Economic Development

Worth the Money?

The competition for top talent is producing a cadre of highly paid public executives.
by | July 2004

Like a baseball coach working his way up the organizational ladder, Rhoda Mae Kerr recently had to abandon her hometown team and make the move to a new city in order to take the top spot. Last January, Kerr took over as chief of the Little Rock fire department after a career in Fort Lauderdale that was capped by three years as deputy chief. Whereas the pattern in the old days was to stay in one place for an entire career, Kerr says, today it's typical to see executives in the fire service move around in order to move up. And for a handful of recognized achievers in her field, such moves bring with them something besides greater challenges and prestige: They bring increased salaries and perks along with a burgeoning reputation that, if nurtured, can put a public-sector career onto an all-star track.

While insisting that she has no plans to leave Little Rock, Kerr admits that some of her employees already have expressed concern that this might be just a short stop for her on the road to somewhere even bigger. That's because Kerr has now entered an elite corps of hired public-sector executives whose expertise makes them hot properties across the country. "There's been a confluence of forces," says Bob O'Neill, executive director of the International City/County Management Association. "There's this incredible pressure that's brought to bear between scarce resources, the demand for and focus on performance, and the political environment in which these people have to operate. People who are effective in that environment are worth their weight in gold."

Indeed, in this new world, hired-gun attorneys negotiate six-figure salaries on their behalf, headhunters make regular contact, and some even speculate that the day will come when the hottest public officials will have agents to shop around for the most lucrative deal.

Some members of the "gold" club, such as Los Angeles Police Chief Bill Bratton and former New York City School Superintendent Rudy Crew, have managed to become household names. Robert Kiley, who is credited with rebuilding both the Boston and New York City subway systems, was recently the subject of a full-blown feature story in The New Yorker magazine, which chronicled his elevation to savior of the London Underground. Kiley was lured overseas by a compensation package estimated to be worth well over half a million dollars.

Because of the aggressive recruitment of top talent, members of the gold club can command heftier salaries and beefier benefits, whether it's big-ticket sweeteners such as generous contributions to pension funds, performance bonuses or help with housing costs, or littler treats, such as cars, cell phones and take-home computers. Meanwhile, the elite are increasingly opting out of traditional, at-will employment and insisting on multi-year contracts with clauses that ensure any falling out with their elected or appointed handlers will end up in a very soft landing.

Add to the dynamic a shortage of top people willing to take on what in many cases are considered impossible jobs and it makes for a lively, lucrative mix. "You have a lot of school districts chasing a few superintendents and that makes for a lot of churning and also for a significant increase in salaries and perks," says Paul Houston, a former school superintendent who is now executive director of the American Association of School Administrators. "In the past decade, it has really shifted from a buyer's market to a seller's market."

Eric Smith, the school superintendent in Anne Arundel County, Maryland, who reportedly was on the short list of candidates for the superintendent's job in Miami-Dade County (a position ultimately accepted by the aforementioned Rudy Crew), says it's the high profile and the high stakes, in particular, that require the combat pay. "It's an area that's covered intensely by the press and that is much analyzed and debated. And if you're trying to drive change, you'll draw a fair amount of fire."

Smith, who makes $200,000 a year, says that while these forces make for an improved salary picture, the downside is that peripatetic school officials can't draw upon the generous pension layouts afforded most state and local employees, who put in their 25 or 30 years in one place and then reap the benefits. Anne Arundel is contributing a decent sum to a 401(k)-style pension plan as part of his compensation package, says Smith, but he still lives in a world of defined contributions and not guaranteed benefits upon retirement. And Smith arguably is now on the modest end of the high-profile superintendent salary structure. Crew's compensation package in Miami-Dade is estimated to be around $550,000, including salary, bonuses and a housing allowance.

For public-sector superstars, goodbyes sometimes can be as lucrative as hellos. Interim District of Columbia School Superintendent Elfreda Massie, who was paid $75,000 to fill in for about six months last winter, was handed a bonus check for nearly $34,000 on her last day of work in April. Members of the city council and the mayor harshly criticized the bonus, but D.C. school board members saw it as much- deserved pay for a job well done. In recent months, D.C. Mayor Anthony Williams seems to have come around to a new way of thinking about compensating the city's chief education officer. A Washington Post article in May had the mayor's office speculating that the city might have to come up with as much as $600,000 to attract a top-flight candidate to fill the job. In mid-June, the city was attempting to lure Carl A. Cohn, former Long Beach, California, superintendent.

PERSONNEL PILFERING

While such remuneration indicates just how much of a seller's market it has become for some top executives, the lucrative talent trade can also be gauged by the amount of public-sector personnel larceny going on as governments jockey to secure the best and the brightest. "It's not unusual for any high-profile administrator to be contacted once a month and offered a job," says Professor George Frederickson, who has spent decades helping train future public managers at the University of Kansas. Rod Gould, city manager for San Rafael, California, say he is frequently on the receiving end of such queries. "I'm amazed at all the calls from recruiters." The 47-year-old Gould adds that part of what's driving demand is a rapidly aging and retiring cadre of experienced managers.

And it's not just high-profile players in traditionally high-profile jobs such as city manager, police chief or school superintendent who are being approached. Planning directors, public works directors, chief information officers--those in the more utilitarian trenches of government--are also routinely recruited by other jurisdictions intent on a little personnel pilfering. "I get called every so often," says Bob Hunter, the long-serving executive director of the Regional Planning Commission in Hillsborough County, Florida. Hunter says he's happy to stay put for now, but as one of the most respected planners in the country, he could probably write his ticket on any given day.

And while few lay people have probably ever heard of Peter Park, the city of Denver knows him as one of the top urban planners in the field. "The reason that I just about killed myself to get Peter Park is that planning is as important as anything else when it comes to what a city does," says Denver Mayor John Hickenlooper, who spent weeks wooing Park. "Park is not just a New Urbanist, he's one of the national and international leaders in urban planning." And probably a significant bargain to Denver at $115,000 a year.

Michael Armstrong has been the assistant city manager for information technology in Des Moines for the past six years. He knows that there aren't very many people with his level of technical skill and knowledge who can also work cooperatively on large projects that span departments citywide. If he wanted to, Armstrong could no doubt move to a bigger municipality on either coast. According to the International City/County Management Association's 2004 salary survey, Prince William County, Virginia, pays its IT director around $130,000 a year; San Diego County pays $160,000; Phoenix pays almost $145,000. But Armstrong says his salary of $125,000 goes a nice distance in the Midwest, which is one of the reasons he has stayed put; salaries may be higher elsewhere, he says, but so is the cost of living. As for being contacted by headhunters, Armstrong says, "It's nothing like two or three times a week, but every once in a while."

Jerry Newfarmer, who finished his city manager's career in Cincinnati after stints in Fresno and San Jose, says that the job has always paid pretty well. But clearly things have gotten better in the past couple of decades as competition for top talent has warmed up. For example, when Newfarmer took over as San Jose's city manager in 1983, the salary was $90,000; the job now pays $209,000. And whereas the big perk for Newfarmer was having the city contribute to a 401(k)-style retirement plan, employment packages in numerous California jurisdictions now include the ability to tap into the state pension system, CalPERS, as well as housing allowances and generous severance packages.

Rod Wood, who at $250,000 a year may be the highest-paid city or county manager in the country, worked out an arrangement with his new employer--the city of Beverly Hills--whereby the city subsidizes his annual housing costs to the tune of $70,000. Wood, who made his name in other cities by thinking up creative ways to finance sewage expansion and affordable housing projects, is also a pioneer in fashioning creative financial packages to attract top talent to public service in a high housing-cost environment. He believes he was the first to work out an equity-sharing deal with a city when he became manager of Indian Wells, California, back in 1989. "I think Indian Wells may have the second-highest per capita income of any city in the country and it costs a ton of money to live there." So he proposed an arrangement whereby the city helped subsidize his mortgage but also profited from the sale of his house when he moved on.

LOCAL LARGESSE

In analyzing who pays how much, it's clear that high pressure and high stakes are only part of what drives salaries. ICMA's salary survey shows that big cities and wealthy suburbs are where the money is. Bratton makes upwards of $250,000 in L.A.; the chief financial officer for Washington, D.C., rakes in more than $170,000. Meanwhile, the fire chief in the well-heeled Boston suburb of Needham earns more than $110,000. Rod Wood's old haunt, Indian Wells (population 3,816), pays its public works director $114,000. Greenwich, Connecticut, pays its police chief more than $110,000. The economic development director in Lake Forest, Illinois, makes around $112,000.

If it sounds like the big-salary and generous perks action is all at the local government level, that's because with a few exceptions-- notably state university presidents, athletic directors and football or basketball coaches--it is. "Our experience is that there are fewer restrictions on pay for local officials," says Bob Lavigna, the former head of recruitment and selection for the state of Wisconsin who now works for CPS Human Resources Services, a Sacramento-based human resources consulting firm. "In many cases, by law or by tradition, state officials can't make more than the governor." (New York's George Pataki is the highest-paid governor, at $179,000.) It's a quirky restriction that in some places even extends to municipalities. For example, when CPS was asked to help Minneapolis find a public works director, Lavigna says, the task was made much trickier by the fact that state law caps municipal salaries at 90 percent of the governor's annual $120,000 salary. Minneapolis recently sought and got a waiver from the state legislature in order to hire a police chief at $128,000.

There may be other reasons that local governments offer salaries more commensurate with the market--not to mention actual job responsibilities. "It's a riddle that always perplexed me," says Alisoun Moore, who left her $101,000 job as chief information officer for the state of Maryland to take the $155,000 CIO job in Montgomery County, Maryland. "But I think that county legislators and executives know that their primary job is to deliver very direct services, so they're willing to pay competitive wages to attract good folks, whether it's firefighters or executives."

Despite all the talk about big bucks and generous perquisites, one point needs to be made clear, say those who follow issues of pay and benefits for public officials: Given the incredible responsibilities heaped on upper-level public-sector executives and the frequently volatile political environments in which they're asked to operate, they are still arguably underpaid. Whether it's taming the streets of Los Angeles, raising student test scores in Miami-Dade, or trying to pull Denver's disparate districts and neighborhoods together into a cohesive, economically dynamic metropolitan whole, lots of upper-level public executives are atop gigantic, sprawling organizations that are charged with accomplishing nearly impossible tasks. Kevin Baum, assistant fire chief in Austin, Texas, and a rising star in his field, says that he is probably paid one-third of what one of his organizational counterparts at Austin-based Dell Computer makes, "minus the stock options," he adds wryly. And it hardly needs stating that the Dell executive's job is sandbox play compared to what Baum faces every day.

Baum says he could move up a salary notch if he listened to any of the headhunters who he says call every so often trying to woo him out of Texas hill country. Baum's next logical move, he says, would be to chief in a mid-size city, which would set him up for the jump to the big league--a Chicago, Boston or Seattle. And certainly there are plenty of six-figure jobs in smaller cities around the country, from Birmingham, Alabama, to Downers Grove, Illinois, to Costa Mesa, California, which pay $115,000, $102,000 and $140,000, respectively, according to the ICMA salary survey. But the politics of fire chief have become more volatile and the job strains more pronounced since 9/11, he says. In fact, he's seeing a lot of longtime chiefs getting out altogether, with fewer and fewer experienced candidates willing to step up. That, along with the fact that average tenure of larger city fire chiefs is getting ever shorter, says Baum, has him thinking twice about the whole idea of pulling up stakes. "I have to ask myself if I really want to move to another city and be chief."

It's a sentiment that's expressed by others who find themselves at the edge of superstar status, not sure if it's worth the extra money to step into the frequently unforgiving limelight that is populated by the public sector's executive movers and shakers. Kevin Duggan, city manager for Mountain View, California, says he could certainly be making more money working somewhere else. But he adds that many of those jobs are in "meat grinder" cities, and he's just not sure he's ready for the blades to swirl his way, regardless of pay.

LURE OF THE LIMELIGHT

But for others, the prospect of taking on seemingly impossible high- level jobs is an enormous part of the appeal. "It's an interesting combination between a really true and altruistic sense of public service, on the one hand, and enormous ego, on the other," says the school administrators' Paul Houston. "It's the adrenaline buzz. There's a lot of pressure, but a lot of people thrive on that and become addicted to it."

When Oakland City Manager Robert Bobb, who had co-existed for five years with the famously egotistical Mayor Jerry Brown, was finally ousted last summer, he received a $275,000 severance package. But rather than riding off into the sunset or choosing some easy assignment, Bobb soon headed for Washington, D.C.--a city with comparable problems and egos. As the District of Columbia's top administrator, Bobb now earns $185,000. That's a step down from the $224,400 and generous benefits he had negotiated with Oakland but $50,000 more than D.C. paid his predecessor.

But even given the potential for high-visibility failure or feuding, the money and the personal satisfaction of doing a hard job that matters make it all worthwhile, says San Rafael's Rod Gould. "If you've got the chops for it, there are few things better than taking on the variety and challenge of being a city manager."

And of course it's not always a jungle out there. Just ask Rod Wood, who was actually contemplating a switch to the private sector before a headhunter talked him into giving Beverly Hills a try. Shortly after taking the job, he was at one of the many after-hour events that city managers view as obligatory. "There was a band," says Wood, "but nobody was dancing. Well, they started playing a particular song, and I just couldn't resist and so I started to sort of move my feet a little." As he got into his groove, an attractive young woman who just happened to be wandering by joined him.

For any public officials out there looking for signs that they have hit the big time: It has arrived when a city gets down on bended knee to offer a compensation package worth a quarter-million dollars. Or, as in the case of Rod Wood, when the job includes taking a quick twirl on the dance floor with Britney Spears.

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