Special-district compensation can top $1 million

Aug. 10--The highest-paid special district worker in the great state of California was the CEO of the BETA Healthcare Group Risk Management Authority, earning $1.18 million in total compensation in 2012.

Regular readers of The Watchdog know that a special district is a narrowly-focused and often invisible government agency. About 4,700 of the wee agencies blanket California in a crazy patchwork quilt that has largely defied consolidation efforts for more than half-a-century, according to figures from the state controller and more reports by watchdog groups than we have room to list here.

The special districts employed more than 130,000 workers, including part-timers, in 2012. Of those:

--329 earned more than $300,000 in total compensation.

--3,890 earned more than $200,000 in total compensation.

--37,491 earned more than $100,000 in total compensation.

"Special districts really do provide a very different, unique service than what's provided by a city, county or centralized government," said Miryam Mora-Barajas, spokeswoman for the California Special Districts Association. "It is very focused, and because they are so focused and specialized, they often require public servants to have advanced degrees and certifications and know local, state and federal regulations. Because of that, they tend to have higher salary rates."

Sunshine, they say, is one of the best disinfectants. The state controller's public pay database launched in 2010 as one of the largest transparency pushes in the nation.

Several districts on the 2012 Top 20 list say those highly-paid executives are now gone, and that the new execs have more sober compensation. Details on that in a minute -- but this is precisely why you'll continue to see public pay stories from The Watchdog at regular intervals.

Total compensation is what it costs to actually employ each worker. It includes wages as reported to Uncle Sam, as well as deferred compensation and the value of health and retirement benefits.

BIG PICTURE

BETA has ranked at or near the top of special district pay lists for years. As special districts go, BETA may be extra special: "In the 1970s, a medical malpractice crisis emerged when commercial insurers in California either abandoned the professional liability market or increased rates so dramatically that healthcare providers could no longer afford coverage," according to the district's official history. "Hospital executives searched for alternatives, seeking to control and stabilize the cost of professional liability insurance and avoid the rate swings that had typified the commercial insurance market."

So 17 public hospital districts banded together, forming "a hospital-controlled risk-sharing pool," structured as a California joint powers authority. BETA now serves more than 100 city, county, district and nonprofit hospitals. Unlike commercial insurers, if BETA collects more than it needs to pay claims and fund operations, it "returns monies over time in an equitable manner," CEO Tom Wander has said. The agency has offices in Alamo, Glendale and San Diego.

Public hospital-types dominated the list of top earners among special district executives statewide. No. 2 was the CEO of the Tulare District Healthcare System, clocking total comp of $969,766 (the bulk via a severance agreement, officials said); while the head honchos at San Diego County's Palomar Pomerado and Tri-City hospital districts received total comp of $802,350 and $798,846, respectively.

Before folks start frothing at the mouth, consider that nonprofit hospital CEOs routinely earn much more than this. The Watchdog's recent review of O.C.'s $1-million-plus nonprofit club found that the St. Joseph Health Care system's CEO had total compensation of $2.04 million; Mission Hospital Regional Medical Center's CEO/president earned $1.58 million; and Memorial Health Services Group had total comp of $1.55 million.

WHY SO HIGH?

We asked dozens of agencies to explain the big compensation packages we see at the top of the list.

The consensus: It's the cost of doing business, and you get what you pay for.

On the $470,271 comp of Art Leahy, CEO of the Los Angeles County Metropolitan Transportation Authority (former CEO of the Orange County Transportation Authority), spokesman Marc Littman said this:

"Our CEO manages an agency with a $5 billion annual budget and more than 9,000 employees and he oversees one of the largest public works programs in the United States. Thanks to the Measure R transit sales tax approved by 2 million LA County voters in 2008, Metro is engaged in building a dozen major new transit projects including five new rail projects underway now plus 15 major highway projects on top of many other programs. Metro is the third largest transit agency in the United States. We carry 1.5 million passengers a day on our buses and trains, we're the lead transportation planning and programming agency for Los Angeles County and a major construction agency. So our CEO actually runs three major agencies in one. Art Leahy's salary and benefit package is not out of line with what other major public agency execs make in Los Angeles such as LA Unified, LAPD, DWP, LASD and others who run large agencies."

Ditto for OCTA. At total comp of $416,409, its CEO oversees some 1,500 employees and a budget of $1.1 billion, including $297 million for streets and roads improvements and $176 million for freeway projects, said spokesman Joel Zlotnik. In 2012, OCTA was paying both the employer and employee share of pension costs, but the board voted to change that last year so workers will pay 100 percent of their share of pension costs by 2017. That will save taxpayers $8.5 million over three years, and $85 million over the next two decades, Zlotnik said. Current CEO Darrell Johnson is already paying 100 percent of the employee share to his pension, he said.

In Orange County, the overwhelming majority of the most well-paid special district workers -- 617 out of the Top 1,000 -- worked for the Orange County Fire Authority. It was one of the only all-public-safety special districts in the mix. The average total comp for these OCFA workers was $235,569.

SUNSHINE

Public scrutiny may be pushing some special districts in a more sober direction.

The nearly-half-million-dollar-a-year CEO for Mountain Communities Healthcare District left the organization in 2013. The new CEO, Stan Oppegard, has a total annual salary of $192,000, with no other wages or deferred comp, he told us.

It's the same for the Northern Inyo County Local Hospital District, where the CEO had total comp of $449,675 in 2012. The new CEO, Victoria Alexander Lane, makes $275,000 with no bonus, and the district has adopted the California Critical Access Hospital pay scale "for fairness to our community," she said. "I am an advocate of fair wage."

In many cases, the big numbers were fueled by enormous cash payouts for unused leave that had been allowed to accumulate over the years.

For example, the GM of the Central Contra Costa Sanitary District retired in 2012 at an annual salary of $234,000. But he cashed out leave totaling $356,221 -- the majority of which was sick leave valued at $307,000, officials said.

Which perhaps illustrates the need for use-it-or-lose-it caps.

Contra Costa San's GM was grandfathered in on a policy that allowed for an 85 percent payoff of total accrued sick leave, said David Heath, director of administration. But most of the district's workers won't be able to cash out that much: They have a maximum payout of 40 percent, he said.

These caps vary wildly from agency to agency, but are clearly an issue in big public payouts. We'll delve into those caps more deeply soon.

Contact the writer: [email protected]: @ocwatchdog

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