The omnibus appropriations bill the House will take up Thursday includes a measure to reauthorize Brand USA, the troubled corporation created by Congress to promote international visits to the U.S.
The charter for Brand USA is due to expire at the end of 2015, but the House has proposed reauthorizing it through 2020 and adding a few reporting measures in an attempt to correct the abuse of federal funds and conflicts of interest that have characterized the corporation (see page 217 of the omnibus bill).
The corporation works as a public-private partnership where funding from the private sector and local governments is matched by federal funding up to $100 million. Congress should think twice about giving blatant corporate welfare a second lease on life.
Here are three good reasons why:
- The trillion-dollar U.S. travel industry doesn’t need help from the federal government. Brand USA advocates paint a gloomy picture of America’s share in international tourism, hoping to demonstrate the need for federal dollars. The U.S. share “has decreased in the last 13 years,” they say.
But the figures are misleading to say the least. According to the Department of Commerce and the World Tourism Organization, the U.S. share of world travel has been growing slowly since the post-Sept.11 dip. America was the No.2 travel destination in the world last year and far and away had the most business – $140 billion was spent in the U.S. compared to half as much for the nearest competitor in the international travel market. The Department of Commerce expects more of the same, anticipating a 27 percent increase in international visits to America by 2019.
- Brand USA is redundant of the huge investments already being made by state and private travel organizations. States, regions and cities already spend significantly on tourism, in addition to the massive private industry. For example, Hawaii’s Tourism Authority spent $12.1 million on international tourism in 2013 and plans to spend more than $1 million more this year in addition to $1.5 million to work with Brand USA. Nowhere is it Congress’ responsibility to help an industry with marketing and communication strategies.
- Brand USA has serious allegations against it that must be dealt with. It is no accident that the bill to reauthorize Brand USA is called the “Travel Promotion, Enhancement, and Modernization Act.” Brand USA has been criticized for questionable business practices and it seems those problems may have only gotten deeper since.
Former Brand USA Vice President of Operations Mary Ellen Curto recently filed a lawsuit against Brand USA claiming that, among other things, the corporation fraudulently reported donations to get more federal matching funds, engaged in a formal kick-back scheme with partnering organizations, failed to hold competitive bids for services, hired personal friends as favors and violated conflict-of-interest rules.
For example, to attract more “donations” from the private sector and therefore more federal matching funds, Brand USA promised to use the $5 million donation from Visit California on Visit California’s existing advertising campaign as well as 30 percent of the federal matching funds.
In other words, according to Curto’s claims, Visit California paid a dollar to Brand USA and got $1.30 back from the federal government. A similar arrangement was made with Visit Florida These agreements became expected by partnering organizations as a precondition for a “donation,” but were not disclosed in Brand USA reports to Congress.
Further, Brand USA allegedly inflated the market value of donations to increase the federal matching amount. Curto explained that in one such instance IMAX donated images to Brand USA at a self-appraised worth of $30 million. When the Department of Commerce required the pictures be appraised by an outside company, the pictures were valued at only $1 million. Consequently, Brand USA searched for a new appraiser who could value the pictures at $30 million – it found such a person at a used bookstore in California.
Ultimately, whether Brand USA increases international travel to the U.S. is beside the point. Americans would rightly be outraged if the federal government had created a corporation to promote “big oil” or “big business.” Corporate welfare to the tourism industry is no different.