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BACKGROUND Project Description Staff reviewed City Funding sources that could be used to fund the Stanley Boulevard UUD, Rule 20B and was not able to identify the required funding. During the funding review, Rule 20A funding was identified that could be used toward undergrounding the overhead utilities. In order to be eligible for Rule 20A funding, PG&E requires the City to establish the UUD. The formation process includes a public hearing and a formal resolution to underground the overhead utilities, specifying the exact limits of the District and stating the public necessity of the conversion. Underground Utility District (UUD) Rule 20A Funds For a number of years the City has had an active utility conversion program to underground overhead utilities on major streets. Moving overhead utility lines underground improves aesthetics, increases property values, provides more reliable utility service and eliminates unsightly tree trimming for overhead wires. For the last 25 years, the California Public Utilities Commission (CPUC) has required PG&E and Pacific Bell (AT&T) to set aside an annual conversion allocation, which is apportioned to cities and counties in their service areas based upon the number of electrical meters for overhead electrical services within the City's boundaries. These funds are commonly referred to as Rule 20A funds. Currently the City has accumulated $1M in credits and receives a yearly allocation credit of approximately $150,000. With the current balance and expected revenue over the next four years, combined with a program that allows the borrowing of future credits after a funding threshold is met, the City meets PG&E's criteria for the project to be entered into PG&E's queue for design and construction scheduling. DISCUSSION The Stanley Boulevard project was originally planned as a street surface improvement project including curb, gutter, sidewalks, lighting and landscaping in accordance with the 2002 Downtown Specific Plan. The project was estimated to cost $2.5 million. The funding to construct the street improvement project is currently available in the CIP, of which approximately half is restricted for use on the street improvements only. The utility undergrounding work that was added to the project in 2008 is estimated to cost $3.25 million. This cost estimate is based upon a complete design for the work. When the undergrounding work was added to the project in 2008 it was planned that funding would be available in the CIP for construction. This project has been competing for limited CIP funding since the design was complete. Due to the number of worthy projects, coupled with the slowdown in the economy, no funding for this project has been identified. Staff is now recommending that Council consider Rule 20A funding for undergrounding the overhead utilities. In order to be eligible for Rule 20A, PG&E requires the City to establish the UUD. The formation process includes adopting a resolution initiating the formation of an underground utility district and setting a public hearing date. Page 2 of 3