Agenda and Attachments - 02/16/10 CC/EWEB JEO

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of the inventory is in the 40 to 50 year age range, which means in the next decade, over half of the hydrant inventory will be at or near the end of its useful life. Some hydrants have already failed and have simply been decommissioned and capped off. Additionally, almost 1,000 of the 4,000 hydrants are in low-income neighborhoods. Approximately one-third of these hydrants are expected to fail over the next 20 years. The current cost of a hydrant replacement (equipment and installation) is approximately $5,000. Within the next decade, the City could easily be looking at an unfunded liability in excess of $10 million to fully address the obsolete, damaged and malfunctioning hydrants in the system. The consequences of failing to address these deferred maintenance issues is that hydrants will continue to fail and many will need to be capped and taken out of service, resulting in substantial public safety liability. The City of Eugene is requesting federal funds from the Fiscal Year 2011 federal appropriations cycle in order to partner with EWEB for the replacement of many of these aging hydrants. This one-time funding request will allow the City of Eugene to partner with EWEB to leverage an intergovernmental cost-sharing strategy to address the $10 million deferred public hydrant maintenance and replacement strategy. Please contact Brenda Wilson (682 - 8441) with any questions. February Special Session Legislative Update Fiscal Overview On Feb. 8, the state revenue forecast predicted a $183 million drop from the previous forecast, requiring a little over $100 million in budget rebalancing in the February Special Session. The state will likely use a combination of unspent general fund balance, reserves and BETC savings (see below) to fill most of that gap, staving off cuts to key state services such as K-12 Education and Health and Human Services. The budget solution will be much easier to solve since voters approved Ballot Measures 66 and 67. Had these measures been rejected, the state budget gap would have widened to $727 million. Business Energy Tax Credit The Oregon Department of Energy (ODOE) offers tax credits to Oregon residents and businesses that invest in energy conservation and renewable energy projects. The Business Energy Tax Credits (BETC) have existed for some time but have become much more popular since the credits were enhanced in 2007, when eligible costs for renewable energy were raised to 50 percent. The current price tag to the State in foregone revenue is $243 million in the 2010-2012 biennium. The magnitude of this lost revenue, coupled by recent newspaper articles alleging that ODOE staff misrepresented the funding impact of the BETC, has created criticism among the public and legislators. The stories also highlighted concerns that the BETC was subsidizing projects that would have been economically viable and completed, without the tax credit, largely as a result of the Renewable Portfolio Standards in Oregon and other Western states. This February, a long simmering policy discussion on reining in the cost of the BETC program has boiled over into the formulation of HB 3680. This legislation strives to strike a balance between ending tax credits for projects that should prove viable without the BETC incentive,