When lawmakers convene Feb. 1 for the 2017 legislative session, the most pressing question will be how to fill a $1.8 billion budget gap.

One answer, say budget watchdogs: Look to the example of United Streetcar.

Not long ago, Clackamas-based United Streetcar's ambitions to resuscitate a nearly obsolete mode of transportation drew praise from then-President Barack Obama and the enthusiastic financial support of all levels of government. Today, its products roll through the streets of Portland, Tucson, Ariz., and Washington, D.C.

In 2010, United Streetcar built a test track for its vehicles and qualified for an Oregon enterprise zone property tax break. The tax break came with a condition: United Streetcar had to employ at least one person on the premises to qualify.

But orders soon dried up and workers lost their jobs. Today, the company finds itself in Oregon Tax Court, fighting to avoid having to give back the subsidy from the state's e-zone program.

Enterprise zones provide companies with a five-year break from paying property taxes, costing local taxing jurisdictions $65 million a year. Critics say that, like many tax breaks, there's little accountability once e-zone status is awarded.

Last July, however, Clackamas County Assessor Bob Vroman canceled United Streetcar's enterprise zone award because it reported zero employees. That meant the company would have to pay the county five years of back property taxes on the affected site—a bill of about $323,000.

In January, United Streetcar sued Clackamas County, claiming it made a paperwork error in filings with the county.

The court will decide who's right. But watchdogs say elected officials should act more like Vroman and scrutinize the $12.1 billion a year of state and local tax breaks on the books.

Jody Wiser of Tax Fairness Oregon, a watchdog group, has been tracking tax breaks since 2003. "I've added up $835 million in new tax breaks or expansions of existing ones in that time," Wiser says. "Legislators say they haven't had money this whole time, and yet it's been new tax break after new break."

Here are some of the watchdogs' pet peeves, with their annual costs.

Mortgage deduction

$548 million

Right now, Oregonians can deduct from personal income the interest they pay on mortgages and home equity loans. It's the biggest single housing subsidy the state provides, and advocates say it goes to the wrong people. Jon Chandler, CEO of the Oregon Home Builders Association, says the deduction is an important incentive for home ownership. Yet nearly two-thirds of the benefit goes to Oregonians making more than $84,000 a year. Activists went to place a $15,000 cap on annual deductions, and invest the savings in affordable housing. "It doesn't make sense to subsidize the wealthy," says Chuck Sheketoff of the Oregon Center for Public Policy.

Capital gains on home sales

$182 million

Every two years, people can sell their homes and pay no state tax on a gain of up to $250,000 (individual filer) or $500,000 (joint filer). Chandler notes that home ownership is a large factor in the creation of wealth, savings and minority advancement. Critics say the tax break is overly generous and has contributed to a tight housing market. "This is a giveaway for home-flippers," Wiser says. "We've destabilized neighborhoods and made it far harder for first-time homebuyers."

Small-business pass-through income

$120 million

In the so-called "Grand Bargain" of 2013, Democrats won Republican votes for pension cuts (which Republicans desperately wanted) by granting tax cuts to the owners of small businesses that employ at least one person. "You don't have to do anything for the tax break," Wiser says. "You don't have to hire anybody. You just have to be an owner." But Republicans who fought hard for small business say a deal's a deal. "It's been a little over three years since [House Speaker] Tina Kotek and [Senate President] Peter Courtney agreed to the Grand Bargain," says Rep. Mike McLane (R-Powell Butte). "I would sure hope that their word has a longer shelf life than that."

Film production

$13.75 million

The Oregon Film and Video Office auctions off tax credits and gives the proceeds to companies producing TV shows and movies here. This subsidy has helped bring small businesses to Oregon. Ryan Deckert of the Oregon Business Association says the program generates enormous investments. "If they don't spend money here, they don't get the tax break," Deckert says. "I'm a big supporter." It's also bankrolled local companies, such as the Oscar-nominated animated film studio Laika Entertainment, which has received $7 million over the past four years. "This program is ridiculous," Sheketoff says. "Travis Knight [son of Phil] has received millions. Does he really need that money?"

Farm home-site exemption

$12.9 million

In addition to getting tax breaks on farmland, equipment and inventory, Oregon farmers get a tax break on the land under their homes—about 41,000 of them. Jeff Stone, CEO of the Oregon Association of Nurseries, says the incentive accomplishes a key Oregon goal of protecting agricultural land from development. It also strips property taxes from cash-strapped rural communities. "Farmers use roads, schools and public safety services just like the rest of us," Wiser says. "They should pay for them."