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Spokane, Washington  Est. May 19, 1883

State reprimands PFD over bonus policies

A report to be released later this month by the State Auditor’s Office will reprimand the Spokane Public Facilities District for issuing employee bonuses in 2003 without having the appropriate policies in place.

Though it appears the district followed the correct procedure in awarding $35,000 worth of bonuses to 30 employees, the report will say the district hadn’t established policies in advance. Those guidelines are now in writing and were used by the PFD board to award $230,000 worth of bonuses to the district’s 32 employees in 2004.

Kevin Twohig, the PFD’s executive director, took exception to the auditor’s plans to issue an official “finding” on a case he said didn’t merit such a penalty.

“A finding is when somebody has embezzled,” Twohig said. “We did all the processes; we just didn’t have the paperwork in place.”

The district did attempt to comply with the law, agreed Allina Holmquist, the state’s audit manager for Spokane. However, the district lacked the necessary documentation to prove it. And since bonuses are a sensitive matter for taxpayers, she said, the audit must be strict.

The PFD receives a portion of sales and hotel taxes collected in Spokane County, which it uses for debt repayment on the buildings it operates. The agency also earned $1.3 million last year on its operations at the Spokane Veteran’s Memorial Arena, Convention Center, Ag Trade Center and Opera House. All bonuses were paid out of operating profits, not out of tax money, Twohig said.

The state’s constitution bars the gifting of public funds, so bonuses must be included as part of a compensation package and the criteria for awarding them must be clear, Holmquist said.

“This is one of those salary and compensation issues that the public expects us to report on when we see,” she said.

In September 2003, the city of Spokane transferred ownership of the Convention Center, Ag Trade Center and Opera House to the PFD, which already owned the Arena. That meant former city employees had to reapply for their jobs with the PFD. In addition, the PFD had to create the policies and procedures for running the three venues.

At the end of 2003, Twohig said, the PFD board decided that the district’s employees deserved bonuses. Twohig received $10,000, and $25,000 was divided among 30 employees. In 2003, the PFD earned a profit of close to $900,000, according to district records.

Holmquist said a public taxing district that awards bonuses must have established criteria for evaluating employees. She said generally the auditor’s office can tell when an agency intends not to comply with the law and that wasn’t the case with the PFD.

The policy that the PFD now has established allows employees to receive up to 20 percent of their base salary as a bonus. The PFD’s procedure grades employees based on merit, ranging from “truly exceptional” to “an average employee,” and awards bonuses accordingly.

In addition, bonuses may be awarded only if the district’s operations earn a profit. Up to one-third of profits may be used for bonuses, according to PFD policy. In 2004, the district reaped a profit of $1.3 million, which meant bonuses could have totaled about $430,000.

The district paid out $230,000 worth of bonuses. That included $15,000 for Twohig, whose base salary was $125,000. Johnna Boxley, general manager of the Convention Center and Opera House, also received $15,000.

The rest of the PFD’s operating profit was poured back into maintenance and improvements to the agency’s buildings, Twohig said. Some $400,000 worth of improvements were made to the Opera House alone, he said.

However, some of the 2004 profit will be one-time earnings because the PFD made some operational changes in its first full year of running the buildings, Twohig said. For example, the Opera House is only open on event days, as opposed to holding regular business hours.

“The energy savings were phenomenal,” he said.