SEATTLE – The Washington State Auditor’s Office (SAO) released its 2015 Accountability Audit for the Port of Seattle today. The report and the response by the Port of Seattle can be found on the SAO website under recent reports.
The SAO’s 2015 Accountability Audit examined multiple areas of Port of Seattle operations. In most areas, Port operations met requirements and safeguarded public resources.
The SAO made one finding and recommendation related to the method of a one-time payment to approximately one-third of Port of Seattle employees in response to large-scale organizational restructuring, changing the required work week of non-represented employees from 37.5 hours to 40, bringing in new leadership across multiple departments, and discussing new pay and benefit programs.
“We had a legitimate business rationale for making this payment, and the report does not dispute the appropriateness of payment as a business need,” said Port of Seattle Commission President Tom Albro. “As the Port conveyed to the SAO, a one-time payment was more cost-effective than permanent wage increases and we believed we had a strong legal standing for the one-time payment. We appreciate the expertise of the State Auditor’s Office and respect how their work helps local governments provide the best possible service to their communities.”
The Port of Seattle respects the SAO’s finding related to the method in which the Port executed this one-time payment. The Port of Seattle will take action to implement the SAO’s recommendation to refine policies as necessary and conduct legal review.
The Port will also take steps that go beyond the SAO’s recommendation. The Port will undertake a comprehensive review of policies and procedures related to extra compensation payments including benchmarking ourselves against local government practices. The Port of Seattle Commission plans to take a number of measures to ensure greater overall transparency between the executive office and the Commission going forward. The Port of Seattle will keep the State Auditor’s Office apprised of reforms as part of the routine audit process.
The full response by the Port of Seattle is below:
Port of Seattle Response
State Auditor’s Office 2015 Accountability Audit
We thank the Washington State Auditor’s Office (SAO) for your thorough accountability audit of the Port of Seattle. The Port respects the finding of the SAO and will implement the recommendations to refine policies as necessary and conduct additional legal review.
We respectfully offer the following for consideration:
Business Rationale and Benefit Achieved
The Port of Seattle recognizes that a high-performing organization is vital to fulfilling our commitments to deliver on the Century Agenda including adding 100,000 jobs over 25 years, reducing our environmental footprint, and promoting more equitable growth.
Beginning in 2014 and continuing through 2015, the Port introduced significant operational and personnel changes including large-scale organizational restructuring, changing the required work week of non-represented employees from 37.5 hours to 40, bringing in new leadership across multiple departments, and discussing new pay and benefit programs. During this time, the Port also announced the formation of the Northwest Seaport Alliance, a joint operating agreement with the Port of Tacoma, requiring significant organizational changes.
By November 2015, these changes resulted in employees expressing concerns about overall job security, uncompensated mandatory work hours, administrative changes resulting in reduced overall pay, and employee morale. Human Resources received approximately 150 emails along these lines. The Port also considered the strength of our highly-competitive regional job market and the risk of losing talent. In response to employee concerns, the Port determined that a one-time payment, versus more costly permanent wage increases, was the best option to achieve our business rationale of retaining our highly-skilled and experienced workforce while limiting the financial impact.
The stated cause leading to the audit finding is the “method in which the Port executed the one-time payment.” Clarification was obtained during the course of the audit from the SAO that had the one-time extra compensation been paid in installments, or if promises had been made by employees to stay in their job for a period of time, there would not have been an audit finding.
The Port achieved the intended business outcome of retaining our dedicated employee talent pool. Consideration was received in return for the one-time extra compensation. Despite significant employee concerns expressed in the waning months of 2015, the Port achieved a 96% retention rate in 2016. We believe the one-time payment contributed to the overall retention rate.1
Legal Review
The Port’s principle for determining compensation is grounded in the Washington State Constitution. Under Washington state law, Port districts have broad authority to set compensation for employees.
The one-time payment was carefully tailored to meet constitutional requirements as understood by Port counsel. The Port intentionally identified the lump-sum payment as forward-looking, timed to address employees’ concerns and the Port’s business goal of retaining high-performing employees. As discussed above, the Port had clear business interests in making this one-time payment and, from the Port’s perspective, achieved the stated intent. State law and Port policy together establish and delegate authority for the implementation of Commission actions to the CEO.
Going Forward
The Port respects the SAO’s recommendations. The Port is conducting additional legal review to determine if further actions are required by state law.
The Port will comprehensively review all policies and procedures related to extra compensation payments including benchmarking ourselves against local government practices. Finally, the Port of Seattle Commission plans to take a number of measures to ensure greater overall transparency between the executive office and the Commission going forward.
About the Port of Seattle
Founded in 1911, the Port owns and operates Seattle-Tacoma International Airport, two cruise ship terminals, Fishermen’s Terminal—home of the North Pacific fishing fleet, one grain terminal, a public cargo terminal, four public marinas, and manages a number of real estate assets for financial return and economic advantage. The Port’s operations currently help create nearly 200,000 jobs and $7 billion in wages throughout the region. Over the next 20 years, the port’s “Century Agenda” seeks to create an additional 100,000 jobs through economic growth while becoming the nation’s leading green and energy-efficient port. Learn more at www.portseattle.org.
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1 Of the 640 employees receiving the one-time compensation, only 29 left the Port voluntarily during 2016 for reasons other than retirement. This represents 4.3% of the total number of employees who received the payment and the total amount paid to these employees was $190,230.
