Top officials at TxDOT see sharp jump in pay

Rash of executive hiring, higher pay necessary, TxDOT officials say, as agency moves increasingly to tollway model

Saturday, July 7, 2012

Executive pay at the Texas Department of Transportation has spiked over the past year as the agency's new chief, tasked to overhaul the department after several years of legislative and internal scrutiny, brought in more than a dozen upper echelon employees and sharply increased the salaries of some top managers already on hand.

The average salary of TxDOT's 10 highest paid workers topped $200,000 as of April 1 — 21.4 percent above that average a year earlier. The top three salaries, at an average of almost $251,000, were 42.5 percent higher than the top three salaries' average a year earlier. The salary figures were obtained by the American-Statesman through the Texas Open Records Act.

Some of those executives and Texas Transportation Commission board members say the pay boost is necessary to lure talent from the private sector to help TxDOT negotiate complex, high-dollar, public-private partnerships largely for toll road projects.

But the raises have occurred with little public awareness. State Rep. Joe Pickett, an El Paso Democrat who led the House Transportation Committee in 2009-10, didn't know the extent of the ballooning executive payroll until told by the Statesman. Pickett questioned the wisdom of the elevated pay amid deep cuts elsewhere in state government.

Executive Director Phil Wilson, hired in October by the commission and paid more than 50 percent more than his predecessor, also has given raises of between 16 and 30 percent to the agency's chief engineer, chief financial officer, general counsel and government and public affairs director. The management portfolio of those four executives, all of them at TxDOT before Wilson's hiring, has remained roughly the same or, in one case, has been reduced.

Meanwhile, the average salary of the agency's 11,500 workers, in April about $48,000 a year, increased 3.7 percent over the same period. TxDOT's overall payroll, including overtime and other bonus payments, was about $560 million a year as of April 1.

Commission Chairman Ted Houghton, who owns an El Paso financial services firm, said the elevated pay and rash of high-level hiring are justified by the growing sophistication of TxDOT business practices as the agency works with private sector engineering firms and financiers on billion-dollar projects.

"It's a huge paradigm shift," Houghton said. "We have to go get the best and the brightest to play in those circles of financing major projects. It's a different business model than just having engineers run the show."

Wilson said that the Legislature, recognizing the need for a new kind of leadership that must be lured from the higher-paying private sector, in the 2012-13 budget passed last year authorized him to pay up to five TxDOT executives as much as $292,500 a year. And Wilson, who makes $292,500 a year, pointed to a January 2011 report from the TxDOT Restructure Council, a three-member body appointed by the Transportation Commission in the wake of several studies critical of the agency, that recommended raising executive pay.

"They all realized we need this kind of talent to run a complex agency," Wilson told the American-Statesman. Wilson, a longtime aide to former Republican Sen. Phil Gramm and Gov. Rick Perry, was Texas secretary of state for about a year (under an appointment by Perry) and then a utility lobbyist and manager before taking the TxDOT position. A move by the commission to pay him even more — $381,000 a year — was shelved after public criticism, and so far it has not been revived.

Wilson has created several new upper echelon positions. Among them: a director of innovative finance and debt management at $250,000 a year; a chief planning/projects officer and a chief administrative and strategy officer, both at $245,000 a year; a director of planning at $195,000 a year; a project management director at $160,000; and directors of performance excellence and operational excellence, each making $135,000. And he hired Scott Haywood — who also formerly worked for Gramm and Perry and in the secretary of state's office, as well as for an aerospace company — as chief of staff, a new position, also at $135,000 a year.

Two of those hires — the innovative finance and administrative and strategy positions — occurred since the beginning of April, so the percentage increases in management salaries probably are greater than the Statesman's April-to-April comparison.

Wilson last week brought on Ron Wilson, a Democrat who represented a Houston district in the Texas House from 1977 to 2005, as director of TxDOT's Office of Civil Rights. Ron Wilson's salary is $140,000 a year, $10,000 higher than what was paid to the previous holder of that position. The two men are not related.

Phil Wilson also gave large raises to Deputy Executive Director John Barton (29.8 percent), General Counsel Robert Jackson (26.4 percent) Chief Financial Officer James Bass (23.8 percent) and Government and Public Affairs Director Coby Chase (16.6 percent), TxDOT longtimers with 18 to 27 years at the agency. Wilson called them "mission-critical."

"I wanted to do whatever I could to retain them," he said.

Agency spokesman Bob Kaufman said several new hires are taking "significant" pay cuts to work at TxDOT. Those people, as well as some TxDOT managers, he said, "can command salaries that are 3-4 times their state salary."

Raises at district level

Some have questioned the salaries — seven TxDOT employees now make more than the $192,000 final salary of Amadeo Saenz, an engineer who until his August retirement was TxDOT's executive director — particularly in an otherwise austere budget cycle in which state government is sloughing off workers. State employees have not gotten an across-the-board pay increase since September 2008, according to Andy Homer, director of governmental relations for the Texas Public Employees Association.

"I know most (TxDOT executives), and they're all good people," Pickett said. "But it's got to be relative to the rest of state government. They're asking all of us to do more with less."

The picture is different further down the management chain, at the district engineer level. No district engineers, who run the agency's 25 geographic subdivisions around the state and work closely with local officials to build new projects and maintain existing TxDOT roads, received raises in the 15 months since April 1, 2011. Five district engineers have since retired, and two have been promoted to other, higher-paying jobs at TxDOT.

District engineers, as of this April, made between $130,000 and $160,000 a year, depending on their experience level and which district they run. Austin district engineer Carlos Lopez, who is retiring later this month, makes $151,200 and has received no raise since sometime before April 2011.

"I just don't see how that has been the case" that none received a raise for more than a year, said Pickett, estimating that the El Paso district engineer works a 60-hour week. "They're the ones that are the closest contact" with the public.

Kaufman, a former Dell Inc. spokesman hired in January at $190,000 a year to be TxDOT's chief communications officer — also a new position — said in a June 29 email that raises for district engineers were "under review." On Friday he said that 19 district engineers had gotten pay increases, effective July 1.

Wilson said, "It is important to me as executive director to make sure we take care of (district engineers) as best we can."

Critic fears lease deals

Longtime toll road and TxDOT critic Terri Hall from Comal County is no fan of the higher salaries. But she is even more disturbed by the thinking behind the hiring push and what it could yield: more long-term toll road lease deals between TxDOT and private companies.

"If these guys think that this constitutes a remake of TxDOT, it does, but in the completely wrong direction," Hall said. "To me, it's not worth it to pay 20, 40, 50 percent more (to TxDOT managers) to get more expensive roads that nobody can afford to travel on."

Hall, executive director and founder of Texans Uniting for Reform and Freedom, was a frequent speaker at the Legislature in 2007, when those long-term deals fell into disfavor with lawmakers and were banned, with a few exceptions. Last year, with the issue cooling and gas tax revenue falling further behind meeting the state's highway needs, the Legislature allowed TxDOT to reach seven specific toll road lease or financing deals and expanded the power of local toll authorities to do them as well.

Wilson and other TxDOT officials say the need to negotiate those agreements quickly, while still protecting the state's interest, is why they hired certain people, including Russell Zapalac and Ben Asher.

Zapalac, a former executive with HDR Engineering who has extensive experience in toll road projects and public-private partnerships, was hired in January at an annual salary of $245,000 for the new position of chief planning/projects officer.

Zapalac's résumé notes that he worked on Perry's now-canceled Trans-Texas Corridor plan, among many other toll projects.

Asher, formerly a senior managing director at Public Resources Advisory Group, a financial advisory firm, is making $250,000 a year as the innovative finance and debt management director.

Plans on the fast track

TxDOT officials say that with Wilson, Zapalac, Asher and others in place, six of those seven complicated projects authorized by the Legislature — three in Dallas-Fort Worth and three in the Houston area — are either on the way to construction or have cleared critical bureaucratic hurdles.

"Never before have we delivered billions of dollars in projects in that fashion so quickly and effectively," said Bill Meadows, a Fort Worth businessman who has served on the Transportation Commission since 2008. "The way things historically have happened at TxDOT, it would have taken years to deliver those projects."

Commissioners also credit Wilson and his staff with figuring out earlier this year how to marshal about $2 billion — some of that money would have become available eventually, but the agency accelerated its availability — and then quickly deciding how to spend it. The commission in June approved a list of about 85 projects, about 60 percent for highway expansions that include tolling. The list included $130 million for adding a toll lane to each side of MoPac Boulevard (Loop 1) north of Lady Bird Lake.

Tom Johnson, executive vice president with the Associated General Contractors of Texas, said that with the Legislature and the public loath to raise the state's gas tax — Perry has also opposed raising the tax, and it has been frozen at 20 cents a gallon since 1991 — TxDOT had no choice but to turn to toll roads and private tollway deals for huge highway projects that might have been built with tax money in the past. He said the longtime TxDOT engineers previously at the top of the organization lacked the expertise to negotiate such deals with private sector lawyers "who paid more for their suits than we paid some of those engineers in a month. It was an unfair fight.

"When you change that, you're going to have to offer big bucks to get good managers," Johnson said.

Meadows said that Wilson and his team have brought energy and urgency to an agency that "was overdue for an overhaul. The check-engine light had been on for a long time."

The commission, he said, is "sensitive" to the issue of uncommonly high TxDOT salaries.

"It's a lot of money, don't get me wrong," Meadows said. "But what is also important is, is it serving the citizens of this state? I'm saying, yes, it is."