City Council Pre Session – March 5, 2024

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City Council Pre Session – March 5, 2024

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Speaker 1 0:00
welcome everybody to this pre session on sales tax on groceries. There will be no public invited speaker tonight. This is information only. And we let’s do a roll call for council members.

Speaker 2 0:19
City council. Mayor Pro Tem Susie’s own parish. Councilwoman Diane Crist mayor and job security Davao City Council,

Unknown Speaker 0:28
Marsha Barton city council,

Speaker 1 0:30
Rodriguez city council. So we have staff here as well. So I’m going to just pass it over to our city manager,

Speaker 3 0:37
Mayor Council, as you all have asked him questions regarding the sales tax on groceries. What that looks like impact. We wanted to have a pre session today because there are a lot of different moving pieces in this. And what you will see from Jim is, there’s legal issues involved in as well, are issues related to our bonds. So this is a pre session, we wanted to give this to you and have a chance for a conversation. Our plan is to then bring this back again for a public conversation in a study session environment, give me a chance to digest and will provide us some questions and then we’ll bring it back and

Speaker 4 1:23
good evening. Mayor, Members of Council so I’m doing golden chief financial officer. Also going to be making this presentation with me. We have a couple of members from our bond council here tonight on teams, Maria Harwood and dolt, Kelly. And then also Vicki says the sales tax administrator is here to potentially help answer some questions when it comes up. It’s kind of a detailed issue. So I’ve got a bit of a presentation to go through. But feel free to stop me and ask questions along the way, as needed. So go ahead and get started. So, you know, the first slide would say sales tax on groceries, kind of changing the conversation to sales tax on food for home consumption, because that is the exemption that the state has is food for home consumption. And that’s defined by stage and I’ll get into a little bit of that in a minute or two. But what other cities that use tax food for home consumption because they they follow the state’s lien on that. So front ring. Managed Counties also exempt food for home consumption aid collects their tax. most frustrating northern Colorado cities do tax on consumption and exceptions are Firestone Frederick II in Loveland for college and really have different tax rates. And I think what that means is I think what happened is they started out by taxing sort of the home consumption and they’ve had tax increases where they didn’t apply the tax increase to food for home consumption. So they have two different rates for his change that that was just for Front Range northern Colorado so for the metro area, it’s pretty split up. The city get exempted from the metro area or Denver or liquid Commerce City, Greenwood Village, Englewood, Glendale, and Sheridan in those attacks include our data, Westminster Thornton, Broomfield, Middleton leak, rich Parker, golden Edgewater, federal heights and Castle Rock. Well, that thing buddy out, I just didn’t do it on purpose otherwise, and Northglenn, again, is another city that has two different rates. So this is the allocation of our sales and use tax. And I’m pointing this out to you all, I think it’s important to look at the allocation. I’ll be coming back to talking about the allocation to the funds of our sales tax. Our total sales tax is 3.53%. And it goes to five different funds. The general fund, the public Improvement Fund gets the initial base 2%. That is the first historical amount of the rate sales tax rate. And then the next three are portions that are are earmarked by voter designation for the street fund, the open space Fund and the public safety fund. So they all have get revenue that has to go specifically for those purposes, to close 3.53% and in 24. It’s 104 million almost $105 million of projected tax revenues budget So the general fund has total ongoing revenue of almost 113 million in 20. Fours budget 50.3 8 million of that is from sales and use tax. 27.1 7 million is from property tax. So neither of those taxes in the general fund are earmarked for specific use. But other revenue, others, there are services in the general fund that have some offsetting revenues, things like recreation development services, and things like that. And then we have other services in the general fund, then that have hardly any offsetting revenues. And so, you know, by nature, that would mean that, that most of the taxes that we’re receiving in the general fund are going to offset those services. 73% of ongoing expenses in general fund are employee related this year. So this is just taking a look at some of the net costs. For some general fund services that do not have any or after work, they’re offsetting revenues. So in other words, these are being these amounts are being coming from sales and use tax or property tax. Public safety is 45 point 7 million parks Natural Resources is 63 quarters million 4.7 million for the library 2.75 for human service agencies, and then Senior Services at 1.4 3 million. And now we have some more services at lower amounts here, but another five or six different services that we’ve identified, and there may be some smaller ones as well. But these are the ones that I pulled out that would have amounts over 100,000. That’s

Speaker 3 6:52
So Jim, real quick on the offsetting revenues and contracts for counsel. So I should yeah. Yeah, so I was gonna say so for example, let’s just take Jimmy myself, there was a significant portion of our salary. While we’re in the general fund, the other enterprise funds pay for connected to what we do so we allocate allocate my time across water, wastewater electric, broadband connect comes in through the ATM, which is then offsetting that costs. And when we talk about it, in a lot of positions have that within the general fund. So that’s a piece that I wanted to clarify a practical example.

Speaker 4 7:40
So the city manager, City Attorney, shared service type divisions, they all have some sort of an offset of administrative transfer fee. So about half in general, about half of those dollars are coming from taxes, and the other half are coming from other funds within the city. So when you that’s sort of the point is, when we reduce the cost that you put in towards opposition’s you only save 50 cents on the dollar. Right, so this is the projections that we have got 2025 up here, because 2024 is already on the way the FISMA would take place in 25, we’re projecting it’s a $14 million total impact how much revenue we would receive and 25 from food for home consumption. This is as it breaks down across those five funds. We are did mostly based on information from our major tax collectors that sell food, including our groceries and discount stores. smaller entities we didn’t try to get because we had to work with the state to get some of this information because we do not have this type of information or records because we don’t exempt it. So we don’t ask our our vendors to give us that information. They just tell us their total sales. But at the state level, they tell them what their total sales are. And then they say here’s how much are our Exemptions are for food for home consumption. So that’s how we’re able to get the data to identify the potential impact, but we only work with the larger ones so that we we didn’t want to let the state for every account that we could think of. So this is I think a reasonable projection it could be higher. Again, this is for 2025. On that your next go for

Speaker 2 9:42
the middle. Alright, so some residents, there are more chairs here. We have a few more chairs. A couple see that there were questions from residents about initiating petitions to change this in our ordinances. So this is I have a requirement for what those signatures are comes from the city’s charter, section 5.2. And so not less than 10%. The number of persons who are registered electors of the city, as of the date of the last regular city election would be the number of signatures required. So what is that number? Jeff with the county clerk who keeps the voter records we don’t keep those, of course. The county clerk provided me the number of 72,788 registered electors and Mama Mama has grown as of 11, November 7 2023, so that is the date of our last election. So for a citizen initiative petition 7278 signatures would need to be collected. And more, right, because typically you over collect, because so many of them are not valid for one of many reasons. State statute requires 5% That was one of the questions. Where does that you know, how does it compare to the statute? Our charter says 10%. So we would go with what our charter says because we are home world. And then one of the other questions was, what do other cities do? It is all over the board. I just picked a few that are within our size range along the front range, Castle Rock requires 10% of the total number of electors. On the date, the form of the petition is approved. Loveland 5% of the registered electors registered on the date of the filing of the statement of intent, so different time markers and different percentages, holder requires 10% of the average number of registered electors who voted in the two previous minute municipal candidate elections. Again, different Pueblo 5% of the total vote cast in the last general city election, for Collins 10, or 15% of total ballots cast in the last regular city election depends if you’re going for regular a special election with that ballot question. And really 10% of total vote cast in the last election, sort of like us. So kind of again, you

Speaker 5 12:08
have a question in regards to and maybe this has no bearing on it at all. I’m just curious. We proved that sometimes people will pay to have somebody, collect signatures, is there any caveat in there, that directs you know, how that can be done.

Speaker 2 12:26
Those are those rules are provided by the state. And of course, petition gatherers would need to abide by those rules

Unknown Speaker 12:31
so they can pay for.

Speaker 2 12:36
They don’t have to be residents of long lat, for example, to collect signatures. So the process is, can be lengthy, I laid out here, what would be called a vanilla petition timeline. So somebody would submit an intent to circulate a petition to the clerk. Within five days, we would respond with an approval or denial of that petition form, that can be iterative until approval is achieved. So depending on saying, great, great form, submitted five days later, you would have approval. And then once signatures are started, once you start collecting signatures, get 21 days to get that petition filed with the City Clerk’s Office. So only a 21 day time period for signature collection. Once submitted, we have 15 days to verify those 7300 signatures come on down will take volunteers. And that can also you know, if insufficient, there’s a cure period of an additional 15 days that would extend this timeframe longer. If we found the petition to be submitted sufficient, then we’re obligated to submit that to the council, the next regular session, and then the council would then within 30 days adopt or repealed, you know, just take action or setback for the next election. So my question for the next election, also noted from the date of the petition filing, there’s a 40 day time clock that starts for protest of that petition. So it’s a very long and complicated time clock. That’s my point. And the notes that I have collected from previous clerks from city Loma is you better start really before June get going if you’re getting a November ballot, because that time clock is gonna be so large and large, long and complex.

Speaker 5 14:38
Because the drop dead date for putting something on the ballot

Speaker 2 14:42
is August because we certify the ballot is September 1 First week ish. Yeah, that date moves by relatively Election Day. Right, it moves quickly once you start adding 40 days here and 15 days there that all adds up. So before Question also was posed, what was the last successful citizen initiative in Longmont, it was the quote unquote fracking ban in 2012. They had to obtain 10% of the registered electors. At that time it was 6609 signatures and they met that bar. We’ve had two other completed I will say approved petition submitted but not they didn’t take the process to fruition since then, when was in 2018. to repeal sales tax on food and 2020. Regarding airport funding, neither submitted petitions those just didn’t make it all the way through. And then most interest perhaps with this conversation is loved ones recent ballot measure 300, I reached out to their clerk. Again, they had to collect 5% of registered lecture electors signatures as of the date of filing the statement of intent. So that was 3126 signatures. They had a 90 day window to collect those. They did collect those they were successful. That ballot measure was number 300 on the November ballot, and passed by very large margin 18,007 29 for a 9650 against.

Speaker 4 16:15
So coming back to me, and I thought I had a slide about defining food for home consumption, but I did not. So I want to just go back to that real quickly. Although I will say that, since we don’t examine the food for home consumption, we’re not experts on it. So what we have is the state’s information. And it’s it’s an interesting definition hard to follow. So I think what I’m going to read you here is what we have from food for home consumption is generally defined as groceries and other foods that are not prepared, prepared prior to purchase and foods that are not consumed on premises. So if a food purchase can be consumed right after the purchase, it’s not seen for home consumption. So there’s no typing to call reporter about this little earlier. And you do a lot of different ones about this about that I can’t answer the what about this question. Every time one comes up? I don’t know, go check that one. So but in general, it’s if it’s for a meal, which can prepare at home is generally exempt. But if they’re preparing that meal for you, it is taxable. So

Speaker 4 17:37
we can move now into the so we’ve got we’re talking about some of the municipal bonds issued related to this. So so we have two bond issues that are backed with sales and use tax as a credit on those bonds. One is the open space bond issues should have had more than two, we have two types of bond issues, I should say. We have two open space bond issues backed by the point to open space sales tax. And then we have the 2019 sales and use tax bonds that were issued for the facility rehabilitation and replacement. They’re bought. They’re backed by the 2% non EMR sales and use tax from the general fund and the public Improvement Fund. And by the way, if I say something that I’m wrong on here, Dalton or Maria, just jump right in if I misstated things,

Speaker 1 18:33
real question back. So the general fund has food tax dollars in it.

Speaker 4 18:41
Yes. Right. So we have all five funds that receive sales tax receive this because what we do is every sales tax dollar is putting up in these percentage directions. So when I say that, that these bonds are backed by the tax, we do use the tax to make the debt payments. But we pledged the full amount of the tax that is generated by the point to open space and the 2.0 of the general fund and public forum when we bet we use them as a back end for the bonds. So it’s the purchase of the bonds or looking towards them if for some reason, our revenue with it to go in the negative direction. You’re looking at these revenue sources as we’ve pledged we would use those towards repaying these bonds. So we can go to the next page. So within the city ordinances that we adopted to sell the bonds, we have bond covenants, and in those we have, we’ve covenant that that we would not amend our sales and use tax ordinances in any way that would adversely affect the amount of pledge sales and use taxes which would otherwise be collected. So we would amend the Sales and Use Tax ordinance to exempt the food for home consumption from the 2.2% tax pledged, for general fund public Improvement Fund and open space plan to pull back these bonds. That would be prohibited as reduce the amount of available pledge revenue. The only way we could do that is if we wanted to receive consent from the majority of the bond holders who have purchased these bonds or hold these bonds so that we need their majority of their permission to amend the bond ordinance. Any questions on that?

Unknown Speaker 20:47
Yeah. Do

Speaker 6 20:48
we have an estimate? Or do we have a roster of how many bond holders we have and where

Speaker 4 20:54
they aren’t? We could we do? We can have that information. You have trustees didn’t do have that? We don’t have that other fingertips. Okay.

Speaker 6 21:02
Yeah. Just as a as an estimate isn’t to insert into dozens as it did the 1000s as it did the 10s of 1000s.

Speaker 4 21:14
I would say it could be to the to the 1000s. You have guests on that? Don’t Korea? Muted Maria.

Speaker 7 21:28
Thanks, Jim. These bonds are registered under what is called a book entry regime. So that means there is a depository company in New York. That is the registered owner owning bonds. What happens when the bonds are registered with DTC that’s the Depository is that all of the investment banks whose customers have purchased on they are the ones that maintain those. So we don’t really have a way of knowing until we start, start some research with the Depository Trust of Maine and have them try to get us. But I wouldn’t say the city funds are very popular in the market. And so I would say somewhere between decades and 1000s. Okay. Range. Yeah, yeah. Yeah, it’s two questions are these services that our registration service provides to us or it’s going to cost the city money. As a general rule, it costs the city some money DTC will provide us maybe, depending on what the investment bankers do, they may provide us the list at the base that are holding positions in the lawn. And then we have to go to each of the investment banks and see if they will share the actual holder data with us,

Unknown Speaker 23:12
which they are not often can’t do

Speaker 7 23:16
it, we’re not obligated to do it. There are some services out there that are pretty useful in tracking down funds and the bank. That is your trustees slash agent likely has some resources to accomplish that as well. But it’s it’s not an easy process. It’s not a straightforward process.

Speaker 6 23:40
And the other question is, does this affect the city’s credit rating bond rating? How will our bonds trade? Is it going to have an adverse effect on the city’s finances? Do it?

Speaker 7 23:52
So I can’t answer the question about finances. But I think Jim has a good idea about that. However, if we get consent from the majority of your bone folders, then we just have to do a notice to the market that says that this has happened and that the security has been reduced. And then we will have to tell the bondholders what the impact on their their security is. So basically, what percentage reduction they can expect overtime clued in to launder money depending on how much of a kit that is against each tax. So I also the city has a financial advisor that deals with the rating agencies on a regular basis. And so I don’t know what the threshold is for downgrading but it’s really good So

Speaker 4 25:03
I guess I’ll jump in here and say that, you know, it’s not like every dollar that we’re getting from the sales taxes, you know that that’s backing these bonds is being used to pay the debt. Right with the 2% bonds for the sales and use tax funds for the buildings, were getting 58 million or something or more than that, actually, that was just for the general fund. So we’re getting, we’re getting combined, yeah, actually 58 million of that money for a $2 million payment, I don’t think that would make a difference. With the open space buys, we would we’re getting we have $5.9 million of open space bonds. And I should say, of sales tax revenue, bond payment is 2.4 million or so per year. The impact of this would be about $793,000, you just got a bond rate upgrade on open space bonds. About six, seven months ago, my guess is we would lose that upgrade. Now that doesn’t cost the city money. That cost those bondholders whose names are trying to go out and sell those bonds, they’re not quite as valuable as they are right now with higher rating. That’s the impact of that. If we go out and try to sell more open space bonds, which we do have authorization to do, but we only have a limited number of years left of that tax, then that would probably get a lower rating, and theoretically, that would be costing our citizens more dollars in interest.

Speaker 5 26:51
So Okay, Jim, based on slide 16, and what you just explained on slide 17, the idea that the City Council could just go in and hold the vote and change, it would be in violation of that. misunderstanding here is this general understanding of

Speaker 4 27:17
for the for those three funds, so for that portion, or 2.2% of our total 3.53% sales tax, you can’t do that. But we do have a difference of 1.33% of sales tax that that is.

Speaker 4 27:44
That is for the streets funding this in the public safety fund. And that that does not get restricted because it is not being used to back into bonds. So that could be done for that portion of the sales taxes. And that impact of the amount of revenue they’re getting from food from home consumption is projected. Here, the ones in yellow streets fund is almost $3 million a year. Public safety fund is 2.3 million. And the next few slides we’ll talk about how much of an impact that is for those

Unknown Speaker 28:25
Is it is it possible? If we’re going to exempt the food for home consumption, could

Speaker 8 28:31
you replace it with a different tax, a direct tax or tax on a different item.

Speaker 4 28:37
Any tax that we would replace them with would be subject to vote.

Unknown Speaker 28:43
So it would have to go to a vote. Continue.

Speaker 4 28:54
So I said the street impact would be about 3 million just to give you a sense of the jail that street fund for 2024 is almost a $30 million budget 22 point 2 million of it is from sales and use tax. And the way we break down the expenses in that fund 6.1 million is personal services that salary and benefits 8.4 million for all and an expense and 15 point 8 million for capital. And then the public safety fund impact is 2.3 million. And in that fund its total budget this year of 18 and a half million of ongoing revenue and 17 point 2 million of that is from sales and use tax dollars 83.4% of the public safety fund budget ongoing revenues for employee related expenses that really mostly is FTE and those funds and then the differences really just like their own and their equipment and

Speaker 4 30:05
And then finally, the city does already exempt purchases of food that is with food stamps and or under the SNAP program. When this came up in 2018, the city did initiate a grocery sales tax rebate program. Rebates are granted to individuals that qualify for assistance under leap or r&d under other any other city approved means tested program within an equivalent or lower income requirement. In this past year, we rebated $148,000 to 927 applicants, and this year, the rebate dollar amounts will be for individuals $86.21, a couple is $172.43. family of three or more $225.48.

Speaker 6 31:04
So that’s about 1% of the population of Walmart that is getting this rebate or no, it’s it’s more than that, because there’s two or three or more people in in each of these some of these destinations. So it’s several percent of the population of Longmont is already getting this exemption. My question is, do we do we believe that most of the people who are eligible are getting it? Or is this? If not, do we know how many more could be eligible?

Speaker 4 31:44
We think that there are more that that are eligible that could be getting I don’t know if we have an estimate of how many,

Speaker 3 31:50
no part of what we’re seeing in this. And this actually started, this actually hit me ahead of the whole conversation regarding food for home consumption. So as part of the Housing Authority work we were doing so we worked with voucher holders and other names. And so what we were what I saw a few months ago, a couple of months ago, was that we had somebody coming in about your work. And they they have the application for the exemption and the cares program generally, which is not just reduction in grocery sales tax or rebate, but it’s also utility. So we started actually working internally in terms of putting together a process because take you back to the definition and qualifying program. And so we’ve started a process that anybody who qualifies that has a Housing Choice Voucher automatically qualifies for this. And anybody that’s in an affordable housing program automatically qualifies for this. So we’re gonna go through and see duplication, but then start moving all of those folks into it. In both for the work and taking on the housing authority, we didn’t see that. So we saw that we’ve also had conversations with had a conversation without commenting the other day about working this opportunity and working with their client base. And because all of those organizations are doing it will come qualified as part of this. And so that was really something that hit us via that HCV discussion that I had, of how we can really make this more robust. And so just if you think about housing choice vouchers, and people in affordable housing, like we own about 900 different units and or vouchers that you have, that we know we’re probably going to start moving into the rebate program pretty quickly. And then obviously, talk to our other Housing Partners, because we know that Boulder County Housing and over Housing Partners have voucher applicants that do as well. So they’re really condensed databases that we could get in terms of ensuring that we’re getting as many people into the program income qualify for it.

Speaker 1 34:22
So just piggybacking on back, is there any way we can automatically put families who through school district are on free and reduced lunches, that’s

Speaker 3 34:31
changed? We did. We didn’t do that. It doesn’t exist anymore. Because everybody, well, not everybody. Everybody in the school gets free. You don’t have to. You don’t have to dog the paperwork. So that’s, um, you know, even before the Housing Choice conversation, Sandy was talking to me about what are the other options to use because that program is no longer in existence.

Speaker 5 34:58
Have something though in existence because of kids that need assistance for sports and other activities.

Unknown Speaker 35:10
So Jimmy, you have more,

Speaker 4 35:12
I have one last slide, go ahead. And that is that. So when we put together the program for the rebates five years ago, he modeled after folders, and that as they had those type of programs, and so we kind of used similar map dollar amounts as they did. And we been increasing each year by CPI index, we’ll pause and take a look at his look at what folder is going to have for their upcoming years programs and gone up quite a bit compared to what we have. So we thought that we would take a look at these programs. We talked about the eligibility requirements and looking at those, but we also can look at the amount of that we’ve made and try to benchmark both closer to what those two entities are. Saying that obviously, would be a budget impact, this is something we would try to look into.

Speaker 6 36:08
Yeah, that’s the question that I have this is where will where would the money come from? If we increase this program and increase, we’re talking about reaching more people, and increasing the amount of the rebate, per person,

Speaker 4 36:30
we’ve been funding the grocery tax rebate as a general fund, so we’d have to come up with that money. And it’s ongoing.

Speaker 1 36:41
We have about five minutes. Real fast to do any more questions? I have one. So on the rebate List of 8621 7243 to 2548, wait, are those rebates?

Speaker 4 36:56
We’re doing an all year long. So the other entity is actually just to turn certain months of the year, we’re taking the applications only a long, long queue of once a year for the applicant. But so there, it’s based on the prior years. So like I said, up there, we’re doing rebates for 23 during 24. And we do monthly, we usually will do it as utility bill credit, but if they don’t have a utility bill will also curvature.

Speaker 1 37:26
Okay, so my question is, and I, for clarification, when they apply the new then they get that check yearly, or Indian credit credit, I mean,

Speaker 4 37:39
they need to apply cheer together. But yes, they do

Speaker 1 37:43
that. And my concern is, what if the family moves, but they before that years up, do they not get that rebate. And we’ve

Speaker 4 37:55
definitely made partial year credits, because we’re also this is the cares program. And it’s not just for the grocery tax rebates. It’s also for utilities, as well. And so we do them all as a utility bill credit. And so as long as they have the utility bill to credited to will do it against that that bill, when it’s still outstanding when it’s still in place. So they would have to come to us if they’ve left to ask for it. But otherwise, they’re going to get it once a year

Speaker 1 38:27
split for winter does not pay the utility bill. Then

Speaker 4 38:32
like I said, they still apply and get a check.

Speaker 8 38:39
Is it the standard amount? Or do they have to keep receipts for their

Speaker 4 38:42
standard? Or is the dollar amount set? Or?

Unknown Speaker 38:50
Are there any more questions or what’s going on from Council?

Unknown Speaker 38:53
What’s the eligibility? You know, it’s like the LEAP programs eligibility limits. So it really depends on family size, and things like that.

Speaker 9 39:06
Any of those things qualify. So if you have snap, leave, if any, any of those kinds of things. And now it’s the now we’re adding section eight housing vouchers or LIG, property, any of those programs, any of those programs, you show us that documentation and you’re qualified. I can tell you the LEAP amounts right now.

Unknown Speaker 39:26
There’s like eight different family side levels.

Speaker 3 39:32
When we look at the affordable housing, affordable housing limits, similar to that in terms of family size and income, and how it changes. number of people in a family

Speaker 4 39:46
a couple for leave it’s 48,000 for instance.

Speaker 1 39:53
As far as getting consent from the bondholders, is there a difference whether it’s a ballot initiative that passes versus a Are the city just saying we will remove the the grocery tax?

Speaker 4 40:07
From Sorry, I missed that. But I should have tried to clear on that. So the City Council is unable to do that because of the bond ordinance. Okay. And as a citizen initiative cannot help me out here now, Attorney ready? Because I was looking for the email on this one, but it was a verbal conversation. But citizen initiative cannot do anything that the council can’t do. The Citizen initiative also would not be able to use it in those areas.

Speaker 1 40:42
Okay. Good thing that came out. I’m sorry. Yeah. Yeah, that’s huge. Okay, I’m seeing no other comments. Thanks for the discussion.

Speaker 3 40:54
So think about this. Any questions on together? We’re going to come back in a study session to present this. Okay, but I wanted to let you start thinking about it.

Speaker 1 41:08
Thank you. This is a Live Nation. Thank you. So

Speaker 2 41:16
we’re gonna thank you guys for being here.

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