Salary Surge: City Utilities executives are compensated well for managing complex utility

Five of the seven executive staff members at City Utilities of Springfield earn a higher salary than the median for their positions at comparable utilities, according to the 2007 executive salary survey conducted by Washington, D.C.-based American Public Power Association.

Independent research by Springfield Business Journal found that salaries of all but one of CU’s six highest-paid officials were higher than their peers at four public utilities, all of which are in regional cities with similar costs of living.

(Click here for a salary comparison of CU's top executives and those of four other utilities and here for a salary comparison of additional CU executives with other utilities.)

“We try to pay salaries that commensurate with the responsibilities that are placed on the people in individual jobs,” CU General Manager and CEO John Twitty said in response to SBJ’s research, 12 days before Missouri State Auditor Susan Montee unveiled her 73-page audit that was critical of CU’s business practices.

“We’ve got five utilities here: electricity, natural gas, water, the bus and a telecommunications business,” Twitty added. “You have additional responsibility, and there ought to be appropriate compensation for that. … It’s difficult to find one-for-one comparisons.”

Similar SBJ comparative research in October, then focusing on electric rates, turned up the fact that CU is a unique utility company handling five lines of service versus a typical two lines at other utilities nationwide. Those findings, published in SBJ’s “Power to the People” report Oct. 29, also revealed that CU’s electric rates are cheaper than those of its counterparts.

The four peer utilities that SBJ surveyed in the salary comparison were Colorado Springs (Colo.) Utilities, Lincoln (Neb.) Electric System, Kansas City (Kan.) Board of Public Utilities and Springfield (Ill.) City Water, Light & Power.

Only one of those four – Colorado Springs – offers natural gas service in addition to electric service, and none of those peer utilities offered telecommunications or transit services.

Topping the lists

The biggest discrepancy between what CU officials earned and what their peers earned was in the general manager’s spot, where Twitty, with a 2007 salary of $334,742, took in almost $65,000 more than No. 2 on the list of five utilities, Jerry Forte of Colorado Springs Utilities. Forte’s utility doesn’t have bus or communications services but does offer electric, gas and water services to twice as many customers as Springfield CU.

In addition to Twitty, CU’s executive staff consists of Associate General Manager of Operations Wade Stinson, Associate General Manager of Electric Supply Scott Miller, General Counsel John Black, Associate General Manager of Administration Robin House, Chief Financial Officer Jim Shuler and Chief Internal Auditor Brenda Putman.

2007 salaries as of November for these seven individuals ranged from $123,333 for Putman to $334,742 for Twitty.

CU has set a salary range for the CEO/general manager role of $232,914 to $349,372, according to CU Director of Human Resources Lisa Turner. The median for the GM position in the APPA survey was $232,304.

In addition to their salaries, CU pays a monthly vehicle allowance of $659 to six executives, including Twitty, the state audit said.

Planning the pay scale

Among the state auditor’s critical remarks of CU, Montee came down on the utility for using “varying market standards to establish a salary plan for its general manager and associate general managers, resulting in significantly higher salaries for these positions.”

The audit explained: “While CU chose to use the ‘Base 50th’ category of the comprehensive study for its standard to set CU nonexecutive employee salaries, it used the Market Average Total Cash Compensation as its standard to set salaries of its six associate general managers. The TCC standard includes bonuses paid to executives of the other utilities included in the study. CU’s human resources director indicated this is done because CU wanted the associate general managers’ salaries to be comparable to those of executives at other utilities who receive bonuses as part of their compensation.”

CU’s associate general managers do not receive bonuses.

Another standard is used to determine the general manager’s salary, according to the audit, which reported that, “The dollar amount for this standard is over $53,000 more than the standard being used for the associate general managers and is over $85,000 more than the standard being used for CU’s nonexecutive employees.”

Prior to the release of the audit, CU’s Turner told SBJ the utility determines executive salaries by conducting its own salary survey about every five years. The last survey was conducted in 2003 and 2004, according to Turner. The next survey is set for fall.

A private consulting firm, Seattle-based Milliman Inc., compiled a list of 22 peer utilities and collected salary and benefit information. CU’s Board of

Public Utilities approved the list of 22 peer utilities, which have among them the four peer utilities that SBJ independently researched.

“Whenever we’re doing a survey, we’re actually looking to see if we have the position in the correct salary range,” Turner said. “We use the midpoint to gauge whether they’re on market or not.”

The midpoint for CU’s general manager position is $291,143, for example.

CU Audit Responses

Below are select audit responses from City Utilities of Springfield pertaining to compensation concerns voiced by the state auditor’s report, released Dec. 18. CU has set a Jan. 31 deadline to announce its action plan.

• To audit criticisms over using different benchmarks for establishing executive salaries and nonexecutive salaries:

“The (Board of Public Utilities) will review the survey benchmarks used for the executive positions during the next comprehensive salary and benefits survey scheduled for the fall of 2008.”

• To audit criticisms over a severance package for CU’s general manager valued at about $517,000, which the auditors called “excessive” in their report:

“In order to attract and retain the caliber of employee the (Board of Public Utilities) requires to fill the general manager position, it is necessary to compete nationally. The current employment contract between the general manager and the board is valid and binding on each party.”

• To audit criticisms over executive vehicle allowances of $659 per month:

“The vehicle allowance is intended not only for daily driving between various CU locations, but also for any driving on behalf of CU business. This would include trips within driving distance for education, off-site meetings and legislative issues. The allowance amount is reviewed periodically for reasonableness.”

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