Target 12: Sky-high pay at T.F. Green

WARWICK, R.I. (WPRI) - The quasi-public agency that runs T.F. Green Airport is paying its CEO nearly $300,000 a year, significantly more than top executives are making at similar-sized airports elsewhere in the country, a Target 12 investigation has found.

Rhode Island Airport Corporation (RIAC) President and CEO Kevin Dillon took home $236,709 during his first 10 months in the job in 2008 and $296,010 in 2009. He is on track to receive $283,130 this year.

RIAC disclosed Dillon's compensation in response to a public records request filed by Target 12. But the agency refused to break down the gross salary figure to show the amounts of Dillon's base salary and yearly bonuses. The figures do not include benefits such as medical insurance and retirement contributions.

The revelation follows RIAC's Aug. 3 decision to lay off 22 employees, a move Dillon said was necessary "to keep this airport fiscally sound." Fitch cut RIAC's bond rating on Aug. 13, saying the airport was at risk because of declining passenger numbers, increased regional competition, high debt and bloated costs.

• Nesi's Notes: More on Target 12's T.F. Green investigation

Dillon answered some questions from Target 12 but declined to be interviewed on camera. He said looking at how much he makes compared with the heads of similar-sized airports is unfair because of Rhode Island's high cost of living and differences in benefit packages across the country.

RIAC's board chairwoman, Kathleen Hittner, declined to answer questions. The seven-member board issued a statement expressing support for Dillon and saying he "has not only met but has surpassed the goals which have been set for him."

Earlier this month, Dillon interviewed for a new job as executive director of Tampa International Airport, but he later withdrew from consideration. Last week, RIAC's board moved to extend his contract through the end of 2013, the maximum duration allowed under state law.

Dillon said he couldn't speak for the board, but his impression was that "the board was trying to send a message that they wanted me to stay" by approving the contract extension.

Dillon near top for pay

In 2009, the total number of passengers boarding at T.F. Green – 2.1 million – ranked 61st in the nation, according to the U.S. Department of Transportation.

Target 12 requested salary information from the 10 airports ranked 56th through 66th in passenger traffic to see how Dillon's compensation compares. Seven of the 10 responded.

Those figures show Dillon's projected 2010 pay of $283,130 tops six of the other seven airport chiefs' compensation. The only exception is Gina Marie Lindsey, who makes $326,855 as head of Los Angeles' aviation agency.

The three airports that Lindsey oversees include not only a T.F. Green-sized facility in San Bernardino, Calif., but also LAX, the nation's fifth-busiest hub with 20.8 million passengers last year – 10 times more than in Warwick.

The amounts earned by the other six top executives ranged from $199,224 for Lawrence Meckler in Buffalo, N.Y., down to $95,787 for Brian Sekiguchi in Kahului, Hawaii.

In fact, the Florida job for which Dillon interviewed might have required him to take a pay cut.

The Tampa airport's previous leader, Louis Miller, was earning $253,294 when he left last winter after 13 years in the job. He also got a $6,000 car allowance plus health, retirement and other benefits, but he did not receive a bonus, spokeswoman Brenda Geoghagan said.

The last time RIAC hired an outside consulting firm to conduct an analysis of its pay structure for non-union workers was in 2007, when Marsh & McLennan's Mercer unit compared it with other agencies across the country, Dillon said.

Bonuses shielded from scrutiny

All of RIAC's non-union employees used to be eligible for annual bonuses, the sizes of which were determined by Dillon. Unionized workers receive raises and other pay hikes depending on longevity and contract provisions.

RIAC awarded a combined $445,256 in bonuses to 41 non-union employees in 2008, up from $334,304 to 36 workers in 2007.

The agency stopped awarding those bonuses last year – except in Dillon's case.

RIAC has long refused to disclose the size of the bonus payments, including Dillon's, saying that information is shielded by state law because it involves job performance.

"RIAC has a very strong policy that they don't want to be setting a precedent" for the disclosure of quasi-public employees' performance-based pay and contracts, Dillon said.

The size of Dillon's bonus is determined annually by RIAC's directors. The board has been chaired since 2007 by Hittner, an executive at Lifespan, which owns Rhode Island Hospital and is the state's largest private employer.

The agency does not have any written criteria to decide the size of the payments, Peter Frazier, RIAC's general counsel, told Eyewitness News. He said they should be described as "pay-for-performance incentives" rather than "bonuses."

Other oversight outsourced

In addition to running T.F. Green, RIAC also has responsibility for five smaller state airports: Block Island, Newport, North Central in Lincoln, Quonset in North Kingstown and Westerly.

RIAC's spokeswoman, Patti Goldstein, said one reason Dillon's compensation is higher than other aviation agency executives' is because he has to oversee those five facilities in addition to T.F. Green.

But our Target 12 investigation shows RIAC doesn't handle day-to-day operations at the smaller airports.

Since 1996, the agency has outsourced that job to Landmark Aviation, a private company based in Houston. Under its current contract, RIAC pays Landmark $150,000 a year as a management fee, plus a share of the profits at Quonset. The agency covers all expenses incurred by Landmark in running the airports.

Target 12's survey of the 10 airports sized like T.F. Green found that all but one of the other top executives has responsibility for multiple facilities. Marc Luiken, the Alaska Department of Transportation's aviation chief, gets paid $116,988 a year to oversee 256 airports across the nation's largest state, a spokesman said.

Wage, benefit costs soaring

Previous investigations of compensation at RIAC and other quasi-public state agencies, like the R.I. Economic Development Corporation, have found that the airport corporation's employees are among the highest-paid in state government.

In addition to Dillon, other RIAC executives on track to pull down hefty salaries this year include four of its vice presidents: Brian Schattle, who will get $183,831; Goldstein, $141,740; Ann Clarke, $129,561; and Alan Andrade, $126,523.

The total cost of employee wages and benefits at RIAC soared by 151 percent over the last decade, growing from $7.8 million in 2000 to $19.6 million in 2009, according to the agency's financial reports. That covers RIAC's work force and the roughly 30 workers Landmark Aviation employs at the smaller airports.

One driver of that increase was a ramp-up in airport security following the Sept. 11 attacks. RIAC's work force rose from 140 in 2001 to 180 in 2003, and post-9/11 measures account for "not all of it, but a good portion of it," Dillon said.

After last month's layoffs, the number of employees at RIAC is down to 154. The agency has not raised wages for non-union workers since 2008 except if they got promoted. But unionized employees have received increases "because that's in the contract," Dillon said.

Analysts warn on debt, traffic

The number of travelers boarding at T.F. Green has been falling for five years, dropping from 2.9 million in 2004-05 to just over 2 million last year, according to RIAC. Dillon cited reduced traffic as a key cause of the August layoffs.

Passenger traffic at T.F. Green is now the lowest it's been since 1997 and the airport may struggle to bounce back because of growing competition from Boston's Logan International, analysts at Fitch said last month when they downgraded RIAC's bond rating.

Southwest Airlines, which accounts for more than half of all passengers at T.F. Green, began flying out of Logan in August 2009. Southwest's CEO said in May the carrier has no plans to stop serving the Warwick airport. (Southwest announced Monday it is buying competing carrier AirTran, which also flies out of Logan but not T.F. Green.)

Fitch also said RIAC’s current debt level – $170 per passenger – is "high," and will make it challenging for Green "to maintain a competitive cost profile in light of depressed traffic trends."

RIAC has borrowed a significant amount of money through the state using taxpayer-guaranteed bonds. The agency will need to come up with $522 million to make principal and interest payments between now and 2039, according to its financial statements.

Fitch also said RIAC’s expenses have "risen dramatically over the past several years and will likely remain elevated." Its operating cost per passenger is likely to be $11 this year, up from $9.61 two years ago and higher than Dillon's team had forecast, Fitch said.

'Fox in the henhouse'

The General Assembly created the R.I. Airport Corporation in 1992 at the urging of Gov. Bruce Sundlun to prepare for a major expansion of T.F. Green. The Department of Transportation had overseen the state's airports before that.

RIAC funds its operations out of fees paid by airlines and passengers, and does not receive any tax revenue from the General Assembly. The agency's executives often emphasize the fact that it is not funded by taxes.

RIAC does receive other indirect subsidies from taxpayers. It issues bonds through the state, which reduces its interest payments but leaves taxpayers on the hook if airport revenue ever falls short. RIAC pays $1 per year to lease T.F. Green and the five smaller airports from the state under an agreement that runs through 2038.

RIAC's relationship with the state has raised concerns among some lawmakers.

Last week, state Sen. John Tassoni, D-Smithfield, called on Gov. Donald Carcieri and Attorney General Patrick Lynch to investigate "whether the Airport Corporation is running an efficient operation and acting in the best interest of the people of Rhode Island." Tassoni previously called on Dillon to resign.

"When we have quasi-public agencies that use their status to state that they are private entities when it suits them, then use their public status when it suits them … it reminds me of the fox in the henhouse, and no one counts the chickens," said state Rep. Joseph McNamara, D-Warwick.

McNamara said that while Dillon "is a very competent executive director," the size of his compensation raised questions when compared with other airports, particularly since airport management is now exploring whether to have Warwick firefighters assist the airport in responding to emergencies.

tnesi@wpri.com / twhite@wpri.com