Port authority's expenses surging

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CEO's salary rises almost 70 per cent in two years; travel costs 10 times higher than 2001
By Steve Buist
The Hamilton Spectator(May 27, 2006)
The Hamilton Port Authority spent $51,000 last fall to send two dozen staff members and directors to Niagara Falls for a three-day strategic management retreat.

It's part of almost $1.5 million that was spent by the Hamilton Port Authority in 2004 and 2005 for travel, consulting and professional fees.

The figures are contained in documents obtained by The Spectator through federal Access to Information legislation.

The documents show:

* Travel expenses last year were roughly 10 times higher than in 2001.

* CEO Keith Robson filed $57,000 in travel expenses alone for 20 trips last year.

* Professional and consulting fees totalled $503,000 last year.

* Staff costs have risen 35 per cent since 2002.

* $42,000 was spent on head hunters to replace three senior employees who left or were let go.

And those costs are rising while the port's profits decline.

Robson, president and chief executive officer of the port authority, says he is trying to chart a new course and the increased spending on consultants and skyrocketing travel costs are justified as part of that change.

The authority, formed in 2001 to replace the former Hamilton Harbour Commissioners, is trying to diversify and gain access to new markets. And it is also aiming for an internal "turnaround," trying to break with the culture of the old harbour commissioners.

"Given the size of the organization, I think those are very reasonable expenditures," said Robson.

"Business has done well, revenue has gone up," Robson added. "We've kept our expenses under reasonable control and we're certainly reinvesting in the port."

But critics question how much is being spent and the value of some of the expenses.

Revenues for the port authority the year before Robson arrived were $14 million, dipped slightly to $13.8 million in his first year, and rose to $16.2 million last year.

But the port's "excess revenue over expenses" -- its profit, essentially -- dropped from $2.3 million in 2002 to $1.8 million last year.

The Niagara Falls strategic retreat was held at the Renaissance Marriott, and the cost included $15,500 for lodging and food, as well as another $36,000 for consultants' costs.

Robson said the retreat was a valuable exercise that helped the agency plan for the future.

"Every company should be doing that," said Robson. "Most of the big ones do it as a matter of routine."

The steepest travel increases have occurred since Robson took over as CEO at the start of 2003.

For the final eight months last year, the port authority's total travel expenses were 10 times higher than they were for the same period of 2001.

International travel costs, in particular, have risen dramatically since 2001 - from about $12,000 to almost $150,000 last year.

It's part of the port authority's strategy to attract different types of business to the harbour.

Traditionally, up to three-quarters or more of the tonnage in and out of Hamilton's harbour each year is connected to steelmakers Dofasco and Stelco.

Former port authority chair Fred Eisenberger said that diversifying the port is a necessary new direction. But he fears the pendulum may have now swung too far.

"I think there's a question of degree in terms of how far you go," said Eisenberger, who was the first chair of the new port authority in 2001. "Do you really need to sit face to face with each individual out there? I don't think so.

"I think there's a need to do economic development and outreach," he added, "but again, it's a question of to what degree and how much money should we be spending on that kind of an effort."

More than a quarter of 2005's travel expenses were racked up by Robson.

His 20 different trips took him to places such as China, London, Amsterdam, Vancouver, Quebec City and Tampa.

"It's a big part of the role I see for the CEO, to go out and promote the port and the marine industry," said Robson.

The port authority's travel expenses were included in the publicly available financial statements for 2001 and 2002, but they haven't been included in the financial statements since then.

Among the port authority's travel and consulting expenses:

* In December, the port authority spent almost $7,000 to send seven staff members and directors to Montreal for the 71st Annual Dinner of the Grunt Club.

The Grunt Club is a collection of people associated with the marine industry. Since inception in 1931, one of its primary purposes has been "to promote fellowship amongst its members and associated industries throughout the marine community," according to the club's own description.

Each year the club hosts a number of events, "such as a ski day, curling luncheons, golf tournaments, family picnic, a Christmas party for the children and the Annual Dinner."

* A husband-and-wife consulting company based in Morriston was paid a total of almost $95,000 in 2004 and 2005 to conduct staff training and development.

* A headhunting firm was paid more than $42,000 last year to find three new employees for the port.

Staff turnover at the authority was a significant issue in 2005.

At least half a dozen senior-level employees have either left or been let go by the port authority since last fall, including the vice-president of operations, the manager of human resources and the marina manager.

"We were trying to make a significant culture shift from where we were before as a harbour commission and where we are now as a port authority," said Robson.

"(Staff turnover) often happens in a turnaround situation," he added. "It's not unusual."

The relationship between the old harbour commission and the city was difficult at best. At its worst, it was confrontational and litigious -- including a $100-million lawsuit once launched by the city over issues related to the harbour's development and finances.

But Eisenberger fears that too many experienced employees have been pruned away.

"Many of the people that had a corporate history of the place have gone," he said. "That's never a healthy thing."

* The port authority spent more than $3,100 for 15 nights of hotel accommodations in Toronto between September and the end of November.

Included in the amount is $716 charged by Robson for two nights' accommodation at the Intercontinental hotel in downtown Toronto to attend a conference.

Jim Howlett, president of the Hamilton Beach Preservation Committee and a vocal critic of the port authority, said he was concerned about the amount of consulting fees paid out.

"The idea of a large government agency spending that much money for rather simple tasks is alarming," said Howlett. "It indicates to me that they're consultant-dependent."

Former port authority board member Bob Charters said the higher travel costs are a worthwhile investment in trying to diversify business away from just steel.

"I know that Keith's travel bills are high," said Charters, a former city councillor. "He has been travelling all over the world promoting a whole bunch of things and trying a whole bunch of other things.

"There will be all kinds of people who'll say they aren't even possible. For those people, they would have just gone with the status quo and let the steel companies operate.

"You are up against a pretty steep hill to try to create other opportunities, but I think Keith has done a pretty good job," Charters added.

Robson's remuneration as CEO has also jumped dramatically since he was hired.

In 2003, Robson was paid $150,000.

In 2005, he received almost $254,000 in salary and bonuses -- an increase of almost 70 per cent in two years.

The amount of all wages paid by the port authority has risen by 35 per cent since 2002 -- from $2.65 million annually to about $3.6 million last year.

The budget for port authority expenses is funded with revenues collected from users of the port, not from taxpayers.

But that doesn't mean there isn't a need for strong oversight, said Charters, particularly by the city.

"I am still a little concerned because there is a huge disconnect with the city, what the city knows about the port and what they're doing," said Charters. "This is one of the economic engines of the community."

Charters is also concerned about the lack of what he calls the board's "collective corporate history." Only one of the seven-member board of directors was in place before 2005.

"The federal government does what it can as far as an overall oversight thing, but they rely a whole lot on the local board to make the judgments as to whether these (expenses) are necessary," said Charters. "It could be a pretty free and loose ride right now."

Last year, the port authority paid $600,000 to the City of Hamilton in lieu of municipal taxes but that amount should be higher, argues Howlett.

"The people of Hamilton deserve a much bigger slice of the pie," he said.

sbuist@thespec.com

905-526-3226
 
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