When City Utilities was faced with the potential for significant staff turnover last year, the utility handed out retention payments to keep top leaders on the job. But a recent investigation by the State Auditor’s Office finds the practice violated the Missouri Constitution.
According to the auditor’s investigative summary document obtained by the News-Leader, CU justified the payments to investigators by saying leaders would take on additional duties and that they were made in the best interest of customers. Additionally, an incentive was used to delay CEO and President Gary Gibson’s retirement. The Board of Public Utilities discussed and approved Gibson’s compensation in closed session, which the Auditor’s Office found to be a violation of the Sunshine Law, according to the document.
The investigation was prompted by a complaint to the office regarding the payments and alleged threats of retaliation if anything was disclosed to the public. According to the summary, no evidence was found to indicate retaliation or an attempt to conceal the payments from the public.
How much were executive leaders paid?
In total, CU paid almost $194,000 in retention payments. The utility provider’s leadership team is made up of the CEO-president and seven vice presidents. With half of these employees retiring or leaving for new jobs, CU was desperate to retain the remaining leaders, who were also eligible to retire or be recruited elsewhere in 2023.
Three vice presidents who remained employed were promoted to senior vice presidents and their retention payments were contingent on them remaining with CU until Dec. 31, 2023. The payments were based on years of service, with one week’s pay per five years of service. Here’s how that broke down:
- SVP-Chief Technology and People Officer Stephanie O’Connor: $46,345 (32 years of service)
- SVP-Chief Financial and Supply Chain Officer Amy Derdall: $17,525 (15 years of service)
- SVP-Chief Legal & Economic Development Officer Dwayne Fulk: $13,454 (5.6 years of service)
When it came to Gibson, the goal was to incentivize the delay of his retirement, which he would have become eligible for in March 2023. The board wanted to extend this to at least the end of 2024, according to the investigative summary. In a closed session meeting, the board approved an amended employment agreement to include a one-time retention payment equal to 10.5 weeks of Gibson’s base salary if he did not submit a notice of retirement or resignation before March 31, 2024. The CEO’s contract requires nine months’ notice for resignation or retirement to avoid substantial financial penalties.
For Gibson, who will retire in February 2025, this meant a $76,351 retention payment. He announced his plans to retire in late April.
Out of the $194,000 total, $40,000 went to retention payments for union-represented bus operators. In January 2023, as part of the collective bargaining agreement, the board approved $1,000 retention payments for bus operators who remained employed for more than one year.
“Like many employers, one of City Utilities’ highest priorities is recruitment and retention of hard-to-fill positions such as our bus operators, as well as the stability, quality, and continuity of our leadership team. Retention payments were believed to be an available strategy to City Utilities to assist in this endeavor based on past Missouri State Auditor reports, Missouri Attorney General opinions and longtime use by other Missouri public entities,” CU Media Relations Manager Joel Alexander said in a statement on behalf of the utility.
But the review by the auditor’s office found that the opinions CU cited to justify the payments still held that the bonuses were in violation of the Missouri Constitution. CU noted that the investigation’s findings and recommendations will be reviewed to inform future decisions and practices.
Why are these a violation?
The Missouri Constitution prohibits payments for services previously rendered and essentially bans public officers from receiving bonuses for regular duties performed previously.
During the investigation, CU noted that as part of the promotions and extra pay, vice presidents would take on responsibility for additional sections of the organization. However, according to the summary, CU did not provide any documentation to support what these additional duties required or if they were actually performed. While they provided an email indicating various units now fell under the senior vice presidents, the report said details were lacking in regard to how these were different from previous responsibilities, and they were not included in the actual criteria for the employees to earn the retention payment. Payments were not made until after the employees met the retention requirement, meaning they were paid for services previously rendered.
The summary also notes that the board never officially voted for or approved the retention payments for vice president roles. While they were mentioned at meetings and the multipliers determined by Gibson and communicated to the board in closed session, the board members never discussed or voted on the matter.
“CU personnel indicated the Board only approves CEO compensation, but it would appear appropriate for the Board toapprove such payments for all employees given the dollar amount and unique nature of the payment,” the investigative summary reads.
Additionally, the investigation found Gibson’s retention payments should not have been discussed and voted on in closed session. While the meeting was closed under the exception for discussing “individually identifiable personnel records, performance ratings or records pertaining to employees or applicants,” the Auditor’s Office noted that the discussion did not disclose any of these categories and instead was solely about compensation. That same exception to the Sunshine Law makes clear that it does not apply to “the names, positions, salaries and lengths of service of officers and employees of public agencies once they are employed as such.”
“With the departure of almost 70 years of institutional knowledge from CU’s executive leadership team, due largely to similar timing of retirement eligibility, we believe it was in the best interest of the utility to ensure continuity by retaining CEO Gary Gibson’s strong leadership through the reorganization of the executive team,” Board Chair Kristin Carter said in an emailed statement. “We also believe the board properly discussed this retention plan for Gary in closed session because we had to consider his leadership capabilities for the seamless transition we were prioritizing. We fully respect the auditor’s analysis and recommendations and will review the opinion in full for guidance on any relevant future matters.”
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What happens next?
The conclusion of the investigation indicates that the Auditor’s Office will issue its findings to CU and reiterate to the board that all payments should be properly approved in open session and comply with all applicable laws and regulations.
Trevor Fox, director of communications at the State Auditor’s Office, said beyond this, the office does not have an enforcement mechanism with the findings. He noted that if future violations were to occur the Attorney General’s Office could step in, based on state statute and the limits on that office’s authority.
In statements both from CU and the board, leaders recognized the investigation’s findings and noted they will be used to guide future decisions.
Marta Mieze covers local government at the News-Leader. Have feedback, tips or story ideas? Contact her at mmieze@news-leader.com.