HomeMy WebLinkAbout03.a. Proposed Fiscal Year 2023-24 Central San Operations and Maintenance, Self-Insurance, and Debt Service BudgetsPage 1 of 21
Item 3.a.
F__1_448�411C_S0
May 9, 2023
TO: FINANCE COMMITTEE
FROM: KEVIN MIZUNO, FINANCE MANAGER
REVIEWED BY: PHILIP LEIBER, DEPUTYGENERAL MANAGER
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: REVIEW PROPOSED FISCAL YEAR (FY) 2023-24 CENTRAL SAN
OPERATIONS AND MAINTENANCE, SELF-INSURANCE, AND DEBT
SERVICE BUDGETS
The proposed Fiscal Year (FY) 2023-24 District Budget will be considered by the Board for adoption on
June 1, 2023 upon conclusion of a scheduled public hearing to receive public comment. Central San's
draft FY 2023-24 budget book was distributed to Board Members on May 4, 2023, at a regularly
scheduled public meeting. Commencing on page 47 of the draft FY 2023-24 Budget book, the Financial
Summary section provides a comprehensive synopsis of the core elements of Central San's entire budget
including analysis of specific funds, revenues, expenses, and reserves. Attached is a draft of the
presentation planned to be given at the May 18, 2023 Board Meeting in regards to the Operations and
Maintenance budget (Attachment 1).
On May 8, 2023, the Engineering & Operations Committee reviewed the Capital Improvement Budget and
Ten -Year Capital Improvement Plan portions of the draft FY 2023-24 Budget.
At this meeting, the Finance Committee is being asked to review and provide feedback to staff on all non -
capital improvement portions of the draft FY 2023-24 budget, namely the Operations and Maintenance,
Self -I nsurance, and Debt Service budgets. To have sufficient time to produce a final budget book for
distribution as part of the June 1, 2023 Board meeting agenda packet, staff is requesting that all Board
Members provide any proposed edits by the end of the day on Wednesday, May 17, 2023.
Strategic Plan Tie -In
GOAL FOUR: Governance and Fiscal Responsibility
Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 3 - Maintain financial stability
and sustainability
ATTACHMENTS:
1. Proposed Budget Presentation
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 3 of 69
Page 2 of 21
1
Table of Contents
1. Budget Timeline
2. Accomplishments
3 Nexus to Strategic Priorities
4 Budget and Economic
Overview
Fund -Level Budget
Highlights
6 Reserves Analysis
7 Next Steps and Conclusion
z
2
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 4 of 69 1
Page 3 of 21
Budget Timeline
January 12: Board Financial Workshop
January -March: Budget data collection,
calculations, analysis, and internal
review/approval
March -April: Budget book development
May 4: Draft budget released
May 8: E&O Committee review of capital
May 9: Finance Committee review of O&M
May 18: Budget Presentation
June 1: Scheduled Budget Approval
June 21: SSC Rate Public Hearing and
Special Board Meeting
3
a
Accomplishments x
Received 94% customer satisfaction rating for the North Orinda Sewer Renovations,
Phase 8 construction project.
Received a 4.0 out of 4.0 average customer service rating for collection system emergency
calls (as of Q2).
Opened a new Recreational Vehicle (RV) Wastewater Receiving Station at no -charge for
customers as part of a three-year pilot program.
Won the 2022 Uptime Award for Best Work Execution Program — the third Uptime Award
received by the Plant Maintenance Division in five years.
Maintained eligibility for the NACWA Peak Performance Award Platinum status for the
25th consecutive year, recognizing 100% compliance with Central San's wastewater
discharge permit.__- _
Responded to 12 sanitary sewer overflows (as of Q2) —the second lowest ever recorded
number of overflows.
Launched Central San's Diversity, Equity, and Inclusion (DEI) initiative. —
Achieved five consecutive years of receiving the GFOA Distinguished Budget Presentation
Award, for the FY 2022-23 Budget.
Achieved 22 consecutive years of receiving the Government Finance Officers Association
(GFOA) Certificate of Achievement for Excellence in Financial Reporting.
!ih
4
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 5 of 69 2
Page 4 of 21
Accomplishments (continued) 1,, eal,-1--i
Co-hosted a Recycled Water Townhall in Lafayette.`, i !-
Hosted the fifth session of citizens' academy, Central San Academy.
Completed a wastewater cost of service study and recommended a new rate class
for accessory dwelling units for Board consideration. M
Administration Department, Engineering Department, and Plant Operations Division
achieved zero lost workdays.-
Replaced or rehabilitated over six miles of pipes in Alamo, Walnut Creek, Lafayette,
Pleasant Hill, and Orinda. -
Completed the Asset Management Plan.
Created the Operations Optimizations Division to improve efficiencies and Y,
effectiveness in all dimensions of performance at Central San. W`
Continued ongoing optimization and improvement of the new enterprise resource "
planning (ERP) software, including commencing planning, design, and test phases for
Enterprise Performance Management (EPM) capital project management.
5
I
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 6 of 69 3
Page 5 of 21
Addressing 9 Strategic Priorities
A
CUSTOMER AND COMMUNITY
Provide exceptional service
1. Balancing the need for financial
Continue commitment to educating customers about required
Public outreach, including the highly successful Central San Academy,
resources against impacts to the
revenue and resources needed to replace aging infrastructure
student education programs, facilities tours, Pipeline community newsletter,
customer
and meet regulatory requirements
and social media engagement
ENVIRONMENTAL STEWARDSHIP
0•
1 Meet regulatory requirements, promote sustainability, and identify and reduce contributions
to climate change
2. Evolving regulatory
Anticipate changing regulations and plan for alternatives to
Develop a Fleet Electrification Strategic Plan to meet new state
requirements
maintain reliability and meet requirements
requirements for zero -emission vehicles
Achieve new Environmental Laboratory Accreditation Program (ELAP)
accreditation standard to maintain self -monitoring and reporting
competency
3. Maintaining a sustains
Partner with agencies to find creative water solutions
Continue exploring partnerships with Contra Costa Water District (CCWD),
supply
benefiting the region and state, and identify ways to maximize
Santa Clara Valley Water District (Valley Water) and San Francisco Public
cost-effective resource recovery and sustainability
Utilities Commission (SFPUC) to advance the Refinery Recycled Water
Exchange Project to utilize recycled water at nearby refineries in place of
raw Delta water to increase the amount of drinking water available to the
community, and collaborate with East Bay Municipal Utility District (EBMUD)
on a potable reuse study
Addressing 9 Strategic Priorities
Primary Response
WORKFORCE DIVERSITY AND DEVELOPMENT
Recruit, educate, empower, and retain a workforce from diverse backgrounds
4. Driving employee Develop, retain, and equip high quality
performance and rewarding employees with the tools needed to succeed, so Central San
excellence may become a preferred employer
5. Foster a culture of diversity, equity, Continue investing in the development of Central San's DEI
and inclusion (DEI) initiative
Employee recognition, training and development programs,
outside conferences, and professional association memberships
to inspire continuous education and improvement
Retention of the services of a DEI consulting firm to help guide the
efforts of Central San's Task Force, including implementing findings
of the DEI assessment conducted in FY 2022-23
R
GOVERNANCE AND FISCAL RESPONSIBILITY
R"
Uphold integrity,transparency,
and wise financial management in an effective governing
model
6. Maintaining
responsible rates at a
Balance capital spending with affordability and rate impact
Financial planning to forecast needs and sensible spending, as well
affordable level
concerns, and offset infrastructure replacement, regulatory
as the continued push to become a more cost-effective and
responses, and other expenses with cost -saving efforts,
efficient operation
efficiencies, optimizations, and innovations
SEMM �M\ SAFETY AND SECURITY
.+ , Provide a safe, secure, and healthful workplace that foresees and addresses threats
7. Protecting the safety and security of Increase security at the treatment plant to address increased Projects to construct and provide safety upgrades and to contract
both people and assets contractor and construction activity, and implement an with a consultant to help develop and implement the Process and
Process and Technology Optimization (PTO) Strategic Plan Technology Optimization (PTO) Strategic Plan
with cybersecurity in mind
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 7 of 69 4
Page 6 of 21
Addressing 9 Strategic Priorities
®INFRASTRUCTURE RELIABILITY
Maintain facilities and equipment to be dependable, resilient, and long lasting
8. Aging infrastructure a Make investments in capital improvements and internal
Major projects include the Solids Handling Facilities Improvements and Filter
climate resiliency resources to deliver on increased levels of capital spending
Plant and Clearwell Improvements
INNOVATION AND AGILITY
Optimize operations for continuous improvement, and remain flexible and adaptable
9. Optimization of Central San Continue to champion and initiate projects through the PTO
Identify and implement process, chemical and energy efficiency
wide business and treatment Strategic Plan.
Improvements.
processes, and project
Advance overall business and decision support processes to
Continue to work with internal stakeholders to optimize infrastructure (e.g.,
workflow and delivery
improve efficiencies and effectiveness in all dimensions of
retrofitting the existing aeration basins to address nutrient mitigation,
through technology performance at Central San.
developing a new electrical substation to address redundancy and reliability
concerns, and evaluating the feasibility of the steam turbine generator as a
Focused effort on the Operations Department to improve
means to convert steam surplus to electricity).
existing operations and develop new and innovative programs,
projects, and training activities.
Continue to work with internal stakeholders to develop the long-term plan
for the Solids Phase 2 project.
PTO Strategic Plan, including SMARTz utility initiatives and technology (e.g.,
geographic information systems (GIS) and SCADA) roadmaps.
0
4. Budget and Economic Overview
�.
10
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 8 of 69 5
Page 7 of 21
Budget Main Points
Continued commitment to Excellence and High Level
of Service
Continued higher inflation impacts several expenditure
categories
Capital Budget reduced in FY 2023-24 due to re -
prioritization of projects recognition of carryforward
Following slides show funding uses and sources at the
fund level
11
Budget Summary
Operations &
Maintenance $90,666,338 $79,520,131 $85,019,046 $90,946,671 $5,927,625 7.0%
Sewer Construction
$88,024,000
$107,955,000
$90,976,000
70,902,000
(20,074,000) 22.1%
(Capital Budget)
Debt Service
$2,517,605
$12,891,059
$13,251,922
9,160,142
(4,091,780) -30.9%
Self -Insurance
$1,153,500
$1,285,000
$2,170,000
2,160,000
(10,000) -0.5%
Total Budget"
$182,361,443
$201,651,190
$191,416,968
$173,168,813
$(18,248,155) -9.5%
*As amended
**Excluding contributions to reserves
12
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 9 of 69 6
Page 8 of 21
Inflation Trends and Forecast
Percent Year -Over -Year inflation Year -Over -Year Inflation, CPI
9
6
r�wen'ner Flra a�oorr
7
khds
6
5
a
3
2
1
2020 2021 2022
CM a CdKunBr ph. Uld-
13
District -Wide: Use of Funds
$1 10,000,000
$100,000,000
$90,000,000
$80,000,000
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
14
2021 Ty2 202]
FY 2021-22 FY 2022-23 FY 2023-24
$201,651,190 $213,536,900 $194,023,300
Operations & Maintenance Sewer Construction Debt Service
■ FY 21-22 ■ FY 22-23 ■ FY 23-24
_ Budget Budget Budget
Self -Insurance Contribution to Reserves
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 10 of 69 7
Page 9 of 21
District -Wide: Sources of Funds
FY 2021-22 FY 2022-23 FY 2023-24
$201,651,190 $213,536,900 $194,026,300
$140,000,000
$120,000,000
$100,000,000
$80,000,000
$60,000,000
$40,000,000
Sewer Service Debt Proceeds City of Concord Tax Revenue Capacity Fees Use of Reserves All Other Revenue
Charges Sources
■ FY 2021-22 ■ FY 2022-23 ■ FY 2023-24
15
Sewer Service Charge
Rates
and Revenues
FY FY
FY
SSC Rates 21-22 22-23
23-24
Change ($) Change (%)
Single Family $660 $690
$697
$7 1.0%
Multi Family $625 $654
$622
-$32 -4.9%
Other Classes -----Charges
Vary — See Ordinance No. 304-----
Budget Budget
Budget
FY 21-22 FY 22-23
FY 23-24
Chan e $ Chan e
SSC Revenues $107,944 $114,657
($Thousands)
$117,980
$3,323 2.9%`
*Higher than rate increase due to dwelling
unit growth,
commercial water volume growth
and baseline budget estimate in FY 2022-23 lower than
actual.
1
16
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 11 of 69 $
Page 10 of 21
17
0&M Fund Expenditures
Other Expenses, 1.9%
Other Purchased
Services, 8.0%
Purchased Property
Services, 8.5%
Additional UAAL
Contributions, 1.1%
OPEB UAAL UAAL,
0.2
18
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 12 of 69 9
Page 11 of 21
0&M Fund Expenditure Trend
$50,000,000
$45,000,000
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
Salaries & Wages Employee Pension UAAL
Benefits
■ FY 21-22 Budget 9 FY 21-22 Actual
19
�M_ a® —: NUM'' gull' 11111 --..m
OPEB UAAL Additional UAAL Purchased Other Purchased Supplies & Other Expenses
Contributions Property Services Services Materials
■ FY 22-23 Budget ■ FY 22-23 Projection ■ FY 23-24 Budget
0&M Fund Spending by Department
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0 L
Executive Engineering& Collection System Recycled Water
Governance Administration Technical Services Operations* Plant Operations** Program*
• FY 21-22 Budget $2,454,169 $19,901,049 $14,880,026 $12,865,365 $27,808,771 $1,610,750
11 FY 22-23 Budget $2,778,212 $20,283,342 $15,208,366 $13,480,048 $31,571,861 $1,697,217
-1 FY 23-24 Budget $3,169,121 $21,906,201 $15,257,107 $14,391,917 $34,297,520 $1,924,804
_ *Function shown separately given significance of service and for comparability with PY budgets
**Includes Office of the Director of Operations, Plant Operations, Plant Maintenance, and Operations
Optimization Functions
20
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 13 of 69 10
Page 12 of 21
Budgeted Staffing
Staffing of 298 proposed full-time equivalent positions
Conducted exhaustive search to assess feasibility of moving
positions from other divisions
Four new FTE additions included:
HHW Technician (Environmental & Regulatory Compliance)
Pumping Stations (Plant Maintenance) '
System Administrator (Information Technology)
Management Analyst (Finance)
Creation of separate Operations Optimizations Division and
accompanying staffing transfers
Reclassification of two Department Directors to create two Deputy
General Manager positions
21
0&M Labor -Related Budget -4
Highlights is
Salaries & Wages:
Overall increase of $2.4 million (5.6%)
COLA is 3.75% (at ceiling) for all bargaining units based on February 2023 SF -Oakland -Hayward
annual CPI of 5.3%
Assumed vacancy factor of 3.0%.
Increase in total headcount by 4 positions to a total of 298
Benefits (Current Employee Costs):
Overall increase of $1.3 million (10.9%) ai
CCCERA (Normal Cost) contributions (as %of payroll) increasing 0.63% for legacy employees to
17.51% and increasing 0.21% for PEPRA employees to 11.67% (per December 2021 actuarial
valuation) 1
Base plan medical premium increase of 6.5% (based on 2022 to 2023 rates)
Capitalized administrative overhead increasing by $104 thousand (1.9%) to $5.7 million
22
s
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 14 of 69 11
Page 13 of 21
0&M Labor -Related Budget
Highlights (Continued)
• UAAL Costs
- Overall decrease of $0.2 million (13.0%)
- OPEB:
- Significant decrease in UAAL component of ADC by $1.2 million (89.3%)
- Retiree healthcare premiums estimated at $4.2 million, reflecting a 8.7%decrease from
the prior year. I
- Retiree healthcare costs in excess of ADC budgeted to be reimbursed from OPEB trust
consistent with the prior years
- Pension (CCCERA)
-r
- Near elimination of UAAL payments to CCCERA following issuance of 2021 COPS in June
2021 and payoff of pension UAAL
- UAAL contribution rate of only 0.15% for admin charges to CCCERA
- Debt service of COPS reported in Debt Service fund
- Budget includes $1.0 million for "additional UAAL trust contribution" in
consideration of market turmoil in 2022
23
23
Additional UAAL
Pension
Fiscal CCCERA Prefunding
Year Trust Trust
2013-14
5.0
2014-15
5.0
2015-16
2.5
2016-17
-
2017-18
2017-18
2017-18
2018-19
2019-20
-
2020-21
70.8
2021-22
-
2022-23
-
83.3
24
3.4
2.0
2.5
1.3
1.3
10.4 *
Trust Contribution History
OPEB Trust
2.5
2.5
Total
5.0
5.0
2.5
2.5
3.4
2.0
2.5
2.5
1.3 2.5
- 72.1
1.3 1.3
1.0 1.0
8.5 102.2
Source of Funds
Budgeted
Budgeted
Budgeted
Budgeted, subsequent Board direction
Board direction on fav variances
Board direction on fav variances
Budgeted, subsequent Board direction
Budgeted, subsequent Board direction
Budgeted, subsequent Board direction; Board direction on
favorable variances
Budgeted, subsequent Board direction; Board action on UAAL
payoff
Budgeted, subsequent Board direction
Budgeted, subsequent Board direction
*Balance of approximately $12.8 million (including investment gains)
utilized to help finance payoff of pension UAAL balance June 2021
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 15 of 69 12
Page 14 of 21
Pension & OPEB Funding Status
Pension Actuarial Results
$10 /$140
" $120 '
$100
$80
$60
7 $20 I
$0
Year ended 12/31
�UAAL —Funded%
25
0&M Funding
Sources
Total FY 2023-24 revenue of $89.7
million
Largest source of revenue is sewer
service charges
City of Concord proportion to flow
to plant and changes in non -
collection O&M expenditures
Investment income captured in
"other" reflecting growth in Fed
rates
26
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
$90
$80
c $70
$60
E $50
$40
Q $30
$20
7 $10
$0
OPEB Actuarial Results
O�� 07O O�� OHO 07b Off^ OHO O,Q O` 11 O`11 P
ti ti ti ti ti ti ti ti ti ti ti ti
Year ended 6/30
�UAAL —Funded%
Permits & Inspection Fees
$1.8 2%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 16 of 69 13
Page 15 of 21
Concord Reimbursement Revenue
Analysis (O&M)
$24
$22
o $20 : • /J I
�$16
O /
s3432 I 1500
s
F+1p 1 �+10 �11111 �1� 'A111 010,11 01p1� 01116 011� 01516 qk Fy10 0Id", 010ip
■Actual ■Projected -No UAAL Payoff Projected With UAAL Payoff —111111
27
Capital Budget Highlights
Infrastructure Investment Over Past 10 Years: $465.6 Million
$110.0
$100.0
$90.0
$80.0
$70.0
$60.0
$50.0 $45.3
$41.1 $428
$40.0 $22
$30.0 9.6 525. $30. $3.5 $0.6 $ISJ $13 $20
$$0.0 Sz.o 40.8
- 80.3
$10.0 $zo 3
41.2
$0.0
$4.0
EM
10\3,\A 5100\M\5 070\5-\6 10\b\'I\B 10\8-\9 010\910 Ft 10102\ 1010-1 yp11131PcO�bdl
�Colleaion System Program —Treatment Plant Program IF(® Recycled Water Program r_ General Improvements Program _ Budget ("Estimated Expenditures" prior co FY 2017-I8)
28
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 17 of 69 14
Page 16 of 21
Sewer Construction
Fund Expenditures
Total FY 2023-24 expenditures of
$70.9 million
Reduction in capital spending from
prior year budget of $20.1 million
Lower capital spending next year will
allow for catch-up on unexpected
budgetary carryforward
Capital spending ramping back up in
FY 2024-25, and remaining higher
than this for duration of 10-year plan
29
Sewer Construction
Fund Sources
Total FY 2023-24 funding sources of
$93.1 million, including debt proceeds
Decrease in total sources by $35.7
million from the prior year due to
lower debt proceeds expected
Net contribution to reserves of $22.2
million necessary for future capital
program spending increases and rate
smoothing
till
R.,—I.d W.tor
City of Concord Capital
Reimbursement $7.6
8%
General Improvements
$3.4 5%
Capacity Fees Other
$4.2 5% $2.6 3%
(Chart in millions)
(Chart in millions)
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 18 of 69 15
Page 17 of 21
Self Insurance Budget
Operating Revenues: $2.0 million Operating Expenses: $2.2 million
Investment Income HHW Contribution
$316,300 $24,000
I
31
Debt Service
Expenditures
Total FY 2023-24 expenditures of $9.2
million
Incorporates debt service on 2018
Revenue Refunding Bonds and 2021
cops
Debt service entirely secured and
funded by ad valorem property taxes
32
Technical & Other
Services, e— —
Expected Loss(
$175,000
Legal Services,
$375,000
Trustee & Other
Costs $6,000
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 19 of 69 16
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33
Reserve Balance Projections
as of June 30, 2023
Reserve Policy Target $37,626,114 $43,235,552 $9,000,000 $89,861,666
Projected Balance $41,300,064 $121,355,886 $9,142,948 $171,798,899
Projected Balance Minus
Reserve Policy Target $3,673,950 $78,120,334 $142,948 $81,937,233
Reserves comply with policy specified minimums to ensure adequate resources
Impacts allocation of SSC to various sub -funds
Affects rate setting, in conjunction with drivers from 10-year financial plan
34
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 20 of 69 17
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Reserve Balance Projections
as of June 30,
2024
Beginning Projected Reserve
$41,300,064
$121,355,886
$9,142,948
$171,798,899
Increase/(Decrease)
($1,223,728)
($35,848,837)
($142,948)
($37,215,513)
Ending Projected Reserve
$40,076,336
$85,507,049
$9,000,000
$134,583,386
Reserve Policy Target
$40,076,336
$47,791,500
$9,000,000
$96,867,836
Over/(Under) Target
-
$37,715,549
-
$37,715,549
mad
35
36
May 9, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 21 of 69 18
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Public Hearing on
June 1, 2023
Staff recommendation for Board to
approve and adopt the following
budgets:
Operations & Maintenance
Capital Improvement
Self -Insurance
Debt Service
Coinciding with budget, Board also
asked to delegate authority to General
Manager to renew insurance
37
Conclusion
FY 2023-24 budget is balanced,
consistent with reserve policies
Financial health of Central San remains
strong
Staff will continue to monitor impact of
inflation and financial markets on
budget
"Thank you" to all dedicated staff
involved in budget development
process, as well as ongoing monitoring
during the year
98]
16
�W.;,�pi.,
M
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