BUFFALO NEWS INVESTIGATION
Power Authority paid nearly $40 million in bonuses
Downstate headquarters received lion’s share
The State Power Authority sidestepped a political brouhaha this spring by calling off $3.4 million in incentive pay to its 1,600 employees after public anger erupted over the payment of rich bonuses at Wall Street firms involved in the nation’s financial meltdown.
But in the previous nine years, the Power Authority, with little fanfare, paid out bonuses totaling $39.8 million, an investigation by The Buffalo News has found.
The bonuses awarded for the years 1999 through 2007 averaged 3.3 percent of pay, peaking at 7.25 percent one year for one group of employees. The bonuses are one reason why average pay at the authority exceeds $82,000 a year and one in five employees makes more than $100,000.
Everyone from secretaries and security guards to engineers and senior executives have received the bonuses, called “variable pay” in authority vernacular.
Even part-time tour guides got a piece of the action. The three who worked at the Niagara Power Project in Lewiston received bonuses that averaged $500.
Payments made last year, based on 2007 performance, averaged $2,452 per employee, according to calculations by The News. They topped out at $8,112 for Arnold M. Bellis, the authority’s comptroller, who received a total of $31,198 in bonus money since 2003.
He is one of 11 employees—all but one working out of the agency’s White Plains headquarters — who received more than $25,000 in total bonuses over five years. None of those top bonuses went to employees of the Niagara Power Project, which was responsible for nearly 70 percent of the authority’s profits last year.
Noting that profitability, Rep. Brian Higgins called the bonuses “part of a historical culture that shows a blatant disregard for Western New York.”
“That $40 million should have been been dedicated to Western New York for economic development or low-cost power for job-creating businesses,” said Higgins, D-Buffalo.
Assemblyman Sam Hoyt, who is sponsoring a bill that would prohibit bonuses for management employees at state authorities, said the payouts amount to “far too much money.”
“Why? Because exempt [management] employees get paid very, very generously,” the Buffalo Democrat said.
Richard M. Kessel, the authority’s president, said such bonuses probably would not resume.
“It’s unlikely that we would revive variable pay in the form it’s been given in the past,” he said. “Whether it’s right or wrong, it sends the wrong impression.”
No decision will be made until a study of employee compensation is completed this summer, although Kessel said he suspects it will show authority employees are underpaid compared with those of other public and private utilities.
Based on performance
The authority instituted the bonus program in 1999 after conducting an informal review of incentive programs at other public and private sector organizations. It was designed to reward employee performance, based on the success of the authority as a whole, the track record of individual departments and evaluations of individual employees.
Departments then were rated on a multitude of performance criteria, including the reliability of power generation and transmission, the number of employee and environmental accidents, and adherence to meeting budget goals.
The departments met or exceeded 59 percent of the goals in 2007.
Employees also received individual evaluations. Those rated 1, 2 or 3, were entitled to the full bonus due employees in their department. Those getting a 4 received one-third. Those rated 5, or unsatisfactory, did not receive any bonus money.
Virtually no employee was denied bonus money under the program open to part-time, provisional and temporary employees, as well as full-timers.
Bonuses downstate
Management employees — many based at authority headquarters in White Plains, north of New York City — generally received about twice as much in bonuses as percentage of pay than union-represented employees working at power generation plants around the state. The bonuses are not part of union contracts.
In 2000, for example, salaried employees earned performance- based bonuses that averaged 3.1 percent, while union-represented workers got an average of 1.6 percent.
For most years, employees’ bonuses were capped at 6 percent of their pay, and aside from 1999, none hit that level. The average for all employees, over all nine years, was 3.3 percent.
In 2007, staff based in White Plains accounted for 18 of the 20 employees receiving the most in bonus money in the last five years incentive pay was awarded, a analysis by The News shows. Employees at generating plants accounted for only two of the 50 staffers receiving the biggest bonuses.
That same year, bonuses paid to 289 employees at the Niagara Power Project averaged $1,678. Horace Horton, regional manager, received the biggest bonus of anyone working at the plant, $5,549. That ranked him 28th among all authority employees.
Bonuses for employees at the Niagara Power Project totaled $485,033, accounting for 13 percent of the authority’s incentive pay.
Throughout the authority, clerks, trade apprentices and security guards typically received bonuses in the $1,000 range, the analysis by The News shows.
Other union-represented employees earning larger salaries received bigger bonuses. Journeymen power plant operators, for example, typically received in the neighborhood of $2,000, while senior operators got several hundred dollars more.
The biggest bonuses went to top executives and lawyers.
Roger Kelley, then-president and chief executive officer, received a bonus of $4,496, on top of his salary of $235,000. His predecessor, Timothy Carey, received $6,660 for the previous year.
The authority’s seven senior vice presidents received bonuses that averaged $6,546. Seventeen vice presidents got an average of $4,739. Eight principle attorneys received an average of $4,877.
The amount paid in bonuses has varied over the years. It peaked at $11.47 million in 1999 — the first year of the program — in part because the authority still owned two nuclear power plants and had twice as many employees as in subsequent years.
In the eight succeeding years, payouts averaged $3.54 million, including $3.76 million for 2007.
Pay levels debated
Assemblyman Richard L. Brodsky, a Greenburgh Democrat and chairman of the Assembly’s Committee on Corporations, Authorities and Commissions, said performance- based pay is not necessarily a bad thing.
“One could make a theoretical case for performance-based pay at the authority. The problem is, the Power Authority has never made the case,” said Brodsky, who represents a portion of Westchester County north of Yonkers.
He also is troubled by the fact that almost all employees receive incentive pay.
“If [almost] every employee is getting something, there is something wrong with the system. It doesn’t sound like incentive pay, it sounds like a gift,” Brodsky said.
Kessel acknowledged that a political firestorm over the prospect of awarding bonuses in March prompted him to cancel the program for this year.
“I decided, based upon the national controversy over bonuses, that it was an inopportune time to make those variable- pay payments. It would send the wrong signal to the public,” he said.
But, he said, the authority has to make sure it’s paying enough to attract and keep staff.
“We are this hybrid. We’re a state authority, but at the same time we’re a utility, and we have to compete with other utilities for talent,” he said.
“I believe [Power Authority] employees do a great job and they should be adequately compensated. But I think variable pay has outlived its usefulness and is being used politically to stop [the authority] from doing some of the big things it wants to do,” Kessel said.
Kessel said he did not want to predict the outcome of the ongoing compensation study, but ventured that “you would find [Power Authority] salaries are significantly lower than [at] comparable utilities.”
Hoyt disagrees. “These people are not underpaid,” he said.
Indeed, an investigation published two years ago by The News found authority employees earned an average of more than $82,000 in 2005. Executives made more than $200,000, while lawyers averaged more than $130,000.
Blue-collar jobs paid more than comparable positions in the private sector and most other government entities. Janitors and clerks earned an average of $52,000 a year, laborers and security guards, $57,000, and trade apprentices, $65,000.
“We’ve watched the greed on Wall Street and corporate America being questioned,” Hoyt said. “We should be questioning the same in the public sector.”
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