RALEIGH — At a pivotal board meeting of the North Carolina Ports Authority Tuesday in Charlotte, directors responded to a critical report from State Auditor Ralph Campbell’s office in part by calling for the resignation of authority CEO Eric Stromberg.
It was one of the fastest reversals of political fortune I’ve seen in a while. Just 24 hours earlier, Stromberg and authority board chairman Dick Futrell were speaking confidently to the media about corrective actions they’d be taken to remedy the accounting and expense-reimbursement issues brought up by the auditor. They were also defending Stromberg’s decision to accept free tickets to the 2003 Gator Bowl for himself and two of his children from the railroad company CSX, which provides rail service to and from the state port facility at Wilmington.
“We were invited by the railroad – they’re one of our partners,” Stromberg said.
On another matter, his receiving $500 a month from the authority as a “car allowance” while also using state-owned vehicles, Stromberg seemed entirely unapologetic. Almost as blase were the board chairman, Futrell, and the former board chairman, retired Sen. Bill Goldston. When Stromberg was hired in 1995, they said, it seemed reasonable to offer the $6,000-a-year car allowance as a supplement to his cash salary. But Futrell allowed that “it should have been changed long ago” and said it would be in response to the audit.
That’s one sign, I think, that Futrell did not know what was going to happen at the Charlotte board meeting on Tuesday. As I write this, the full story about why Stromberg was asked to leave has not yet been reported. But putting two and two together, I suspect that CEO and chairman defending the authority’s past decisions and characterizing the auditor’s findings as relatively unimportant or “needing clarification” helped to make a bad public-relations situation worse.
Unfortunately, as often happens in these situations, many observers will conclude that the only problem here was poor judgment, and the only effect was a bad news cycle. That conclusion would miss a couple of important points.
First, the financial problems at the North Carolina Ports Authority didn’t occur in a vacuum. State leaders, news organizations, public-policy groups, and watchdogs have been conducting a very public discourse over the past three years or so about the propriety of taking gifts from entities that do business with the state or misusing state-provided expense reimbursements and vehicles. If you’ve been paying attention in state government, you’ve been tightening up whatever is loose and cleaning up whatever seems a bit messy. And if you’re not been paying attention in state government, you should have been.
Second, Stromberg is right about one thing: CSX Corporation is a “partner” of the ports authority. Rail service is important to the Wilmington port and critically important to the state port facility at Morehead City. These are transportation businesses. In fact, they should be treated as businesses, not as public utilities.
None of the traditional tests for identifying a “public good” (and even some of them are questionable) apply to a port. It is quite simple to identify users of the service, and quite simple to exclude non-payers. Ports do not involve the protection of a “commons,” such as flowing water or breathable air, for which property rights cannot effectively be established and enforced. Ports compete actively with other kinds of transportation infrastructure.
To the extent that ordinary rules for how to conduct state government and compensate state employees don’t fit the operations of North Carolina’s state ports, it creates yet another argument for moving them out of the public sector and into the private market. The case for privatization is already strong; among other boons, selling the two state ports could generate tens of millions of dollars in one-time revenues that would be put to better use on legitimate public responsibilities such as the repair and renovation of key state facilities.
In an ideal world, what one business “partner” chooses to give the CEO of another during football season would be none of my business. Its auditors might get upset. Its shareholders or other partners might not like it. But I and other bystanders would have no dog in the fight. As long as the state ports belong to the taxpayers of North Carolina, however, their financial and compensation practices are the public’s business. That includes the sham of Stromberg’s “car allowance” and his receipt of corporate freebies while a state employee in a position to make decisions on the government’s behalf concerning said corporation.
Many overseas ports were sold years ago to the private sector, including the 19 facilities that used to make up the Associated British Ports. North Carolina politicians talk about wanting to be innovative, but they rarely are. Here’s a good opportunity to get something right.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.