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Jax Daily Record Tuesday, May 12, 202011:10 AM EST

Salem wants City Council to sign off on JEA employee bonuses

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The plan would require voters change the city charter.  
by: Mike Mendenhall Staff Writer

City Council member Ron Salem wants Council to have a say in future JEA employee bonus plans.

Salem filed Ordinance 2020-0245 on May 6 that would amend JEA’s charter to require any employee bonus or incentive plan to be approved by both the utility’s board of directors and Council.

Salem, Council and city attorneys are working to redraft JEA’s charter to increase oversight.

Ron Salem

In an interview May 11, Salem said he is specifically targeting a 30-year-old short-term incentive plan that historically has a $3 million to $7 million annual payout to JEA employees.  

The bonus is not included as a line item in JEA’s annual budget reviewed by Council auditors, according to an April 23 email sent from JEA Operating Budgets Manager Kristina Quarterman to Council auditors.

Salem’s concern stems from a failed Long-term Performance Unit Plan initiated by former JEA Managing Director and CEO Aaron Zahn. Council auditors found in November that plan could have cost JEA up to $636.6 million if the city-owned electric and water utility was sold to a private company.

Like the long-term incentive, the JEA board gave control to the CEO of implementation and financial structure of the short-term bonus plan.

In 2017, former CEO Paul McElroy was in charge of implementing the plan. Zahn was given the authority in 2019 as part of the same January 2019 vote that authorized Zahn to create the PUP bonus.

McElroy is back as JEA’s interim CEO.

“I’m not trying to stop the plan. If the JEA board feels strongly that it should have a short-term incentive plan they can have one. This ordinance puts some additional controls over it that I think are absolutely necessary,” Salem said May 11 in a Council workshop redrafting JEA’s charter.

JEA budget officials told the Council Auditor’s Office that the short-term incentive isn’t a budgeted item because the payout is based on fiscal year operating savings. 

If JEA doesn’t save the money, the bonus is not paid.

JEA documents that break down the Pay for Performance plan’s FY 2019 financial information show the utility estimated a $4.96 million payout to 1,955 employees last year. The payout includes eligible retirees and represents 3.04% of all JEA salaries.

That was based on $15.13 million in operational and management savings, according to the documents.

Because the payment structure is based on salary, individual bonuses are higher for JEA’s senior leadership. In 2019, the utility’s 13 executives received $191,146 through the program.

Individually, Zahn received $31,224, former President and Chief Operating Officer Melissa Dykes $25,321 and former CFO Ryan Wannemacher $22,156. 

All three have since been fired from JEA because of their roles in the utility’s failed push to privatize and the long-term incentive plan.  

“(Plan implementation) was given to Mr. Zahn at the beginning of the creation of the long-term incentive plan,” Salem said. “He had complete authority over that. I don’t believe a CEO should receive a payment from an incentive plan that he’s creating. I think that’s a clear conflict of interest.” 

The bonus plan was temporarily discontinued from 2009-11 as JEA’s revenue declined during the Great Recession. Dykes, JEA’s interim CEO at the time, did not approve the plan for FY 2019-20, according to Salem. 

The plan’s intended purpose is to encourage JEA leadership and employees to reduce costs related to utility safety, customer satisfaction, cost per kilowatt hour in the electric service and cost per unit in water and wastewater service, according to board memoranda. 

The bonus payments are calculated from JEA’s overall performance and individual employee performance. The bonuses are included in JEA’s union-negotiated contracts.

Council member Michael Boylan is leading Council efforts to redraft the JEA charter. He said McElroy told him May 10 the incentive program is important in pushing the utility’s senior leadership team to save money.

 Boylan said he supports Salem’s efforts.

“One of the greatest challenges I think all of us found in this process is our lack of awareness of what was transpiring over at JEA in the management and in the C-section of that building,” Boylan said.

Council Vice President Tommy Hazouri said May 11 the bill’s language should be redrafted by the City’s Office of General Counsel to keep approval with the JEA board. 

He said he could support a financial review by Council auditors, but Hazouri fears a Council vote to approve the plan could be “overreach.”

“We could spend all Council meeting discussing the merits of how much each of these individuals should get based on the information we get. That’s really digging into the weeds. We have to trust and return that trust back to the JEA at some point,” Hazouri said. 

Salem’s proposed charter change will require a voter referendum. If approved by Council, the question will be on the Nov. 3 ballot.

“The controls in this ordinance puts it back under the control of the JEA board and if they deem it appropriate, then it comes to the City Council in an ordinance, and we could approve it or disapprove it,” Salem said.
 

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