Waco, Texas is a perfectly nice city in the very big State of Texas. Home to Baylor University, Waco has been in the news for both impressive achievements and unsavory activities/practices in the past. None of the AutoSlash team lives in the region, so a visit by the Fee Detective means only one thing – the region has decided to play games with the tax rates assessed on rental cars. And the region’s new game is happily attempting to extract revenue from visitors to explicitly pay for facilities that are not overtly intended for visitors. In this case, the fee is intended to support the county fairgrounds.

Introducing the Extraco Events Center (née Heart O’ Texas Coliseum)!

The Extraco Events Center – Credit HuecoBear via Wikimedia Commons

Question and Answer Time!

Question: What is an Extraco? Is this a dot-com that was unable to register a .com web domain and settled for .co?
Answer: It’s not a shell corporation, excess company or dot-com; it’s just a bank with an odd name.

Question: The government sold the naming rights of the fairgrounds to a bank?
Answer: Indeed, the fairgrounds have a corporate sponsor but the naming rights fee is apparently woefully insufficient for the actual cost of maintenance and desired upgrades.

Question: What’s the Coliseum used for?
Answer: The building was originally the home of Baylor University basketball for 35 years. The facility now hosts a one-week rodeo and is part of the Fairgrounds.

Question: Isn’t Baylor a private university?
Answer: Baylor University is a private, religious university. However, the original (1950’s era) bond issue was focused on local taxpayers who had the right to determine the merits of their infrastructure projects. Members of the AutoSlash team live in cities that consistently vote for projects of questionable public benefit, so we can’t find fault with the 1950’s era voters.

Question: How much money is needed to renovate and update the fairgrounds?
Answer: Right about $34.37 million now, with $6.88 million needed for future projects.

Question: Isn’t $34 - 41 million a lot of money to renovate and update fairgrounds?
Answer: Some would say yes, considering Waco isn’t even a top-20 city (in terms of population) in the State of Texas. Yet everything’s bigger in Texas, where one community built a $60 million high school football stadium with structural defects.

The Stars at Night, are Big and Bright …

How’s Waco going to pay for the renovations for the fairgrounds and the former (deep in the) Heart O’ Texas Coliseum? On the backs of those who use the travel and hospitality industries!

The new revenue stream is structured as an extra 5% on rental cars and an extra 2% on hotels! Why is the differential tax 5% on rental cars and just 2% on hotels? One could guess it’s a nod to the fact that “hotels normally cost more per day” but it’s probably just the power of lobbying. There are more hotels in Waco than rental car providers, so the hotels would be comparatively overrepresented in civic organizations and among the registered voters who will be asked to approve the proposal.

At least the proceeds of the proposed tax can only be used “for sporting- or competition-related purposes”. If the proceeds of the tax exceed projections, the tax could be eliminated (unlikely) or more projects could be funded (likely). If the proceeds of the tax fall short of projections, the local governments could choose to cover the shortfalls out of the general operating budgets (unlikely) or to raise the tax again (likely). Translation: the tax on rental cars is going up 5% at a minimum.

What does the President and CEO of the Extraco Events Center say about the proposed taxes? He’s an ardent supporter of financing renovations (and protecting his livelihood) through fees on out-of-towners! Per the Waco Tribune-Herald:

“It creates a sustainable model that has the opportunity to be funded through a venue tax that would not tax residents in any way, but those who stay in hotel or motels or might rent cars,” said Wes Allison, president and CEO of the Extraco Events Center. “The neat thing about this for me is this does not cost the citizens of McLennan County a penny. It’s something that will fund itself.”

We suspect there’s robust bus service in Waco; Mr. Allison has been waiting to throw tourists under those buses. With the overt attitude that tourists are to be exploited, the AutoSlash team is now a little less excited about crossing the Texas Ranger Hall of Fame and Museum (law enforcement, not baseball) and Dr. Pepper Museum off our bucket list.

Psst … want to know something that’s not exactly a secret? Mr. Allison’s wrong. The citizens of McLennan County will end up paying for most of the renovations.

Waco-Style Rental Car Taxation

Renters at the airport – where the three providers are Avis, Enterprise, and Hertz – probably won’t notice another 5% fee. After all, there’s already an 11.1% Concession Recovery Fee, $1.95 per day Customer Facility Charge, a Vehicle License fee that varies but is usually about $2 per day, and then everything is taxed another 10%. That’s in addition to the cost of the rental car!

The Existing “Total Tax” of 10% is charged on the car plus all other taxes and fees.

In the real world, many airport rentals are undertaken by locals for various reasons such as vehicle availability and the expanded hours of operation (evenings and weekends). The industry trade group CART (Curb Automobile Rental Taxes) spends time debunking the myth that taxes on rental cars – especially at airports – are taxes on tourists. When speaking to voters, the statement “we intend to tax tourists” simply garners more votes than “we’re going to raise taxes” or “we’re going to tax a combination of residents and tourists”.

Then there are the non-airport locations in the region, including three Enterprise locations alone in the City of Waco. And who rents at neighborhood locations? We’ll give you a hint – it’s not tourists! Think about it – every time a resident’s car breaks down, or a vehicle is in a repair shop after an accident, or a larger car is required for a road trip, that resident is going to get stuck paying for the Extraco Events Center!

We’re not going to say Mr. Allison is untruthful. We’re nice enough to say either he’s not fully informed or he’s working from a set of alternative facts.

Our Take

Whether you live in Waco, McLennan County, or just visit the region, you’re going to pay more for your rental car if the local government entities get this tax approved by the state, then passed by the local voters. Taxes are always borne by the consumer and the rental car operators are exceptionally talented at managing the basic economic concepts of supply and demand. If consumers respond with fewer rental days due to this new tax, rental car companies will shrink their fleets available in the region. In the worst possible scenario, consumers would pay more for a reduced selection of vehicles!

Fees, facility charges, and taxes got you confused and/or down? The Fee Detective can explain. Send your query to feedetective@autoslash.com and we may feature your question in an upcoming post.

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