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Goodwill Central Coast CEO pay raise to $241,000 leads to rift

The Goodwill store in San Luis Obispo.
The Goodwill store in San Luis Obispo. jjohnston@thetribunenews.com

Jess Brown, the 2015 Goodwill Central Coast board chairman, has resigned his board seat with a letter detailing concerns about moving the headquarters to Salinas at a cost of $16 million, selling the Santa Cruz headquarters for $5.5 million without putting it on the open market and the CEO’s demands for higher pay.

Ed Durkee, CEO since July 2013, said via email that Walter Henning, who chairs the Goodwill Central Coast board, would speak for the organization.

Henning contended the CEO’s pay was 36 percent below the median for comparable organizations, that the privately negotiated sale of 350 Encinal St. exceeded appraisals, saved $150,000 in commissions and provides guaranteed flexible leaseback terms, and the Salinas move was supported by three board committees after countless hours of evaluating finances.

“I truly believe in the Goodwill mission,” said Brown, executive director of the Santa Cruz County Farm Bureau and co-founder of the nonprofit Ag Against Hunger with nearly 25 years of service on Goodwill’s board. “It’s always been incredibly well-run.”

MORE THAN 600 EMPLOYEES

A large nonprofit, Goodwill Central Coast has an operating budget of $28 million and employs more than 600 people in Santa Cruz, Monterey and San Luis Obispo counties, helping 13,000 job seekers a year get back to work.

Brown chafed against the cost to buy and remodel the new headquarters and the CEO’s requests for a bigger salary.

He said he was one of two votes against the new headquarters and one of two votes last week against boosting the CEO’s salary by almost $65,000 on top of a 36 percent raise in 2015. Durkee’s new salary is $241,000.

Henning said Brown was the only “no” vote.

Brown’s resignation letter pointed out that Durkee now makes more than the Santa Cruz city manager, who manages a $212 million budget and 820 full-time employees.

COMPARING PAY

Henning said the recently approved raise was recommended by a respected compensation consultant that found the previous salary lagged the median pay of comparable nonprofit CEOs by 36 percent.

Durkee, recruited from Goodwill serving Sacramento Valley and Northern Nevada, came in at a base salary comparable to his predecessor Michael J. Paul, according to Brown.

Paul spent 27 years with Goodwill; his salary in 2013, the year he retired, was $156,000 plus a $46,000 bonus, which Brown said was bigger than usual. Health insurance and retirement brought Paul’s total compensation to $235,000.

Henning said Durkee’s new salary is “exactly the 50th percentile of CEOs in 120 similar nonprofit organizations across the United States.”

Local nonprofits were evaluated but excluded “due to their inconsistency with our organization in their size and scope of work,” he said.

The ultimate goal is to provide the programs ... job training to empower people in their lives. It seems like programs aren’t at the forefront.

Jess Brown, former board chairman for Goodwill Central Coast

Brown disagreed, saying a comparison to nonprofit CEO pay in the three counties served by Goodwill Central Coast was valid.

“You’ve got to be considerate of people in the area who are helping make the organization run,” he said, noting local nonprofit CEO pay ranged from low $100,000s to mid-$100,000s.

A 2015 survey by Nonprofit Compensation Associates covering 537 nonprofits from the San Francisco Bay Area to the Central Coast, Sacramento and the Central Valley found only 10 percent were paid a base salary and bonus exceeding $235,000.

Among those with a budget of $15 million or more, 10 percent paid a base salary that topped $302,300.

In the Central Coast, only 10 percent of the 51 responding nonprofits paid a base salary more than $200,200; the average was $124,000.

FINANCES

Brown said Paul closely monitored Goodwill’s finances and “knew those reports backward and forward.”

When Paul retired, Goodwill had a $23.7 million operating budget, noncash donations of $7 million, payroll of $10 million and net assets of $22 million, according to its 2013 Form 990, which nonprofits file with the IRS to retain tax-exempt status. This is the most recent posted at Guidestar.org.

Brown said he worries that Goodwill faces either reducing assets or borrowing to close the $10 million gap on the Salinas move, putting pressure on cash flow to make payroll.

He pointed out every $1 increase in the minimum wage will boost Goodwill’s expenses by more than a $1 million and the eventual loss of $720,000 net revenue from the flea market on Soquel Avenue, property acquired by Sutter Health as a site for medical facilities.

“The ultimate goal is to provide the programs,” Brown said. “Job training to empower people in their lives ... It seems like programs aren’t at the forefront.”

Henning did not offer a newer Form 990 but he contends, “We are financially strong and have the resources to make these investments.”

The move “will improve the safety of our workplaces and the productivity of our employees,” he said.

A more efficient processing facility in Salinas for donations will help address the upcoming wage increases, Henning said, as will efforts to decentralize Goodwill stores, improve material handling processes, increase donations and boost e-commerce.

As for the flea market, he said, “We are searching for alternative sites in the event our lease on the current property is not extended beyond the first quarter of next year.”

MINORITY VIEW

Most of the 15 Goodwill Central Coast board members came from the for-profit sector.

Henning was vice chairman at Monterey Gourmet Foods before retiring and teaching at Cal State Monterey Bay.

Brown was one of two board members from nonprofits; the other board member works at a medical foundation affiliated with Dignity Health.

In an interview, Brown said he hoped his concerns would be heard by the board.

“I am in such a minority on this — for almost two years,” he said. “I can spend my time elsewhere.”

Weary of “beating my head against the wall,” he submitted his resignation letter to the board Tuesday.

Brown did not alert the Sentinel but a community member emailed a copy of the letter late Wednesday night to the newspaper.

Henning thanked Brown for his years of service and said that local unemployment rates — 7.5 percent in Santa Cruz County vs 6.2 percent in California in 2015 — mean that Goodwill’s mission of helping people get jobs “is as vital as ever.”

Reach Jondi Gumz at jgumz@santacruzsentinel.com or follow Gumz on Twitter: @jondigumz.

Goodwill leadership

President and CEO: Edward Durkee.

Board of Directors: Walt Henning, instructor, operations management, CSU Monterey Bay, chair; Jess Brown, executive director of Santa Cruz County Farm Bureau, immediate past chair (resigned); Mark Hannah, Witzig, Hannah, Sanders & Reagan, secretary; Robert Jenkins, retired business executive; Charles Leigh-Wood, retired business owner, Facilities Committee Chair; Joe Pulford, West Marine, vice chair and chair of Audit Commitee; Tom Strait, Pacific Western Bank, treasurer and chair of Finance Committee; Otis Lloyd, Central Coast Protection Services; Kristi Melani, Plantronics; Debby Nicklas, French Center Medical Foundation; Bruce Ray, Cannon; Tish Sanchez, IT director; Erica Stewart, First Choice Physician Partners; Erwin Young, retired municipal HR director; Edward Durkee.

Annual operating budget: $28 million.

Employees: More than 600 in Santa Cruz, Monterey and San Luis Obispo counties.

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