2016 07 05 FA Special
FINANCING AUTHORITY AGENDA 1 JULY 5, 2016
SPECIAL MEETING
FINANCING AUTHORITY
AGENDA
CITY HALL COUNCIL CHAMBERS
78-495 Calle Tampico, La Quinta
SPECIAL MEETING ON TUESDAY, JULY 5, 2016 AT 4:00 P.M.
CALL TO ORDER
ROLL CALL: Authority Members: Franklin, Osborne, Peña, Radi, Chairperson Evans
PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA
At this time, members of the public may address the Financing Authority on any matter not
listed on the agenda. Please complete a "request to speak" form and limit your comments to
three minutes. The Financing Authority values your comments; however in accordance with
State law, no action shall be taken on any item not appearing on the agenda unless it is an
emergency item authorized by GC 54954.2(b).
CONFIRMATION OF AGENDA
CONSENT CALENDAR
PAGE
1. APPROVE MINUTES OF JUNE 21, 2016
2. ADOPT A RESOLUTION FOR ISSUANCE AND SALE OF SUBORDINATE
TAX ALLOCATION REFUNDING BONDS (Resolution No. FA 2016-002)
BUSINESS SESSION - NONE
STUDY SESSION – NONE
PUBLIC HEARINGS – NONE
CHAIR AND BOARD MEMBERS' ITEMS
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FINANCING AUTHORITY AGENDA 2 JULY 5, 2016
SPECIAL MEETING
ADJOURNMENT
*****************************************
For information about the next special meeting of the Financing Authority, please
contact the City Clerk’s Office at 760-777-7000.
DECLARATION OF POSTING
I, Susan Maysels, Authority Secretary of the La Quinta Financing Authority, do hereby
declare that the foregoing agenda for the La Quinta Financing Authority meeting was
posted near the entrance to the Council Chambers at 78-495 Calle Tampico and on
the bulletin boards at the La Quinta Cove Post Office at 51-321 Avenida Bermudas and
at the Stater Brothers Supermarket 78-630 Highway 111, on July 1, 2016.
DATED: July 1, 2016
SUSAN MAYSELS, Authority Secretary
La Quinta Financing Authority
Public Notices
The La Quinta City Council Chamber is handicapped accessible. If special equipment is
needed for the hearing impaired, please call the City Clerk’s Office at 777-7103,
twenty-four (24) hours in advance of the meeting and accommodations will be made.
If special electronic equipment is needed to make presentations to the Financing
Authority, arrangement should be made in advance by contacting the City Clerk's
Office at 777-7103. A one (1) week notice is required.
If background material is to be presented to the Financing Authority during a meeting,
please be advised that eight (8) copies of all documents, exhibits, etc., must be
supplied to the City Clerk for distribution. It is requested that this take place prior to
the beginning of the meeting.
Any writings or documents provided to a majority of the Financing Authority regarding
any item on this agenda will be made available for public inspection at the City Clerk
counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253,
during normal business hours.
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FINANCING AUTHORITY MINUTES 1 SPECIAL MEETING JUNE 21, 2016
FINANCING AUTHORITY
MINUTES
TUESDAY, JUNE 21, 2016
A regular meeting of the La Quinta Financing Authority was called to order at 8:40
p.m. by Chairperson Evans.
PRESENT: Authority Members Franklin, Osborne, Peña, Radi, Chair Evans
ABSENT: None
PUBLIC COMMENT - None
CONFIRMATION OF AGENDA - Confirmed
CONSENT CALENDAR
1.APPROVE MINUTES OF JUNE 16, 2015
MOTION – A motion was made and seconded by Authority Members Franklin/Radi to
approve the Consent Calendar as recommended. Motion passed unanimously.
BUSINESS SESSION
1.ADOPT RESOLUTION TO APPROVE FISCAL YEAR 2016/17 BUDGET
MOTION – A motion was made and seconded by Authority Members Radi/Franklin to
adopt Resolution No. FA 2016-001 entitled:
A RESOLUTION OF THE LA QUINTA FINANCING AUTHORITY
APPROVING A BUDGET FOR FISCAL YEAR 2016/2017
Motion passed unanimously.
PUBLIC HEARINGS – None
CHAIR AND BOARD MEMBERS' ITEMS – None
ADJOURNMENT
There being no further business, it was moved and seconded by Authority Members
Franklin/Radi to adjourn at 8:42 p.m. Motion passed unanimously.
Respectfully submitted,
SUSAN MAYSELS, Authority Secretary
La Quinta Financing Authority
CONSENT CALENDAR 1
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City of La Quinta
FINANCING AUTHORITY MEETING: July 5, 2016
STAFF REPORT
AGENDA TITLE: ADOPT A RESOLUTION FOR ISSUANCE AND SALE OF SUBORDINATE TAX
ALLOCATION REFUNDING BONDS
RECOMMENDATION
Adopt a Resolution authorizing the issuance of Subordinate Tax Allocation Refunding
Bonds by the Successor Agency to the La Quinta Redevelopment Agency in the
approximate amount of $35,280,0000, 2016 Series A Bonds, and authorizing certain
actions in connection therewith.
EXECUTIVE SUMMARY
In 2011, the La Quinta Redevelopment Agency issued $6,000,000 of Tax Allocation
Bonds of which $5,850,000 are currently outstanding and the La Quinta Financing
Authority issued $28,850,000 Taxable Revenue Bonds of which $27,225,000 are
currently outstanding (together the “2011 Bonds”).
Current bond interest rates are at historically low levels and refinancing the 2011
Bonds will reduce annual bond payments, allowing additional property tax revenue
distribution to the City and taxing agencies.
The Successor Agency has approximately $2.3 million of unspent 2011 Bond
proceeds on deposit with the Trustee, which will be used to pay down the principal
amount of the 2016 Bonds.
The 2011 Bonds are not subject to optional call and redemption until September 1,
2020 so the bond proceeds would be deposited in an escrow fund held by an
escrow bank, and used to pay regularly scheduled principal and interest payments
on the 2011 Bonds until September 1, 2020 (an advanced refunding).
Refinancing the 2011 Bonds will require State Department of Finance approval,
which may take up to 60 days.
FISCAL IMPACT
Lower bond interest costs with yield lower annual debt service savings of approximately
$614,000 or $12.82 million over the twenty-three year term of these bonds.
CONSENT CALENDAR: 2
5
BACKGROUND/ANALYSIS
Starting in 1985, the La Quinta Redevelopment Agency (RDA) issued tax allocation bonds
to raise capital for infrastructure, public facility, economic development, and affordable
housing investment. Bond debt service payments are funded by property tax revenue.
When the RDA was eliminated in February 2012, the Successor Agency assumed the
responsibility to ensure that bond debt service payments are made. These payments are
classified as enforceable obligations and are tracked on the Recognized Obligation
Payment Schedule (ROPS).
The Successor Agency may refinance outstanding bonds and other obligations of the
RDA. The City’s financial advisors determined that today’s lower bond interest rates
would yield cost savings; all bond refinancing must be first approved by the Oversight
Board and the DOF.
In December 2013, the Successor Agency issued $97,190,000 2013 Series A and
$23,055,000 2013 Taxable Series B refinancing bonds. These bonds refinanced the
former RDA’s 1998 PA 1 Bonds, 1998 PA 2 Bonds, 2001 Bonds, 2002 Bonds and 2003
Bonds. The 2013 refunding bond program resulted in annual debt service savings of more
than $555,000 per year with an overall savings of $10,650,000.
In July 2014, the Successor Agency again successfully refinanced $65,600,000 of
additional former RDA bonds resulting in annual debt service savings of more than
$680,000 per year with an overall savings of $13,700,000.
In the current bond market, an opportunity exists to further reduce annual debt service
by refinancing the 2011 Bonds. Interest rates for the 2016 refunding bonds are estimated
at 3% to 5% with yield potentials 0.50% to 4.50%, on a taxable basis. The 2011 Bonds
have interest rates ranging from 5.375% to 8.15% on a taxable basis.
By refinancing bonds, debt service payments will be reduced by $12.8 million over 23
years This would free property tax revenue for distribution to other taxing agencies and
the City, with approximately $8 million to schools districts, $2.8 million to Riverside
County, $922,000 to the Coachella Valley Water District, $634,000 to the City, and
$225,000 to parks and recreation over the 23 year period.
ALTERNATIVES
As refinancing would result in an annual savings on bond debt service, staff does not
have an alternative.
Prepared by: Gilbert Villalpando, Management Specialist
Approved by: Frank J. Spevacek, City Manager
Attachments: 1. Summary of 2016 Refinancing
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RESOLUTION NO. FA 2016 –
A RESOLUTION OF THE LA QUINTA FINANCING
AUTHORITY AUTHORIZING THE EXECUTION OF THE
ESCROW AGREEMENT
WHEREAS, the La Quinta Redevelopment Agency (the “Prior Agency”) was a
public body, corporate and politic, duly created, established and authorized to
transact business and exercise its powers under and pursuant to the provisions of the
Community Redevelopment Law (Part 1 of Division 24 (commencing with Section
33000) of the Health and Safety Code of the State of California) (the “Law”), and the
powers of the Prior Agency included the power to issue Bonds for any of its corporate
purposes; and
WHEREAS, a Redevelopment Plan for a redevelopment project known and
designated as the “La Quinta Redevelopment Project Area No. 1” has been adopted
and approved by Ordinance No. 43 of the City of La Quinta on November 29, 1983, and
all requirements of the Law for and precedent to the adoption and approval of the
Project Area No. 1 Redevelopment Plan, as amended, have been duly complied with;
and
WHEREAS, a Redevelopment Plan for a redevelopment project known and
designated as the “La Quinta Redevelopment Project Area No. 2” has been adopted
and approved by Ordinance No. 139 of the City of La Quinta on May 16, 1989, and all
requirements of the Law for and precedent to the adoption and approval of the
Project No. 2 Redevelopment Plan, as amended, have been duly complied with; and
WHEREAS, the Authority on behalf of the Prior Agency has previously issued
$28,850,000 La Quinta Financing Authority, Local Agency Subordinate Taxable
Revenue Bonds, 2011 Series A (the “2011 Taxable Housing Bonds”) and loaned the
proceeds to the Prior Agency pursuant to the terms of a loan agreement dated
February 3, 2004 and a Second Supplemental Loan Agreement, dated as of March 1,
2011 (the “2011 Loan Obligation”); and
WHEREAS, Assembly Bill AB XI 26, effective June 29, 2011, together with
Assembly Bill 1484 (“AB 1484”) (collectively, the “Dissolution Act”) resulted in the La
Quinta Redevelopment Agency being dissolved as of February 1, 2012; and
WHEREAS, the authority, rights, powers, assets, duties and obligations of the
Prior Agency were transferred on February 1, 2012 to the Successor Agency; and
WHEREAS, AB 1484 specifically authorizes the issuance of refunding bonds by
the Successor Agency to refund the bonds or other indebtedness of the Prior Agency
to provide savings to the Successor Agency, provided that (A) the total interest cost to
maturity on the refunding bonds plus principal amount of the refunding bonds shall
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Resolution No. FA 2016-
Escrow Agreement
Adopted: July 5, 2016
Page 2 of 3
not exceed the total remaining interest cost to maturity on the bonds to the be
refunded plus the remaining principal of the bonds to be refunded, and (B) the
principal amount of the refunding bonds shall not exceed the amount required to
defease the refunded bonds, to establish customary debt service reserves, and to pay
related costs of issuance; and
WHEREAS, the Successor Agency deems it necessary and proper to issue
taxable tax allocation refunding bonds to refund and defease the Refunded Bonds.
WHEREAS, for the corporate purposes of the Successor Agency, the Successor
Agency deems it necessary to issue at this time tax allocation refunding bonds in a
principal amount of not to exceed Thirty-Nine million dollars ($39,000,000) (the
“Bonds”), and to irrevocably set aside a portion of the proceeds of such Bonds in a
separate segregated trust fund which will be used to refund the outstanding Refunded
Bonds of the Prior Agency, to pay costs in connection with the issuance of the Bonds,
and to make certain other deposits as required by the Indenture (defined herein); and
WHEREAS, as part of the issuance of the bonds and the refunding of the 2011
Taxable Housing Bonds, there has been prepared an Escrow Agreement to which the
Authority is a party; and
WHEREAS, the Board of Directors of the La Quinta Financing Authority wishes
at this time to approve certain matters relating to the refunding of the Loan
Obligations;
NOW, THEREFORE, BE IT RESOLVED by the La Quinta Financing Authority to
adopt, as follows:
SECTION 1. The Chairperson, Vice-Chairperson and Executive Director, and any
other proper officer of the Authority, acting singly, be and each of them hereby is
authorized and directed to execute and deliver any and all necessary documents and
instruments, relating to the refunding of a portion of the 2011 Taxable Housing Bonds,
including, without limitation any necessary Escrow Agreement, the form of which
Escrow Agreement, by and among the Successor Agency, the Authority and U.S. Bank
National Association, has been submitted at this meeting and made a part hereof as
though set forth in full herein; and
SECTION 2. This Resolution shall take effect immediately upon its adoption.
PASSED, APPROVED, and ADOPTED at a regular meeting of the La Quinta
Financing Authority held on this 5th day of July, 2016, by the following vote:
AYES:
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Resolution No. FA 2016-
Escrow Agreement
Adopted: July 5, 2016
Page 3 of 3
NOES: None
ABSENT: None
ABSTAIN: None
LINDA EVANS, Chairperson
La Quinta Financing Authority
ATTEST:
SUSAN MAYSELS, Secretary
La Quinta Financing Authority
(Authority Seal)
APPROVED AS TO FORM:
__________________________________________
WILLIAM IHRKE, Authority Counsel
La Quinta Financing Authority
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ATTACHMENT 1
Summary of 2016 Refinancing
Successor Agency to the La Quinta Redevelopment Agency/La Quinta Oversight Board
In December, 2013, the Successor Agency completed the refinancing of its 1998, 2001, 2002 and
2003 Tax Allocation financings issued by the former Redevelopment Agency. Issued in a tax‐exempt
and a taxable series, this refinancing program resulted in annual debt service savings in excess of
$555,000 and overall savings of more than $10,650,000 over the remaining life of the refinanced
Bonds. In July, 2014, the Successor Agency completed the refinancing of its 2014 Tax Allocation
financing issue by the Financing Authority. Issued in a tax‐exempt series, this refinancing resulted in
annual debt service savings in excess of $680,000 and overall savings of more than $13,700,000 over
the remaining life of the refinanced Bonds. These debt service savings result in excess revenues to
various taxing agencies as well as increased residual revenues to the City.
There is now an opportunity to refinance the Agency’s last two financings issued prior to
redevelopment dissolution, for economic savings. The financings consist of $6,000,000 La Quinta
Redevelopment Project Area No. 2, Subordinate Taxable Tax Allocation Bonds, Series 2011 of which
$5,850,000 are currently outstanding and $28,850,000 Local Agency Subordinate Taxable Revenue
Bonds, 2011 Series A of which $27,225,000 are currently outstanding. These Bonds were issued just
prior to dissolution in June, 2011 and carry extremely high interest rates ranging from 5.375% to
8.15% on a taxable basis.
Following the issuance of the 2016 Bonds, the Agency would have its final debt in place and is
expected to be as follows:
Savings Analysis
Original Outstanding Final Interest Rate
Principal Principal Maturity Range
Project Areas 1 and 2
2013 Tax Exempt Bonds 97,190,000$ 89,095,000$ 2033 3.00% to 5.00%
2013 Taxable Bonds 23,055,000 21,010,000 2032 0.76% to 5.82%
2014 Tax Exempt Bonds 65,600,000 63,875,000 2034 2.00% to 5.00%
2016 Taxable Bonds * 35,280,000 35,280,000 2039 1.50% ‐ 4.50%
* 2016 Taxable Bonds assumptions are all estimates.
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The 2011 Bonds to be refinanced will be payable on the same dates (March 1 and September 1) and
will mature on their regularly scheduled date without extension (September 1, 2039).
Refunding numbers on the 2011 Bonds show that based on current interest rates and yields, the
Successor Agency can achieve annual debt service savings of approximately $614,000 from 2017
through 2035 and $285,000 from 2036 through 2039 with overall savings of $12,822,000 over the
remaining life of the 2011 Bonds. At this time, the refunding of the 2011 Bonds results in present
value savings of about 16.25%. The overall estimated savings are after ALL costs associated with the
financing have been paid.
The following sets forth the detailed annual savings:
Since the reduced debt service after refunding will reduce the amount of property taxes deposited in
the Redevelopment Property Tax Trust Fund required to be paid to the Successor Agency, there will
be additional “residual” property tax that can be distributed to taxing agencies that overlap the
boundaries of the Redevelopment Project Areas in accordance with their share of the general
property tax levy shown below. The City may be able to use up to 50% of the additional residual
Total Total
Bond Year Current Proposed
Ending Debt Service Debt Service Savings
9/1/2017 18,217,372.76$ 17,602,829.90$ 614,542.86$
9/1/2018 18,213,679.00 17,599,194.26 614,484.74
9/1/2019 18,220,271.50 17,604,211.76 616,059.74
9/1/2020 18,218,892.76 17,604,204.26 614,688.50
9/1/2021 18,226,867.76 17,614,554.26 612,313.50
9/1/2022 18,220,804.00 17,607,116.76 613,687.24
9/1/2023 18,214,156.00 17,602,348.76 611,807.24
9/1/2024 18,214,888.00 17,602,049.50 612,838.50
9/1/2025 18,213,618.00 17,597,104.50 616,513.50
9/1/2026 18,217,494.00 17,603,140.50 614,353.50
9/1/2027 18,219,624.00 17,608,850.50 610,773.50
9/1/2028 18,212,696.50 17,597,865.50 614,831.00
9/1/2029 18,209,594.00 17,594,748.00 614,846.00
9/1/2030 18,218,324.00 17,603,188.00 615,136.00
9/1/2031 18,216,853.00 17,603,327.00 613,526.00
9/1/2032 18,217,267.00 17,605,641.00 611,626.00
9/1/2033 8,858,778.50 8,243,060.00 615,718.50
9/1/2034 8,895,858.50 8,284,310.00 611,548.50
9/1/2035 3,625,136.50 3,007,675.00 617,461.50
9/1/2036 933,397.00 646,675.00 286,722.00
9/1/2037 936,007.50 646,250.00 289,757.50
9/1/2038 935,697.50 644,700.00 290,997.50
9/1/2039 335,497.50 47,025.00 288,472.50
Total 315,992,775.28$ 303,170,069.46$ 12,822,705.82$
Present Value Savings %16.25%
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generated by the refunding first to repay certain City advances to the former Agency, and if so, the
taxing agencies will receive their percentage of the remaining residual after such payment estimated
as follows.
School Districts: 62.50%
Riverside County: 22.18%
Water District: 7.21%
City of La Quinta: 5.29%
Recreation and Parks: 2.82%
The following table sets forth the estimated Costs associated with the 2016 financing.
Underwriter’s discount estimated at 0.750%, costs of issuance estimated at 0.60%, bond insurance
estimated at 0.31% and a debt service reserve surety bond fee of 0.14% for all in costs of 1.80%
which is in line with the percentage of costs associated with the refunding programs. As previously
mentioned, the savings discussed above are after all costs of issuance associated with the financing.
The Financing Team expects the Bonds to be rated “A+” by Standard and Poor’s. Purchasing
insurance will bring the bond rating up to “AA” although based on the current market, insurance will
not be necessary for all maturities. The increase in rating should offset the insurance premium
through reduced interest rates and yields on the refunding bonds. The Financing Team will prepare
a stress test at the time the refunding bonds are marketed to determine the actual savings
generated by using bond insurance. If the insurance premium isn’t justified by savings, bond
insurance will not be utilized.
Estimated 2016
Bonds
Costs of
Issuance
Rutan & Tucker, Bond Counsel 75,000.00$
Stradling Yocca Carlson & Rauth, Disclosure Counsel 42,000.00
Harrell & Company, Financial Advisor 40,000.00
Standard & Poor’s Ratings Group, Rating Services 30,000.00
Grant Thornton, Verification Consultant 2,500.00
US Bank National Association, Trustee and Escrow Bank 4,500.00
Avia Communications, Financial Printing 2,500.00
Miscellaneous 3,500.00
Subtotal Costs of I ssuance 200,000.00$
Underwriter's Discount 264,600.00
Bond Insurance Provider 171,635.00
Total Costs of Issuance 636,235.00
Percentage of Bond Financing 1.80%
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The Prior Agency’s Bonds all carry a reserve fund surety bond in lieu of cash for the reserve funds.
Using cash at this point would greatly increase the amount of refunding bonds required to be issued
in order to cash fund the new reserve funds. The use of a reserve fund surety bond will be required
in order to achieve the reported savings.
Underwriter’s Discount will be based in part on the rating of the refunding bonds. If bond insurance
is utilized the underwriter’s discount would be reduced over a standalone rating only. This is
predominately due to the amount of takedown (commission) necessary to pay salespeople to sell
the bonds. The higher the rating, the less takedown required.
Cash Contributions
As part of the 2016 Bonds refunding program, the Financing Team has included approximately
$2,800,000 of unspent proceeds remaining with US Bank as Trustee for the Project Area No. 2 2011
Bonds, initially issued in the amount of $6,000,000. These moneys have been designated by DOF as
available for two purposes: 1) purchasing Agency bonds on the open market or 2) reducing bonded
debt amounts in a refinancing. Over the past 24 months, there has been less than $100,000 of these
PA 2 Bonds available on the open market (bonds being offered for sale to the general public). It has
therefore been determined that the best use of these moneys is in the refinancing process. The
unspent proceeds will be transferred to the Escrow Bank and deposited in the Project No. 2
refunding escrow which in turn reduces the amount of bonds necessary to be issued for said
refunding.
In addition, certain cash reserves are currently on deposit with the 2011 Bonds Trustee. These
moneys have also been used to reduce the principal amount of bonds necessary to be issued for the
refunding. As previously discussed, the Agency will purchase a reserve surety policy to satisfy its
debt service reserve requirements.
2011 Bonds Escrow Accounts
Proceeds from the financing will be held in an escrow that will pay regularly scheduled principal and
interest on the prior 2011 Bonds until their first optional call date of September 1, 2020. The escrow
fund will also hold funds to redeem all remaining maturities on September 1, 2020. The proceeds
held in the escrow will be invested in either State and Local Government Securities or Open Market
Securities, whichever are more efficient. The prior 2011 Bonds will be considered fully defeased on
the date the 2016 Bonds are issued.
Conclusion
There is no way of knowing if the municipal market will maintain current interest rates and yields
long enough for the Successor Agency to complete the approval and DOF review process estimated
to require 60 to 75 days. We believe your Financing Team should be able to steer the refinancing
thru the approval process at little or no cost to the Successor Agency, should the refunding bonds
not be economically feasible following the approval and review process. In addition, prior to the
issuance of refunding bonds, the Financing Team will return to the Successor Agency Board for the
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approval of a substantially final Preliminary Official Statement and to provide an update of refunding
numbers and financing costs at that time.
Timeline
The following is a general timeline for the proposed refinancing. This schedule will be updated
based on DOF approval actions and market conditions.
Scheduled Event Date to Complete
Successor Agency Board adopts Resolution approving Financing Documents May 3
Oversight Board adopts Resolution approving Financing Documents
Submit Revised OB Resolution and Documents to DOF May 4
DOF Approval of Financing July 5
Submit Documents to Rating Agency/Insurer July 6
Receive Rating/Insurance July 27
Successor Agency Board adopts Resolution deeming Preliminary Official Statement
Substantially Final August 2
Bond Sale ‐ Successor Agency signs Purchase Contract August 24
Bond Closing September 14
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