A new audit released today by Oregon Secretary of State Bev Clarno today found that Travel Oregon, the state's marketing agency, pays its executives very generously by state government standards and does not exercise the kind of purchasing and contracting discipline required of state agencies.

"Travel Oregon's managers are some of the highest compensated managers compared to state agency managers," the audit found. "[And] prior to 2020, Travel Oregon's largest contract had not been competitively bid since 2010."

Those differences from other state agencies stem from Travel Oregon's unusual status. In 2003, lawmakers made big changes to how the state promoted tourism, scrapping a state-run effort and creating Travel Oregon, which is semi-independent and gets no money from the state's general fund budget.

The change made Travel Oregon exempt from state contracting rules and untethered its compensation from the schedule that governs the pay of agencies that are fully under the state's control, such as the Oregon Health Authority or the Oregon Department of Human Services. (It is still subject to oversight from the governor and the Legislature and subject to Oregon's Public Records Law.)

Although lawmakers cut Travel Oregon off from direct state funding, they left the agency with a potent source of revenue: a 1 percent tax on hotel bills that is dedicated to funding the agency. That tax increased to 1.8 percent in 2016. Travel Oregon's budget has tripled over the past decade.

Travel and tourism in Oregon has increased dramatically, for which Travel Oregon takes credit. With the increase of its share of the hotel tax in 2016, the agency became on the best-funded in the country.

Some of that new tax revenue has pumped up executive salaries. Because Travel Oregon is semi-independent, its board can pay staff what it wants and that has led to far greater compensation than the directors of large state agencies.

"Travel Oregon's managers are some of the highest compensated managers compared to state agency managers who oversee more expansive and complex budgets; manage large numbers of employees and contractors; and perform many diverse, technical, and critical government services," the audit found.

As an added benefit, Travel Oregon employers are members of the Oregon Public Employee Retirement System, which means the high pay for CEO Todd Davidson and his team will translate into generous state pensions.

The auditors found that other states with big travel budgets such as Arizona and Colorado have kept their tourism agencies under state controls and pay their top executives far less than Oregon does.

Auditors also raised their eyebrows at Travel Oregon's contracting process—especially its advertising contract with the Portland firm Wieden + Kennedy.

"As allowed by state law, Travel Oregon's procedures do not require competitive bidding for large contracts. We reviewed the largest advertising contract, which accounted for $8.4 million in expenditures between July 1, 2017, and March 31, 2019, and found it has not been competitively bid since 2010. Travel Oregon has contracted with the same vendor since the contract was last competitively bid in 2010," the audit found.

In a response to the audit, Travel Oregon's CEO, Davidson, agreed with recommendations to tighten fiscal procedures and provide a more defensible explanation for employee compensation. His agency put the large advertising contract out for bid in January.

Davidson also said his agency is doing what it is supposed to do: bring tourists to Oregon.

"Since the establishment of Travel Oregon, Oregon's share of national travel spending has grown by more than $1 billion and has delivered economic growth across all regions of the state," Davidson wrote in his response.

"Between 2003 and 2017, visitor spending increased by 107%. The agency's various campaigns continue to realize excellent return on investment and support each of Oregon's seven tourism regions. Every dollar spent in advertising and strategic marketing results in $157 dollars in direct tourism spending in communities throughout Oregon. That visitor spending translates to $8 dollars of additional state and local taxes. The investment in tourism envisioned nearly two decades ago is working."