 2010 compensation put them among the 30 highest-paid public housing directors in the country, according to a HUD survey. They made more than the housing directors in Chicago, Boston and Charlotte, which all have bigger budgets and staffs.

The Raleigh Housing Authority board, which is appointed by the mayor, has given Beam a raise every year since he was hired in 1996. The biggest has been $18,000.

“He’s sort of on the upper end of the pay scales, but we think he deserves that,” said Dilday, a retirement community administrator who serves as the authority’s board chairman.

Dilday points to Beam’s record at the agency. He has overseen the demolition of 1,000 of the city’s worst public housing apartments while building several new complexes, for a net gain of 2,000 units. The agency’s past 26 audits have come back clean. And he has worked to restore credibility after the 1992 deaths of two Walnut Terrace residents from carbon monoxide poisoning.

“I cannot fathom trying to replace Mr. Beam,” Dilday said. “Raleigh would lose a tremendous asset because of what he has been able to do.”

Officials at some of these agencies point to compensation surveys to justify executives’ pay. But often those surveys include private-sector pay, which tends to be higher because those officials are rewarded for making a profit for their entities’ owners and shareholders.

Dilday said the board sets Beam’s pay after reviewing surveys of compensation at similar agencies. The most recent study, in 2011, looked at 100 other housing authorities across the country and found seven that paid their directors more than Beam. Three of those managed at least 20,000 more public housing units than Raleigh, which had 5,417 at the time.

The study didn’t factor in directors’ nonsalary pay, which for Beam totaled $46,760 that year. The study also compared Beam to leaders of other government and private agencies in North Carolina, including college presidents, hospital executives and city managers.

Beam’s pay came in only slightly above the study’s average for other agency leaders – but only because it included the CEO of WakeMed, whose pay of $767,477 raised the average by $13,000.

Waits for public housing

Wilson, the Greensboro housing chairman, said his board paid for a salary study for all positions at the time HUD began capping how much it would pay executives. The study said Akers Brown’s pay was not out of line, but it lacked the same comparative analysis provided for the rest of the staff.

Blanchard and the Fayetteville Public Works Commission’s chairman, Mike Lallier, also cited compensation analyses done by the Hay Group and the American Public Power Association that show Blanchard’s salary was in line with similarly sized privately and publicly owned utilities. They said the private-sector companies should be included because the commission competes for the same pool of utility leaders.

The Raleigh Housing Authority board rarely questions Beam’s leadership. Nearly all its votes in recent years have been unanimous; most of the board members have served at least eight years.

Because the terms are so long, Mayor Nancy McFarlane has yet to make a new appointment – even though she’s nearing the end of her first two-year term in office.

Beam and Akers Brown have seen their pay increase during hard times, while their agencies have had to turn away thousands seeking housing. A sign on the front desk of the Greensboro Housing Authority in August told those seeking housing that it stopped taking applications after April 30.

In Raleigh earlier this fall, 5,884 people were waiting for a public housing apartment, and 4,659 others were waiting to join the Section 8 voucher program, which provides subsidized rent at privately owned homes. Section 8 applicants can expect to spend up to five years on a waiting list. With the cost of vouchers averaging $11,000 a year, the authority could provide rent subsidies for 10 more families if Beam’s pay were capped at the federal limit.

Octavia Rainey, a Southeast Raleigh community activist, said she had not been aware of Beam’s salary. She said the housing authority’s operations are secretive.

“He should not be making that kind of money,” she said. “It is unacceptable when you have people suffering in the city of Raleigh.”

Tuesday: A big pension play

Kane: 919-829-4861

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