Palmetto Railways – Money Train for Top Staff

December 16, 2013

Investigative Reports

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TrainSouth Carolina’s choo-choo chief has been seeing a lot more cha-ching in his paychecks in recent years.

The salary and bonus package for Jeff McWhorter, president and CEO of Palmetto Railways, a division of the S.C. Department of Commerce, skyrocketed from $98,000 in 2007 to $195,750 this year – a 77 percent hike after inflation, The Nerve found in a review of Commerce records obtained under the S.C. Freedom of Information Act and McWhorter’s annual disclosure forms filed with the State Ethics Commission.

McWhorter received a bonus this year of $50,750 – nearly double his bonus of $25,500 last year – on top of his annual salary of $145,000. In comparison, McWhorter’s 2007 income-disclosure form shows he received a salary of $86,000 and an “incentive award” of $12,000.

Eight other Palmetto Railways staffers, mostly top executives, received bonuses this year ranging from $2,269 to $28,935, records show.

The bonuses – labeled as an “incentive” in Commerce records – paid out this year to the nine staffers totaled $125,905 – a collective hike of $73,246, or 139 percent, compared to the $52,659 in total bonuses paid to eight employees last year, The Nerve’s review found.

Established in 1969, the Charleston-based Palmetto Railways, formerly known as “South Carolina Public Railways,” operates three freight carriers in the Charleston area, serving customers that include, according to its website and other records, BP Chemical, Nucor Steel, Norfolk Southern, GE, BMW, Mitsubishi, Westinghouse, Duke Power, state-owned utility Santee Cooper and the S.C. Ports Authority.

Palmetto Railways employees aren’t the only Commerce staffers receiving bonuses. The Nerve reported last week that the S.C. Budget and Control Board voted to renew an ongoing “pilot” bonus program for the agency’s “Global Business Development Department,” which could net 10 eligible employees an extra $4,000 to $6,000 on average this year.

McWhorter is among 26 Palmetto Railways employees – slightly more than half of the division’s 46-member work force – earning more than $50,000 annually, according to Commerce records provided last week to The Nerve under the FOIA.

Their salary information is not listed in the state salary database, which lists public salaries of at least $50,000 and is maintained by the S.C. Budget and Control Board. The database lists Commerce Secretary Bobby Hitt’s current salary at $162,640. It has a separate column for bonuses but lists nothing in that category for Hitt, which, if accurate, would mean that McWhorter this year will make $33,110, or 20 percent, more with his combined salary and bonus than Hitt.

Efforts by The Nerve late last week to reach McWhorter for comment were unsuccessful.

“Jeff is a good guy, and he runs a good operation,” said state Sen. Paul Campbell, R-Berkeley and executive director of the Charleston County Aviation Authority, when contacted by The Nerve. “He has done a lot of service to help create and maintain jobs in South Carolina.”

Aerospace giant Boeing leases the property where its North Charleston assembly plant is located from Palmetto Railways, which, in turn, leases it from the Aviation Authority, according to documents provided recently by Commerce to The Nerve under the FOIA.

Campbell said Palmetto Railways will own an additional 267 acres of airport property sold recently by the Aviation Authority and will lease it to Boeing, which will have the option to buy the property after taxpayer-funded state bonds are paid off. The same lease arrangement between Palmetto Railways and Boeing is planned for another 201 acres of privately held property, he said.

Following are the top-five paid Palmetto Railways employees, with their bonuses this year in parentheses, according to Commerce records provided to The Nerve:

  • Jeff McWhorter, president/CEO:  $145,000 ($50,750);
  • Patrick McCrory, vice president/chief operating officer:   $125,000 ($0);
  • Sheri Cooper, vice president/chief financial officer:  $106,000 ($28,935);
  • Marsha Jenkins, accounting/administration manager:  $74,000 ($7,110); and
  • Mike Steele, director of train operations:  $73,250 ($14,080).

Palmetto Railways had 45 employees last fiscal year, which represented more than a third of Commerce’s total workforce, according to Commerce’s 2012-13 accountability report, though the division is not listed with other divisions on the agency’s website. The railways division, formerly known as “South Carolina Public Railways,” has its own website (www.palmettorailways.com or www.scontrack.com ), though it doesn’t list salary or bonus information for McWhorter or top staff.

The Nerve reported last month that Palmetto Railways has plenty of money, citing, for example, its most recent financial statements filed with the Office of State Auditor showing that it had $20.3 million in cash and “cash equivalents” as of Dec. 31 – 2.65 times more than its operating expenses for last year.

The division this year is expected to generate $12.2 million in total revenues and $8.1 million in total operating expenses, leaving an estimated year-end profit of slightly more than $4 million, according to figures provided earlier by Commerce to The Nerve.

Budget information about Palmetto Railways is not included in the annual state budget. Commerce officials say that’s because the division does not receive state appropriations but instead relies mainly on charges to its customers.

As The Nerve reported last month, the Columbia accounting firm of McDowell Pearman gave Palmetto Railways an “adverse opinion” on the division’s financial statements, noting in a state audit report submitted on Aug. 9 to Hitt and Gov. Nikki Haley that the division failed to provide “certain material disclosures” for its operations last year.

The accounting firm said Palmetto Railways relied on an exemption in the FOIA to withhold certain financial information – a common practice by Commerce when responding to FOIA requests by The Nerve.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thnerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.