HomeMy WebLinkAboutR85-944 a169.
RESOLUTION NO. R85-944
A RESOLUTION OF THE CITY COUNCIL OF PI2kINVIEW TEXAS
AUTHORIZING THE MAYOR TO EXECUTE A TAX ABATEMENT AGRRV~I~T
BE~t~ THE CITY OF PLAINVTH4 AND WAL-MART STORES, INC.
WHEREAS, the City of Plainview has created a reinvestment zone;
WHEREAS, Wal-Mart Stores, Inc. have agreed to construct a
Distribution Warehouse in said reinvestment zone; and
WHEREAS, the City of Plainview has agreed to grant tax abatement to
Wal-Mart as an inducement for building in the reinves~t zone:
NOW, THEREFORE BE IT RESOLVED by the City Council of the City of
Plainview, Texas that the Mayor is hereby authorized to execute a Tax
Abatement A~3reement with Wal-Mart Stores, Inc.
BE IT ~ RESOLVED that a copy of said agreement is hereby
attached and permanently made a part of this resolution.
PASSED AND APPROVED this the 10th day of December, 1985.
E.V. RIDT,RRUBER, Mayor
~N~LTER S. DODSON, 'City Clerk
STATE OF TEXAS §
§ AGREEMENT FOR PROPERTY TAX ABATEMENT
COUNTY OF HALE §
This AGREEMENT entered into this the 10th day of December ,
1985 by and between CITY OF PLAINVIEW, TEXAS, hereinafter called
"CITY", and WAL-~IART STORES, INC., a Delaware corporation, herein-
after called "WAL-MART".
WHEREAS, on September 10, 1985, in compliance with art. 1066f,
Vernon's Tex. Civ. Stat., CITY passed Ordinance No. 85-2609 estab-
lishing a reinvestment zone for commercial-industry tax abatement
within the area designated as a reinvestment zone in said ordi-
nance. A copy of the ordinance is attached hereto marked Exhibit
1; and
WHEREAS, WAL-MART is the owner of the real property described
in Exhibit 1 attached hereto which has been designated as a rein-
vestment zone; and
WHEREAS, WAL-MART desires to enter into an agreement with CITY
to exempt from taxation the value of the real property described in
Exhibit 1 attached hereto for a period of fifteen (15) years on the
condition that WAL-MART shall make the specified improvements
described herein in conformity with this agreement.
NOW THEREFORE, KNOW ALL MEN BY THESE PRESENTS that for and in
consideration of the mutual covenants and agreements recited herein
CITY and WAL-MART agree as follows:
I
The 1985 market value of the real estate described in Exhibit
"1" attached hereto, as established by the Hale County Appraisal
District for ad valorem tax purposes is $45,839.00. Ail of the
taxable real property described in Exhibit "1" attached hereto and
the improvement to be constructed thereon, which have a market
value in excess of $45,839.00 shall be and the same is hereby
exempt from taxation for a period of fifteen (15) years, subject to
the right of holders of existing outstanding bonds of the CITY as
follows ..
A. Beginning on January 1, 1986 and terminating on December
31, 1995, the real property and improvements to be constructed on
the land described in Exhibit "1" attached hereto shall receive an
abatement of 100% from taxation of all of the market value of said
land and improvements which is in excess of $45,839.00.
B. Beginning on January 1, 1996 and terminating on December
31, 1998, the real property and improvements to be constructed on
the land described in Exhibit "1" attached hereto shall receive an
abatement of 75% from taxation of all of the market value of said
land and improvements which is in excess of $45,839.00.
C. Beginning on January 1, 1999 and terminating on December
31, 2000, the real property and improvements to be constructed on
the land described in Exhibit "1" attached hereto shall receive an
abatement of 50% from taxation of all of the market value of said
land and improvements which is in excess of $45,839.00.
II
WAL-MART shall in consideration for such tax abatement con-
struct on said real property the improvements described in Exhibit
"2" attached hereto.
CITY, its agents or employees, shall have access to inspect
said tax abatement area at reasonable times to insure that the
improvements to be constructed on the real estate described herein
are in accordance with the sPecifications and conditions of this
agreement.
WAL-MART represents to CITY that the real property and im-
provements to be constructed thereon are to be used by WAL-MART as
a warehouse distribution facility. WAL-MART agrees during the
period of time that the real property tax exemptions are in effect
WAL-MART shall use the real estate and the improvements thereon as
a warehouse distribution center and other related activities which
are within the general purpose for encouraging development of the
tax abatement zone.
If WAL-MART fails to make the improvements to the real estate
as provided in this agreement, then WAL-MART shall pay to CITY all
real property taxes which wouid have been owed to CITY by WAL-MART
had no such tax abatement exemption ever been granted. CITY shall
have a lien against the real estate described in Exhibit "1"
attached hereto and all improvements located thereon to secure
payment and recapture of any real property tax revenue loss plus
statutory penalty, interest and attorney's fees if WAL-MART fails
to make the improvements on the real property described in Exhibit
II~II ·
This AGREEMENT shall not become effective until it has been
approved by an affirmative vote of a majority of the members of the
governing body of the CITY.
IV
This AGREEMENT may be terminated by the mutual consent of all
parties.
ATTEST:
WAL-MART STORES, INC.
By.
D~ods!n ,~ C~i/~ty Clerk
CITY OF PLAIN~IEW~ / ~
CITY OF PLAINVIEW
TAX ABAT~b~ENT
On November 3, 1981, Texas Voters approved an amendment to Article
VIII of the Texas Constitution. Basically Article VIII required that
property taxes be equal and uniform but the amendment permitted cities
and other taxing units to encourage development or redevelopment within
their boundaries by granting exemptions or other relief frc~u ad valorem
taxes on real property. The necessary enabling legislation for tax
abatement was introduced and passed during the first called session in
July, 1981, and became law upon the adoption of the Constitutional
Amendment. The Constitutional kn~ndment, known as Proposition No. 1,
was phrased as follows: "TO AUTHORIZE CITIES, TOWNS AND OTHER TAXING
H~TITIES TO ENCOURAGE THE IMP~, DEVELOPMENT, OR REDEVELOPMENT OF
CERTA/N AREAS THROUGH PROPER~Y TAX RELIC." In Hale County tb~t
proposition passed with 1,719 voting "for" and 977 voting "against."
This new legislation gave the City of Plainview a new tool whereby it
could assist in the inducement of development in partnership with the
private sector.
Most of the Plainview C~¥~nity is aware that Wal-Mart has chosen
Plainview as the hcme for a new Distribution Facility. The facility, to
be located on a 97 acre tract of land, will lie to the east of the
Intersection of Interstate 27 and State Highway 194. The proposed
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facility, when opened during the sunvaer of 1986, will e~ploy 400
individuals and within three years is expected to employ approximately
1,000. Wal-Mart's initial investment in the City of Plainview is a $25
million facility and an initial annual payroll of $10 million. It is
quite obvious that the Wal-Mart Distribution Facility will have a
substantial positive impact on the Plainview economy.
Competition for the Wal-Mart Distribution Center was extremely keen
and not only involved Texas cities but municipalities in New Mexico,
Colorado, Kansas and Oklahoma. When it appeared that Plainview might
loose the distribution facility, the Plainview City Council began a
review to identify other inducements which might assist in keeping
Plainview in the cc~petition. It was at this point, several months ago,
that the City Council opted to infom Wal-Mart of the possibility of tax
abatement and that if Wal-Mart were interested in abateaent then the
City Council would be willing to enter negotiations to consider the
feasibility of the tax abatement proposal. When Wal-Mart announced that
it had chosen Plainview as the location of its new distribution
facility, said announcement was contingent upon the cc~mzanity satisfying
numerous conditions. One of those conditions was that tax abatement be
granted at 100% for 15 years. Preliminary estimates of this inducement
showed that abat~t might result in excess of $3 million in abated
taxes from the City of Plainview, Plainview Independent School District
and Hale County. It is quite obvious that tax abatement is not an item
which is to be taken lightly.
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The first step in granting tax abatement is the qualification of the
proposed site as a "reinvestment zone." One of the provisions of State
Law governing tax abatement, states that a reinvestment zone may be
established if the area considered is "predcmtinantly open and, because
of obsolete platting, deterioration of structures or site improvements
or other factors, substantially impair or arrest the sound growth of the
City or Town." It is upon this principle that the City Council will
consider the creation of the reinvestment zone. Before the City Council
can consider final action on creation of the reinvestment zone, a public
hearing must be conducted. The public hearing is intended to inform
the public of the City's intention and provide a forum for discussion
prior to taking official action. The final decision, as to whether or
not the reinvestment zone will be established, rest entirely with the
City Council. If the reinvestmsnt zone is established through the
adoption of an ordinance said zone will take effect on January 1, of the
year following the year in which the zone is approved. If the
reinvestment zone is established, the City may then enter into a
contract with Wal-Mart establishing tb~ terms and condition of the tax
abatement. The contract will require Wal-Mart to make certain
improvements in the reinvestment zone. At any time that Wal-Mart fails
to honor the terms of the contract, State Law requires that provisions
be in the contract which call for "recapturing property tax revenues
lost as a result of the agreement if the owner fails to make the
impro~ ts or repairs as provided by the agreement."
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Assuming that the reinvestment zone is created, and the City of
Plainview Council authorizes the execution of a contract with Wal-Mart
calling for tax abatemsnt, State Law calls for the Plainview Independent
School District and Hale County to execute identical agreements with
Wal-Mart. If either or both the Plainview ID~ependent School District
or Hale County choose not to execute an identical agreement the entity
failing to do so is "penalized." State Law states, "if a taxing unit
fails to execute such an agreement, the taxing unit is limited to taxing
any property that is the subject of an agreement under Subsection (a) of
this section at tb~ same value at which th~ property was taxed
proceeding the execution of the agreement with the City, for a period of
time equal to twice the duration of the agreement with the City."
Simply put, the taxing entity which chooses not to execute an identical
contract agreement as adopted by the City will have the identical tax
abatement applied as approved by the City, for twice the length of time.
The ratioD~l behind this type of "penalty," right or wrong, is without
it taxing entities like School Districts and Counties would experience a
wind fall. They would gain the iDcreased tax revenue on the
impro~ts without having joined with the City to encourage those
improvements.
An ~CONOMIC DEVELOPMenT STUDY was recently completed and that study
sunm~nrized the problems faced by Plainview and all of Hale County.
Said study was funded through an Economic Development Grant frcm the
State of Texas. In the econc~ic development strategy section of said
study the following statement .was. made:
"The primary problem ~ faced by the Plainview/Hale County Area is a
function of an over dependence on agricultural production. The local
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economy has evolved into one which is not sufficiently diversified to
compensate for the major fluctuations which have characterized the
profitability of farming over the last decade. Az3ricultural will always
be a significant component (probably the most significant) of the area
econcmy, but fundamentally important changes have altered the ability of
agriculture to sustain the area. More over, near term forecast of
profitability in the agricultural sector indicate even b~rder times
ahead."
"As a result, it becomes almost imperative that Plainview convert
alternative industrial/cc~nercial potential into a new economic reality.
Tb~ basic goal to be achieved, more specifically, is an expanded
industrial base which can provide levels of value added income
comparable to agricultural production (when it enjoyed a more s~_able
cost of production/price ratio). The Commercial/Financial sector of the
Plainview econc~y is quite ws~L_developed, on the other hand, and has
been responsive to shifts in the incom~ base. Consequently, any
significant improvement in the~industrial base should be expected to
register multiplied gains in the cc~nercial sector."
The Plainview City Council has and continues to look upon tax
abatement for Wal-Mart favorably. Because of concerns expressed by
other taxing entities as well as concerns of the City of Plainview the
City did contact Wal-Mart and requested that Wal-Mart consider something
less than 100% tax abatement. Wal-Mart responded by stating that they
would be agreeable to 100% tax abatement for 10 years; 75% tax abatement
for years 11 and 12; and §0% tax abatement for years 13 through 15.
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The Plainview City Council is very much aware that Wal-Mart is undoubtly
out to make as large a profit as possible, for that is the nature of our
free enterprise syst~. This Council also has no doubt that Wal-Mart
through tax abatement, is being given preferential treatment. This
Council is aware that there are risks involved in granting tax abatement
but these are calculated risks which this Council is confident will be
beneficial to our community. This Council does not look upon the tax
abatement as a proposal which calls for "the loss of tax dollars." This
Council feels that if the tax abatement induc~nent was not offered for
consideration by Wal-Mart, in conjunction with the many other
inducements, that Wal-Mart would not be planning to locate their
distribution facility in Plainview, Texas. Therefore, the City of
Plainview has not lost or given up anything but it is giving the
Plainview economy a shot in the arm which it so badly needs.
If the assumption is made that tax abatement is granted in
accordance with the proposal of Wal-Mart, and it is also assumed that·
the tax rate of the School, County and City remain constant along with
the appraised value, the total tax abatemant for Wal-Mart through the
year 2000 W~Uld be $2,484,697. In the same light it is assumed that
Wal-Mart invests $25 million in the construction and equipping of the
distribution center, and that Wal-Mart contributes a minimum $10 million
per year payroll over the same 15 year period, Wal-Mart's total impact
on the Plainview economy will be $175 million. One of the truest maxims
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of the business world is that "you must spend money in order to make
money." This Council contends that tax abatement is an excellent
"investment," for it would appear that for ever $1,00 of abated taxes
a minimum of $70.00 will be put back in tb~ Plainview econcmy.
The City Council does not feel that it is its place to determine
the advantages and disadvantages of tax abatement as it might pertain to
the Plainview Independent School District or Hale county. Both of these
entities have elective representatives which must make that
determination. The City of Plainview does hope that those governing
bodies can concur with this council that the potential benefit, by
granting tax abatement, is significant. The most immediate financial
impact that the City of Plainview anticipates is an increase in sales
tax of $30,000 per year. With .the creation of additional "spinoff jobs'!
and as the Wal-Mart Distribution facility labor force grows, that sales
tax benefit can be expected to increase even more. Also, the additional
money in the econc~y should result in the construction of new hcmes and
businesses which will be added to the City tax rolls.
Some concern has been expressed that the creation of 400 to 1000
jobs will result in a large influx of people creating additional demands
on City services thus requiring city taxes to be increased. The City
Council does not have a crystal ball and[ therefore cannot guarantee that
this will not happen. But it is the firm belief of this Council that
the Wal-Mart Distribution facility and the spinoff benefits will assist
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in the diversification of the tax base which will help to assure that
taxes remain as low as possible.
A direct corelation to tax abatement for the City of Plainview and the
effect that it might have can be seen by looking at the Excel facility.
The Excel facility, which employees over 1000 people does not pay any ad
v~lorem property tax to the City of Plainview because of its location
outside of the City's municipal limits. Yet, few can argue that Excel
has not played a very important role in Plainview's econcmy by employing
many of its citizens. The Plainview City Council is extremely proud of
the role that Excel has, is and will continue to play in the econc~y of
the City of Plainview as well as Hale County.
In ~, the City Council feels that the tax abatement proposal
for the Wal-Mart Distribution Center is an almost no loose proposition.
The Wal-Mart Distribution facility success story for the City of
Plainview will result in many additional benefits. The entire ~ity
should be proud of the role that it has played in "winning" the Wal-Mart
Distribution Facility. Cc~3petition ~is the name of the game. The City
of Plainview is no different than any other business and it must "spend
money in order to make money" and it must continue to take calculated
risk so that it may rem~in a healthly viable business in order to best
· serve its citizens. The most recent visible example of how serious the
cc~petition is for econc~ic developing-hr was the "home-port" project
whereby the Navy announced it would be placing a new fleet at a costal
City on the ~ulf of ~xico and the City of Corpus Christi successfully
garnished that tr6mendous economic project, when its citizens voted to
approve a $25 million bond issue if the Navy chose Corpus Christi. The
effort of the Plainview connunity is no less significant than what was
accomplished in Corpus Christi. This City Council wishes to express its
sincere gratitude to every individual and organization which played a
role and has made a financial commitmsnt to the future of Plainview, and
this City Council wishes to encourage support of the tax abatement
proposal.
8/6/85
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WAL-MART TAX ABATEMENT ANALYSIS
ABATEMENT CITY CITY SCHOOL SCHOOL COUNTY COUNTY TOTAL TOTAL
YEAR PERCENTAGE ABITEMENT TAX ABATEMENT. TAX ABATEMENT T, AX ABATEMENT, TAX
1986 100% $ -0- $ 165 $ -0- $ 221 $ -0- $ 92 $ -0- $ 478
1987 100% 71,980 165 96,380 221 38,698 92 207,058 428
1988 100% 71,980 165 96,380 221 38,698 92 207,058 438
1989 100% 71,980 165 96,380 221 38,698 92 207,058 478
1990 100% 71,980 165 96,380 221 38,698 92 207,058 478
1991 100% 71,980 165 96,380 221 38,698 92 207,058 478
1992 100% 71,980 165 96,380 221 38,698 92 207,058 478
1993 100% 71,980 165 96,380 221 38,698 92 207,058 478
1994 100% 71,980 165 96,380 221 38,698 92 207,058 478
1995 100% 71,980 165 96,380 221 38,698 92 207,058 478
1996 ~5% 53,985 18,160 72,285 24,316 29,024 9,766 155,294 52,242
1997 ~75% 53,985 18,160 72,285 24,316 29+024 9,766 155,294 52,242
1998 50% 35,990 54,150 48,190 ~8,41t 19,349 19 4~ 103,529 122,002
1999 50% 35,990 54,150 48,190 48,411 19,349 19,441 103,529 122,002
2000 50% 35,990 54,150 48,19~ 48,411 ~ 19,349 19,441 103,539 122,002
2001 0% -0- 72,145 -0- 96,601 -0- 38,790 -0- 207,536
TOTALS $863,760 $272,565 $1,'1~5'6~,560 $~2.9'2,676,' $'4~97~7~682,806
Assumptions:
a) Tax rate of School, County and City remain constant
b) Appraised value of property remains constant
c) Wal-Mart completes no improvements before January 1, 1986.
City of Plainview 8/9/85
The Property Development Tax Abatement Act provides for the
designation of reinvestment zones. Such zones may meet any one of four
criteria and the City of Plainview has chosen to utilize the following
criteria in calling for the designation of 97 acres adjacent to the
intersection of Interstate 27 and State Highway 196 as a reinvestment
zone which will be utilized by Wal-Mart to construct a distribution
facility: "THE AREA M~ST BE pREIX~v~NANTLY OPEN AND, BECAUSE OF OBSOLETE
PLATTING, DETERIORATION OF STRU~ OR SITE IMPR~S, OR OTHER
FACTORS SUBSTANTIAT,T.Y IMPAIR OR ARREST THE SOUND GRfNNTH OF THE CITY OR
TOWN." Although the Act delineates in some specificity what applies,
the definitions are very broad. The Legislature intended to make the
act adaptable to the needs of all cities.
The "But-For" rule is the best one to apply in order to determine
whether tax abatement is appropriate for a particular area. "But-for"
the use of tax increment financing, will development occur in the area?
"But-for" tax abatement will new business activity be generated in the
area; Will unemployment decrease? If the City determines that
development will occur in an area any way, without tax abatement, then
abatement should not be utilized. But, if the value of tastable property
will not go up unless there is some kind of economic stimulus, then the
area is probably right for tax abatement. The City of Plainview feels
that the answer to all the "but-for" questions is "NO". Factors which
substantiate the "NO" answer are as follows:
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1) The Plainview/Hale County area has become overly dependent on
agricultural production. Although agricultural production is still a
significant element and has been in a large part, responsible for the
prosperity of the area, it can no longer meet the econcmic needs of an
expanded population.
2-) The proposed site for the reinvestm~nt zone is currently vacant
and unproductive, and the prospect that it will continue to be such for
the foreseeable future unless developed by WalLMart, is highly likely.
Wal-Mart's letter of June 13, 1985, sets forth eleven conditions which
must be met prior to their con~encement of the project, notably present
among those being the provision of tax abatement.
3) Plainview has experienced a significant out migration of its
young adult population. Lack of promising jobs and local recreation
deficiencies are sited as primary reasons for leaving. Continued
movement from rural areas to urban centers will bring to communities
like Plainview, young adults who b~ve better earnings potential and who
have a stronger demand for consumer products and services. The proposed
Wal-Mart facility and the subsequent creation of substantial jobs will
address this critical problem.
4) Tax Abatement will serve as an econcmic stimulus. Without the
stimulation of the proposed reinvestment zone property values will
remain stagnant.
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5) The proposed creation of the reinvestment zone and the
subsequent tax abatement, which will assist in securing the Wal-Mart
distribution facility, will play a significant role in enhancing an
overall socio-econcmic stability, especially with regard to retaining
the younger population and improving housing quality/access.
6) Plainview currently lacks adequate job opportunities for wc~en
who wish to work and the Wal-Mart facility will begin to address this
problem.
7) Plainview's unemployment rate in 1982 was 6.2%. The County rate
was 6.4%. The relatively high unemployment rates for Hale County and
the City of Plainview are an effect of economic dependence on the
seasonability of agricultural work and agri-business, as well as
functions of the overall hardship in the agricultural sector that have
been experienced in the last decade. The uneaployment rate as of June
1985 for Hale County is 8.9% as compared to 7.5% nationally and 7.7% in
Texas.
8) In 1980 the basic/service mix in the City of Plainview was 25%
basic and 75% service. The basic/service mix in the State was 30% basic
and ~70% service. A c~arison would indicate that Plainview's basic
employment is less than that of the State. The creation of a
reinvestment zone followed by tax abatement will ac~lish a
significant goal through th~ securing of the Wal-Mart facility and the
subsequent large number of persons that said facility will employ.
Basic/Service e~plo~t should provide a favorable mix in order to
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maximize income while at the sams time offer a variety of goods and
services to residence of the area.
9) It is anticipated that the Wal-b~rt success will attract new
business and industry to the improved econc~ic area which will in turn
preserve present jobs and create new ones, which Plainview desperately
needs.
10) Plainview and the surrounding area has a good labor force
potential which can meet the needs of a wider variety of industry if the
Plainview com~/nity can successfully secure those industries.
11) Building construction starts, for eight of the past ten years,
have been depressed and it is anticipated that the Wal-Mart facility
will result in a stimulation of new development.
12) It is anticipated that tax abatement might very well be the
strategy that provides a framework for developing a more diversified
industrial/economic base.
13) In a recent survey, several priorities were articulated.
Essentially a vast majority of said priorities 'focused on recruiting a
more diversified industrial base and in addition to the survey extensive
date collection efforts, have demonstrated that the econcmic commnnity
within Plainview would like to see more growth and diversity in its
existing industrial base.
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14) Accord/ng to the United States Chamber of Cc~m~rce, an industry
such as the Wal-Mart Distribution Center (~nploying 500 workers), could
mean: 1,755 more people in tb~ ~ity; 395 more children; 485 mere
households; $2,455,000 more bank deposits; $5,180,000 more personal
income per year; 485 mere passenger cars registered; 5 more retail
establishments; 340 more workers employed in other establishments;
$2,825,000 more retail sales per year. The foregoing increase in annual
retail sales would be divided among the following business
establishments: Grocery $595,000; Automobile dealers $445,000; Eating
and Drinking places $215,000; Gasoline Service Center $205,000;
Department Stores $295,000; Clothing and Shoe stores $150,000; Lumber,
Building materials and Hardware dealers, $115,000; Furniture, Home
furnishings and household appliance stores $130,000; Drug Stores
$95,000; and other stores $580,000 resulting in a total increase in
annual~ retail sales of $2,825,000. It is also anticipated that the
creation of 400 jobs in the Plainview economy will result in the
subsequent creation-of an additional 272 jobs in other businesses and
industry.
*Supporting documentation for the above referenced statements may
be found in the Plainview Economic Study - 1985.
8/5/85
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