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San Antonio’s top utility executives should stop receiving annual bonuses for their work and should instead have their total pay wrapped into their base salaries, Mayor Ron Nirenberg told the Rivard Report this week.
Nirenberg questioned the need for bonuses after viewing the Rivard Report’s research into executive pay at CPS Energy, the City-owned electric and gas utility, and the San Antonio Water System, which handles water and wastewater service.
Nirenberg called CPS Energy President and CEO Paula Gold-Williams and SAWS President and CEO Robert Puente “exemplary leaders” but added that San Antonio needs to “take the political theater out of executive compensation.”
High pay and bonuses for San Antonio officials have become an increasingly noisy issue in local politics. It came to a head last year when voters approved a firefighters union-backed charter amendment that limited the pay of San Antonio’s city manager to 10 times the salary of the lowest-paid City employee, or around $300,000. The amendment was born out of a squabble the union was having with then-City Manager Sheryl Sculley over the terms of its contract. Sculley retired shortly after the vote.
However, Sculley’s overall pay of $475,000 was less than both utility chiefs. Gold-Williams’ current base salary is $485,850, with a board-approved bonus of $444,820 that brings her total compensation to $930,669. Puente earns a base salary of $496,520, plus a $100,000 bonus for work last year, for a total of $596,520,
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Unlike at SAWS, most members of CPS Energy’s 26-person executive team receive bonuses every year. In the utility’s 2018 fiscal year, the most recent for which the Rivard Report was able to obtain records, bonuses were nearly $70,000 for two top executives below Gold-Williams. Among SAWS’ 13-member team, only Puente received a bonus.
The pay disparity is in part a result of the wide gap between what energy and water utility executives make across the country. Most Americans get their power from a private company, which often pays higher salaries, and their water from a government.
Nirenberg was open to the idea of CPS Energy executives continuing to make more than SAWS in base salary, even if it’s not paid in bonuses. Both utilities face competition for labor from the private sector.
“I think the level of pay should be informed by what the market tells us we can afford, that’s corrected for [income levels in] the San Antonio area, but that also ensures we have the strongest possible leadership for these critical organizations,” Nirenberg said. “At first glance, they need to be roughly on par, but the nature of the operations are much different.”
However, Nirenberg, who, in his official capacity, serves on both utilities’ boards, can easily be outvoted by other board members. His recommendations likely will be a tough sell among some board members who believe in the current compensation structure.
That includes Ed Kelley, a former USAA executive who has served as a CPS Energy trustee for eight years. In 2015, after the departure of former CPS Energy CEO Doyle Beneby, Kelley and then–trustee Derrick Howard chaired a compensation committee to look at how they would pay the utility’s next CEO.
After examining comparable pay in the public and private sectors with the help of consultants, Kelley said he structured the CEO’s compensation based on his incentive-based pay at USAA.
“When we looked at salaries and compensation in the industry, it was going to require a big number to hold on to somebody to run this utility,” Kelley said. “I didn’t want to pay that big number, I wanted them to have the opportunity to earn that big number. But I wanted to put roughly half of their compensation at risk.”
That’s why Gold-Williams earns up to half of her nearly $1 million salary in bonus form. Every year, outside consultants grade the utility on 16 performance-based metrics, and bonuses for top officials are tied to the results.
This year, Gold-Williams earned a 3 percent raise and bonus after the utility achieved all but two metrics – one related to the rate of employee injuries on the job, the other related to the average frequency of service interruptions. On the second one, the score was off-target by a fraction of a point, which Kelley brought up to illustrate the rigor of how Gold-Williams is judged.
Asked about this, Nirenberg said that “compensating based on bonuses is not how a public utility ought to run.”
“If someone achieves the level of performance that the public requires, it should be baked into the contract,” Nirenberg said. “Annual bonuses for being a good leader don’t make much sense for a utility owned by the public in which many of the owners struggle month-to-month to pay the bills.”
At SAWS, Puente said he maintained a no-bonus employee pay structure that existed before he became CEO in 2008.
“If they got bonuses, they would have an added hurdle to jump over to justify what they’re doing,” Puente said. “I think they all, at least hopefully, feel they’re adequately paid, that they have opportunities for increased compensation through regular raises, … an opportunity to advance, meaningful contribution as an individual to their sphere or whatever they’re doing, very good benefits.”
Puente also said that bonuses only for executives and not for the next tier of department directors cause morale issues in an organization. If he’s the only one who gets a bonus, he’s the only potential target of resentment.
This year, SAWS hired independent companies to perform a more rigorous review of Puente’s performance than he has faced in the past. Of the 28 metrics evaluated, SAWS missed targets for water lost from its pipe network, the number of sanitary sewer overflows, the rate of customer service calls answered, and the number of SAWS customers using electronic billing.
Nirenberg touted recent efforts to “professionalize” the way these performance reviews are done at the utilities, adding that eliminating bonuses should be the next step.
“In my view, a good leader is rewarded, and in a great public job, by keeping their job and getting competitive pay,” Nirenberg said. “I believe we need to eliminate the subjective metrics that equate to bonuses.”