Monday, October 24, 2016
Goodwill Omaha CEO Frank McGree appeared before the Douglas County Board in May and successfully argued the charity should keep the property tax exemptions on its Omaha stores, saying the thrifts are an integral part of Goodwill’s efforts to help needy job-seekers.
But several members of the board now say they might have thought differently about the request had they known McGree was paid nearly $1 million in 2014, compensation spiked by a $519,000 retention bonus. Or that the tax-exempt nonprofit last year had 14 leaders on its payroll making six-figure salaries. Or that little of the profit from those stores actually found its way into those jobs programs McGree talked about.
"I am just flabbergasted, and disappointed," reacted board member Mike Boyle.
"That’s outrageous and wrong," said board member James Cavanaugh.
"You know, you just ruined my day," said board member Marc Kraft.
All three said they voted for the tax exemptions with the belief the charity was putting its thrift store proceeds to good use in its mission of serving the disabled and others facing barriers to employment — something they now question in light of The World-Herald’s investigation of Goodwill.
The newspaper found that McGree’s corporate-styled compensation was more than double the average paid to the leaders of Omaha’s most prominent local social service nonprofits or those leading the Goodwills in our region that are most comparable in size. An analysis of the nation’s largest Goodwill affiliates also found none could match Goodwill Omaha in the percentage of budget it devoted to CEO pay and the rate at which it paid six-figure salaries to employees.
Highest paid Goodwill CEOs
Among 156 regional Goodwill affiliates identified by The World-Herald, Goodwill Omaha's 2014 pay to its CEO ranked third-highest. Even excluding a $519,000 retention bonus, it still rated 22nd.
|City||CEO total compensation||% of budget devoted to CEO pay|
|St. Petersburg, Fla.||444,714||0.8|
|San Jose, Calif.||429,812||1.2|
|Omaha (excluding $519,000 retention payment)||414,444||1.4|
|Fort Worth, Texas||410,741||1.4|
|Palm Beach, Fla.||394,220||0.9|
* 2013 numbers
Source: Latest IRS disclosure forms (2014 for most) accessed on-line at National Center for Charitable Statistics.
Goodwill Omaha Board of Trustees
Officers of the board
• Joseph R. Lempka: Chairman of the Board, 2009-present (President, Kiewit Building Group)
• Mark L. Stokes: Vice Chairman, 2013-present (Area executive vice president, Arthur J. Gallagher & Co.)
• Scott D. Semrad: Secretary, 2015-present (Principle, Urban Village Development)
• Robert J. Mitchell: Treasurer, 2006-present (Office managing partner, Deloitte Tax LLP)
• Mark Brasee: Chairman Emeritus, 2007-present (Attorney, Fraser Stryker PC)
• Frank McGree: President & CEO, 1986-present (Goodwill Omaha)
Other Board Members
• David M. Anderson: 2004-present (Vice president of finance, Blue Cross Blue Shield of Nebraska)
• Richard Frandeen: 2004-present (Commercial real estate representative, American National Bank)
• Ronald C. Jensen: 1993-present (Partner, Baird Holm LLP)
• Larry R. King: 2012-present (President and CEO, Woodmen of the World)
• Sandra A. Lane: 2008-present
• Joseph W. Lang: 2005-present (Principal, RDG Schutte Wilscam Birge Inc.)
• Erin Limas: 2015-present (Chief financial officer, Borsheims Fine Jewelry)
• R.J. Neary: 2011-present (Managing director, Investors Realty)
• Joseph J. Olsen: 2009-present (President and CEO, Phenomblue)
• Daniel A. Padilla: 2010-present (Business banking officer, First National Bank)
• Carol L. Russell: 1987-present (Community volunteer)
• Daniel G. Wenzl: 2013-present (Vice president, Aon Risk Services Central, Nebraska and Iowa)
• Lyn Wallin Ziegenbein: 2015-present (Executive director emerita, Peter Kiewit Foundation)
• Nancy L. Crawford: 2016-present (Associate general counsel, Mutual of Omaha Insurance Co.)
• Robert M. Bertsch Jr.: 2016-present (Senior vice president wealth adviser, Wells Fargo Financial Group)
Former Goodwill employees interviewed by the paper also consistently expressed a belief the public charity has strayed from its mission, often citing its outsized executive pay.
And the paper found that just a fraction of Goodwill Omaha’s store profits went toward the charity’s mission programs. Instead, most such proceeds were consumed by administrative overhead, including pay for Goodwill leaders.
McGree, Goodwill’s 30-year CEO, and the charity’s board chairman declined to discuss the nonprofit’s pay practices or operations beyond a prepared statement to the newspaper and its required annual public disclosure statements. The board chairman said the pay is based on Goodwill’s need for "top-notch executive talent" and McGree’s performance.
Whether Goodwill will receive property tax exemptions on its Omaha stores in the coming year remains up in the air. Douglas County Assessor/Register of Deeds Diane Battiato has appealed to the state to overturn the County Board decision on thrift store exemptions for Goodwill and two other charities.
Battiato based the appeal on her interpretation that state law calls for such stores to be taxed. But she said The World-Herald’s disclosures may raise other grounds for rejecting Goodwill’s exemptions, including the possibility that profits derived from the property are being distributed to officers, members or others.
"It certainly does raise that question," said Mike Goodwillie (yes, that’s his real name), the compliance officer in Battiato’s office.
Regardless of how the appeal turns out, Goodwill’s exemptions are something that can be reviewed annually. Battiato and some County Board members said they thought that, in light of the new revelations, the issue could well come up again next spring.
"This definitely deserves some sunshine," Cavanaugh said. "The purpose of a charity property tax exemption is not to enrich individuals working for those charities. If that’s what’s going on, that’s wrong."
Goodwill Omaha, like most of Douglas County’s nonprofits, has for years received tax exemptions on its properties, including its stores. Though the properties have not been given valuations for years, the Assessor’s Office calculates Goodwill is saving roughly $280,000 in annual taxes on the five stores it owns in Omaha. Goodwill also rents four retail locations in Omaha, has an online store and seven other retail locations across the metro area.
At the urging of the county board, Battiato in the past year took a hard look at nonprofit exemptions. As part of that process, the assessor examined the Omaha thrift stores operated by Goodwill, the Salvation Army and Habitat for Humanity.
Frank McGree’s 2014 pay
|Retirement and deferred pay||52,000|
* Likely includes country club membership
The Assessor’s Office in the end recommended that all three be denied the exemptions on their stores, citing state tax regulations.
Even if the income from the property is used to support the charity, state tax regulations specifically say it’s the use of the property that determines whether it is exempt. In this case, the property is used as a retail store — a taxable commercial enterprise, the assessor said.
"If you generate money for a good cause, that’s terrific," Goodwillie told the board. "But that doesn’t change the basic use of what’s going on within the four walls of that property."
Goodwillie also offered photos that showed the nonprofits’ thrift stores were indistinguishable in appearance from for-profit thrift stores in the county that are taxed.
In addition, he noted that the past exemptions were in part granted based on indications from Goodwill and the Salvation Army that the stores were used in their training programs. In examining the programs, the assessor ultimately deemed the properties were more stores than job-training sites.
The assessor noted that in the five stores Goodwill owns, only 28 of the 145 employees were job trainees. The rest were regular hourly employees hired from the community. One of the stores had no trainees.