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Direct Sales OK Baked Into Nevada's $1.3 Billion Incentive Deal With Tesla 149

The new battery factory that Tesla has announced it will build in Nevada comes with some nice perks: specifically, with a package of tax incentives, road construction, and legislative protection from the kind of dealer cartels that have hindered Tesla's ability to sell cars in some other states. A Bloomberg wire story gives some details about the size of the deal that Nevada made to attract the company: The biggest chunk of the deal, Tesla's sales tax exemptions, is worth an estimated at $725 million. In addition, the company would save more than an estimated $300 million in payroll and other taxes through 2024. ... Among the bills approved in both houses was a provision phasing out and eliminating 1970s-era tax credits for insurance companies, which backers said would free up about $125 million over five years beginning in 2016 for transferable tax credits to Tesla. The package would also gut a pilot program approved just last year giving tax credits to the film industry, freeing up about $70 million for Tesla. ... Lawmakers also agreed to buy right of way to build a road connecting I-80 and U.S. 50, a project estimated to cost $43 million that will improve access to the industrial park from other regions of the state.
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Direct Sales OK Baked Into Nevada's $1.3 Billion Incentive Deal With Tesla

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  • by Anonymous Coward on Friday September 12, 2014 @09:24AM (#47889409)

    As a non-American, I find the notion a government exempting one specific company from one or several taxes bizarre. Is this really legal in the U.S.? Why?

    • by Kkloe ( 2751395 ) on Friday September 12, 2014 @09:30AM (#47889459)
      as a non-american, your country probably has\makes the same deal with major industries, you probably just dont know about it
      • as a non-american, your country probably has\makes the same deal with major industries, you probably just dont know about it

        Yes, but it is bending the general rules that apply to everybody in a direction that is helpful to specific major industries. Making rules that only apply to a named individuals or entities is specifically outlawed by most constitutions. Sure there is still lobbying and the effects of it, but not this overt, out in the open, blantent corruption.

        • by Adriax ( 746043 )

          If you're going to have crime then it's better to have it organized and out in the open. Easier to keep track of and keep from getting too out of hand.

          • If you're going to have crime then it's better to have it organized and out in the open. Easier to keep track of and keep from getting too out of hand.

            I'm sure John Gotti and a few others would agree.

          • If you're going to have crime then it's better to have it organized and out in the open.

            Nice job defending the indefensible.

            Reminder: corruption is bad, and should not be normalised.

        • Except in the Giga factory announcement the State Govt executive coordinating the deal made the following clarifications:
          1 - Tesla is 100% performance bound. They don't get a dime worth of benefits unless they deliver. The norm typically has been to give the benefits in hopes of the company getting them honors its word. This deal is the extreme opposite.
          2 - The bill the governor's office is sending to NV legislature isn't Tesla specific.
          Of course, I haven't read the documents. I'm just pointing out your utt

      • by DrXym ( 126579 )
        The US was bitching that Apple paid a really low rate of tax in Ireland just recently while Ireland was claiming it was all above board. I'm not sure if it was or not but Ireland has always insisted their taxation scheme is transparent - it's just that it allows big corps to launder their profits through a few countries to shake off the tax liabilities.
      • Re: (Score:2, Insightful)

        by Anonymous Coward

        because corporations buying, controlling, and/or bribing government is legal.... and then the opposite is true, government can bribe corporations into doing things too (in this case, build a factory in a specific state).

        essentially the end result is, nevada tax payers are paying for most of the startup and construction costs of the factory.

      • "Under the EU's state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way,"

        It is not possible to specifically write one company into the law as exempt. Now it has been done by making laws such that they only apply to one company, but these practices are being sued now.

        http://www.usatoday.com/story/... [usatoday.com]
        http://europa.eu/rapid/press-r... [europa.eu]

        So no, it is not common place outside the US, and certainly not as easy.

        But the voting in the US is dominated by companies anyways, it is a very different climate and understanding of democracy than anywhere else.

      • Due to some verbiage placed into a Supreme Court ruling in the 19th century, corporations suddenly had the same rights as we flesh and blood entities.

        The case in question is Southern Pacific Railroad vs. Santa Clara County in 1886. The head reporter for the court inserted language into the judgement that asserted corporations had the same rights as people.

        That court reporter was one Bancroft Davis - may he be rotting in hell!
        • Corporations have been around long before the 19th century and as legal entities managed and owned by us individuals, they most certainly do enjoy the same rights to own property and conduct trade, and are held accountable to not violate the law.

          That last part is kind of important. Corporations are considered persons because they're expected to follow the law, too!

          Really, what do you think corporations are made of, woodland critters and robots?

    • Because we have a system of elections that are virtually designed to award offices to those most inter-tangled with corporate powers. Privately financed campaigns, winner take all elections that tend towards gerrymandered "safe" districts, unlimited corporate financial support for campaigns.

      That doesn't mean this particular action is a result of that corruption(though there's no reason to expect otherwise), just that those in office have a very strong interest in excusing the behavior being allowed to prov

    • by smooth wombat ( 796938 ) on Friday September 12, 2014 @09:34AM (#47889485) Journal

      It happens regularly in this country. The taxpayers get the shaft so private industry doesn't have spend their money. Our football teams (U.S. football, not your football), when they need a new stadium, threaten to take their team to another city unless the taxpayers cough up their money to build the new stadium and related matters, while the team continues to charge exorbitant prices.

      This country wastes hundreds of billions of dollars each year by making sure private industry doesn't have to suffer the pangs of going out and getting financing for its projects like the rest of us do when we want to buy a home or do major repairs.

      Don't forget we used several trillion dollars to prop up our banks and financial firms when, through their own incompetence, our financial system went into meltdown. These folks then used the taxpayer money to give themselves bonuses for the great job they did AND have told us taxpayers to go pound sand any time it is mentioned they should thank us for protecting them.

      For all our talk about free markets and capitalism, we are incrementally closer to fascism than we are to a representative democracy. Industry, as a whole, gets what it wants, even if it means the taxpayers have to bend over and take it.

      • by plover ( 150551 )

        Don't forget we used several trillion dollars to prop up our banks and financial firms when, through their own incompetence, our financial system went into meltdown. These folks then used the taxpayer money to give themselves bonuses for the great job they did AND have told us taxpayers to go pound sand any time it is mentioned they should thank us for protecting them.

        The only thing I would disagree with in this statement is the word "incompetence." It seems to me that any banker who could walk away with millions in bonuses after all that theft is an extremely competent criminal.

      • by mspohr ( 589790 )

        I find it ironic that all of these "free market" people are so keen on providing subsidies, etc. to corporations. Rick Perry, a staunch "free market" Republican is famous for running around handing out Texas state government subsidies to hand-picked corporations. You can call this socialism, crony capitalism or fascism... it's all basically corrupt and screws the 99% in favor of the needy 1%.

        • One could argue that he and his State are competing in a free market against other states. There are obviously benefits to having these business operate in your state. If the people of his State didn't support these deals they would almost certainly discontinue electing assembly people and governors who support it.
          • by mspohr ( 589790 )

            Not exactly a free market when you are picking favorites and subsidizing industry. This really distorts the market.
            As for "the people can just throw the bums out if they don't like the way they are spending their money"... this is remarkably naive.

            • Within the state perhaps, but the picking is in bringing these companies to the states instead of others.

              I do agree that it distorts the market though. It gives the illusion that these taxes and fees are necessary in the first place just to be forgiven when attracting someone from outside the system. If any state can actually give these subsidies and tax breaks, it is a sure sign they are taxing and charging too much already.

      • by Hadlock ( 143607 )

        In particular, Reno/Nevada offered this because it was beneficial to the state over the long term. Other states were also competing for this long term heavy industry by offering similar deals. The factory would have gone to another state if they had not offered this deal and then they would not be the national leader in battery manufacturing + all of it's cottage industries. The building the road part is genuinely a good idea as it adds value to their industrial park and is a good long term investment.

    • Re: (Score:3, Interesting)

      This happens for many large businesses, Wal-mart, Bass Pro shops, et cetera. It is supposedly good for the region to have the large business, so tax breaks are commonplace. I find it strange that this is being pointed out for Tesla specifically. The oil companies maybe are not happy.

      • by SydShamino ( 547793 ) on Friday September 12, 2014 @10:18AM (#47889907)

        At least the tax breaks for Tesla make more sense than the ones for the film industry. States continuously try to attract film and television through massive incentive programs, but they only work if the state has one of the best packages at the time of filming a particular film or season.

        Texas had a good package for a while, and things were filmed here. Other states got better, and shooting moved to places like Louisiana. Right now Georgia has a great package and things like The Walking Dead and Archer are shot there, but don't for a moment think The Walking Dead wouldn't move to Louisiana or Arkansas or northern California if the incentives changed.

        It's much more difficult for Tesla to move their factory, since they'll have extensive immovable infrastructure costs. The film industry is used to packing up every 6-26 weeks as films or seasons end.

        • by jfengel ( 409917 ) on Friday September 12, 2014 @11:42AM (#47890841) Homepage Journal

          There is a certain amount of lock-in to the film incentives, especially for TV series. Shooting a film requires a substantial amount of infrastructure, both personnel and equipment, which doesn't exist everywhere. These people are often not employed by the studio directly, but form local service companies. And where those companies exist, it's easier for more film projects to move in.

          Even if Walking Dead were to pack up and move, Georgia may still have accomplished its goals with the subsidies. I know that Maryland is similarly pushing this. They developed a lot of that infrastructure a while back during the filming of Homicide in Baltimore, and there have been a lot of follow-on projects. They're now trying to boost that with House of Cards, which is an enormous undertaking that employs many hundreds of people (at least part time). The resources of material and knowledge built up in the local economy attract other film projects that can do the job faster and better because it's already here, rather than building it up from scratch.

          Of course, producers know that, and will drive up the price as far as they can. Maryland nearly lost House of Cards in a kind of game of chicken; neither side wanted the production to move but each wanted to get a better deal. In the end, House of Cards largely won, and people in the local film industry are extremely happy about that. I don't know if it's really a good deal for the state in the end, but at least for the moment it's employing a lot of people, and since it's a series they'll go on having work to do for a while.

    • by OhPlz ( 168413 )

      Things like this are often done at the state level, so there's really no one to hold them accountable for it. The federal government can't go after a state for how it chooses to tax entities within its own borders. Surrounding states have no leverage either, other than to make similar concessions in a kind of bidding war. Happens constantly near the state borders. My state loses a lot of opportunities because the state just to our south will do anything a company asks. Personally, I think this is one o

      • by Jaime2 ( 824950 )

        The Federal government already has a model to fight this. They just raise federal taxes and send piles of money back to individual states as long as those states fall in line. Once federal taxes are raised and a portion on the state's budget is covered, the only choices are to lower state taxes or lose people. They already did it for highway and education funding. Of course, this has done more harm than good, so it's probably better to just leave states to make their own decisions as the Constitution says t

        • by OhPlz ( 168413 )

          I don't disagree. I was just pointing out how this ends up happening for the non USians among us. I strongly support state's rights, it is how the nation was intended to work and it brings far more positives than it does negatives. The federal funding scam is abhorrent and the states need to find an effective way of fighting it. DC never will, it's how they force their views on states that don't agree with them. No politician elected is going to want to surrender power they just gained. Even Ron Paul

        • by tomhath ( 637240 )

          They just raise federal taxes and send piles of money back to individual states as long as those states fall in line

          That only works if the federal dollars are cost effective compared to the mandate. Obamacare goofed on that by assuming states would want to run their own exchanges. Plus if the feds get too heavy handed the constituents will vote them out - which is the main reason Ms. Pelosi is no longer Speaker.

    • by sycodon ( 149926 )

      As an American, I find the multitudes of taxes, fees, charges, and other blood sucking extortion schemes run by Government to be bizarre.

      • Agreed. There's a billion ways to extract money from businesses. State and local governments have it down to an art. It's no small wonder why we see companies like Burger King crossing the border.

    • by wile_e_wonka ( 934864 ) on Friday September 12, 2014 @09:52AM (#47889629)

      This factory is expected to be gargantuan and will employ a great many smart people with good paying jobs. The factory will have a great many trucks going in and out. The money going to pay these people is coming from the income from a California company. So, well paid engineers will receive California money to purchase houses and furniture and food, etc. in NV. The engineers will pay sales taxes, property taxes, and will spend money in the casinos (I almost mentioned income taxes, until I remembered that NV doesn't have a state income tax--they have casinos instead). The calculus that NV is making with this deal is that the tax revenue it is giving up from Tesla will more than be made up for by the cut of the income they keep from the money that Tesla will pay to its employees and to NV truck drivers and suppliers, etc. The thought is that this will be a net positive for NV.

      • Well, go figure, taxes chase people away, and lack of taxes invites people to stay!

      • by Ralph Wiggam ( 22354 ) on Friday September 12, 2014 @11:25AM (#47890645) Homepage

        This is the correct answer. Northwest Nevada is currently an economic wasteland. The plan is to make it a central hub of the US battery design and manufacturing industry. That applies to a lot more industries than just electric cars. If that plan works, any tax revenue they give up in the short term will be more than made up in the long term.

    • by qbast ( 1265706 )
      As a non-American I find forbidding car manufacturers from selling directly to customers even more bizarre.
    • by tomhath ( 637240 )
      Why would a government not want to provide incentives? It happens all the time, everywhere. Sometimes it benefits one industry a subsidy (think "green" energy), sometimes it benefits one company (think Solyndra or General Motors), sometimes it actually makes sense to help a company or lure it into your region so you can charge other taxes (Tesla). Keep in mind that the US is a federation of states - not one monolithic government. This is a state (Nevada) which is competing with other states (California and
    • by Ixokai ( 443555 )

      These things don't really apply to a specific company-- they're written like, "a company building a factory of X size employing Y people [doing Z sort of activity]" doesn't have to pay these range of taxes. The conditions are just specific enough that in practice it probably only applies to one company, but gosh darn if their competitor wants to come in and build the exact same thing they'd probably qualify for the breaks, too.

      But why is this surprising? Government giving incentives (be they tax breaks or s

    • They don't exempt one specific company by name. They exempt all approved battery producers with over 2000 proposed employees in a certain county or some trick like that. Is if fair? No. But that is how it is done legally.

    • These are state taxes. As such, its up to each individual state to determine. I suppose its possible that some states do not do this, however the whole reason why it is done is due to competition amount the states for employers.

  • I live in the area and that's going to be a significant change to the landscape. Putting in what will eventually be a high-traffic road into an area (on the 50 side) with people who live there specifically to get away from this sort of thing. It's also going to cut one of the areas where wild Mustangs still roam in half.

    ...

    Speaking of Mustangs, Mustang Ranch [mustangranchbrothel.com] will be a big winner here as they will be located just a stones throw from the new Tesla factory....

    • Re: (Score:2, Informative)

      by afidel ( 530433 )

      Mustang's aren't wild, they're feral, the species is not domestic to North America.

    • by sycodon ( 149926 )

      So the view of the other single wide mobile homes and the washer dryer sets in the front "yard" will be obscured?

        Nevada, for the most part, is dirt and weeds.

  • What dealerships should be demanding is that all car add-ons can be quickly assembled on the fly by their service people. That way, all the car company sends them is a vanilla model and the dealership can quickly upgrade the vehicle to customer taste. There should be only one fully loaded vehicle on the lot any time: the demonstration model. If dealerships could get that worked out and improve their reputation for treating customers, they might have some relevance in the future.

    • by Anonymous Coward on Friday September 12, 2014 @09:53AM (#47889637)

      Most options do not involve simple add-ons, but fundamentally different components or treatment (engine types, upholstery, paint colour). There is no such thing as a vanilla model.

      What you propose is essentially moving the final assembly to dealerships. That is much less efficient, it would require massive dealerships with massive investments and the only benefit would be that cars can be delivered somewhat quicker.

      • Paint color -> e-ink color. There's no matrix involved to address individual pixels, so I don't know why this hasn't happened yet. Maybe not with cars, but at least with phone back shells, etc.

    • True... However the dealership model is one of the few decent middle class jobs creator in the country that doesn't require a lot of education and/or certification.

      Direct sale just means more profit to the big auto makers (Their price will not be lowered) and less people will benefit from the auto economy.

      • True... However the dealership model is one of the few decent middle class jobs creator in the country that doesn't require a lot of education and/or certification.

        Direct sale just means more profit to the big auto makers (Their price will not be lowered) and less people will benefit from the auto economy.

        Not just that, but warranty and aftermarket maintenance are performed by the dealerships as well. Without a dealership presence in the state, if your car is busted, then you are just out of luck, or you have to have your car shipped to the manufacturer to get it fixed.

        • True... However the dealership model is one of the few decent middle class jobs creator in the country that doesn't require a lot of education and/or certification.

          Direct sale just means more profit to the big auto makers (Their price will not be lowered) and less people will benefit from the auto economy.

          Not just that, but warranty and aftermarket maintenance are performed by the dealerships as well. Without a dealership presence in the state, if your car is busted, then you are just out of luck, or you have to have your car shipped to the manufacturer to get it fixed.

          I'm pretty sure that a factory owned retail outlet would provide pretty much the same level of service as an independently owned dealership.

        • Re: (Score:3, Insightful)

          by Anonymous Coward

          aftermarket maintenance

          That is a fantastic way to say "oil change". Thank god we have these precious dealers to bequeath unto us their holy ritual that we mere mortals are unable of performing. And let us not speak of those ne'er-do-well dens of scum and villainy known as ANY OTHER MECHANIC.

      • >True... However the dealership model is one of the few decent middle class jobs creator in the country that doesn't require a lot of education and/or certification.

        It used to be, but sadly that is no longer true. The owner makes good money, and so do the parts manager, shop manager and sales manager. Sales droids, for the most part, don't make a living wage and don't last very long, with the exception of maybe 10% of them. Parts guys don't make squat. The mechanics make a good middle-class income,

    • So what you want the dealership to have is a bunch of chassis & bodies for vehicles. No engine. No front seats, although rear seat could probably be pre-installed. I don't think it would have windows because of the option for tinted vs not. Your dash would be mostly missing. Quickly would be about four to six hours if you're really lucky and more likely than not you'd be waiting until the next day.

      You're basically advocating removing all the time efficiencies that are gained by having an assembly line.

  • I love the smell of American plutocracy first thing in the morning!

  • Link to TFA is paywalled.

    • It loads fine for me.

      Many news sites give you a limited number of free articles. This may be one of those. Typically after you hit the limit, your options are:

      *) Pay money
      *) Don't read the articles
      *) Clear your cookies
      *) Use private browsing mode

      • I've found that clearing the cache + changing user agent also works pretty well at bypassing article read limits.

  • by gurps_npc ( 621217 ) on Friday September 12, 2014 @09:48AM (#47889599) Homepage
    Not the legal protections (those are fine), I mean the monetary incentives.

    They are anti-competitive, and bad for the economy.

    Frankly, the federal government should put a user fee on them at a prohibitive rate - i.e. 50%, paid out of the money given.

    That is, if a state wishes to give a benefit worth $100 million to a company, that company owes $50 million paid immediately.

    These things are usually paid to convince someone to build X in Y state, rather than Z state. It is almost never paid to get something built inside the USA, rather than outside the USA.

    As such, any benefit to that particular state is outweighed by the loss to another state.

    It is even worse when it comes to sports teams. Then, usually the teams make out like a bandit without in any way increasing the economy of the state (in particular, big cities will always get sports teams, even if the city refuses to build a stadium, because the city is where the CUSTOMERS for sports teams live. People in NYC are not going to suddenly decided to root for and see baseball in New Jersey if the Yankees and Mets leave the city. Not even if the stadium is build in Hoboken. Instead, some other team will build a stadium in New York, earn a ton of money from New Yorkers coming to them, then buy good players and suddenly everyone will be rooting for the NYC Metros, or whatever they call themselves (just like New Yorkers don't still root for the Dodgers, after all.)

    • by WillAdams ( 45638 ) on Friday September 12, 2014 @09:55AM (#47889649) Homepage

      Now, now, you can't go criticizing sports teams when the N.F.L. is a non-profit organization which exists for the good of the game and to enhance the beneficial effects which the game has on society, right? I'm sure the goals of the other sports organizations are as noble and that their bookkeeping is similarly transparent.

      I'm sure that it's some bizarre, pestilential outside influence which has banned community ownership of teams (save for the grand-fathered-in Greenbay Packers) and required that a minimum percentage of a team be owned by a single individual.

      • ...

        I'm sure that it's some bizarre, pestilential outside influence which has banned community ownership of teams (save for the grand-fathered-in Greenbay Packers) and required that a minimum percentage of a team be owned by a single individual.

        No, no. It's patriotism. Community ownership is COMMUNISM, and totally un-American. It says right there in the Bible and the Constitution, that the individual profit is sacred. Besides, no fat-cat wants to live in Green Bay, where you get sucked dry by 12 pound vampire mosquitoes in summer and get your nads frozen off in winter.

    • by godrik ( 1287354 )

      There is a similar law (in spirit) in North Carolina about public universities trying to hire a university professor from another public university. You can not make an offer more than xx% over what they currently have (I think it is 10%). The reasonning is similar, it cost more money to the state to get the same person they were already having at a similar position.

      • I don't find that to be a similar case

        The universities are hiring the professors, the professors would not work if they did not get paid by the state. Passing a law about two parts of an organization not competing for the individual is a very questionable act.

        In my case, the states are BRIBING companies and sports teams that would still work if they were not being paid by the state, they would simply work elsewhere. The companies are not supposed to be paid by the states, they are supposed to get money

    • Please look closer. The reason why states are discounting their "prices" is because the prices are higher than the economic cost and value. There is zero economic cost to the state of a corporation generating income in a specific location. The solution is to eliminate corporate income taxes.

      • Your belief, while common, demonstrates general ignorance of economic theory.

        First and foremost, most businesses do not make decisions about where to build factories, etc. on taxes. Otherwise NYC and California would be economic backwaters, rather than the powerhouses they are.

        Note, corporate headquarters is different, I am talking about manufacturing factories and customer facilities for sports.

        Sports stadiums are NEVER built based on tax rules, they are ALWAYS built based on customer location. It

  • How could it possibly be worth a billion dollars to Nevada? It won't bring very many new people into the state because Nevada already has a higher unemployment rate than surrounding states. It won't generate direct tax revenue due to exemptions. Their only hope is that it creates a geographic area where an industry collects, like SIlicon Valley or the Research Triangle. But, that is just an arms race against other states, so it just wastes money from a macro perspective.
    • by brunes69 ( 86786 )

      Money flows. 100,000 people working at a factory all need to spend the money they earn on consumer goods, food, and housing. All of that money makes a lot of taxes for the state, even if Tesla is not paying much tax.

      • by Jaime2 ( 824950 )

        To make their billion dollars back in sales tax, they would have to generate an additional 20 billion dollars in local sales. That's $20K for each of the 100,000 workers, which is six months of the Nevada average gross wage. If the payoff is longer than ten years, then it would be a poorer investment than doing almost anything else with that money. To put it in perspective, Nevada collected less than $20 billion in total taxes in 2012. This one business would have to grow the economy of the entire state by

      • Re: (Score:2, Informative)

        by Anonymous Coward
        FTA: The gigafactory is expected to create 6,500 direct jobs and thousands of indirect jobs.
        What's this about 100K jobs?
    • by tomhath ( 637240 )

      Nevada already has a higher unemployment rate than surrounding states

      Bingo. Just the savings in unemployment compensation and Medicaid that Nevada pays will be a big chunk of it.

      • by Jaime2 ( 824950 )

        Unemployment benefits are paid from a pool that is funded by employers.

        Getting a few thousand people off Medicaid is going to save them money, but a billion dollars is a huge amount of money. Show me some math that shows they will even come close to that.

    • Its not like Nevada is paying Tesla a billion dollars. From the summary it only looks like the state is building a road at their own expense. If all the tax rates stayed in place with the factory, then sure they'd have a ton of extra money. But without the tax breaks, Tesla would have likely chosen some place else so nevada wouldn't get that money anyway.

      You're right about the big picture though. I'd really like to see a detailed analysis of tax havens to find out if it really helps out anyone in the count
  • "Direct Sales OK Baked Into Nevada's $1.3 Billion Incentive Deal..."

    I like my deals cooked, not baked.

  • In a recent debate with the Republican candidate for governor, Governor Brown had to defend his business incentive policies. Particularly the loss of the battery factory. He simply stated that the incentives that Tesla demanded were too much of a burden on taxpayers in CA. Now we know that he was probably correct.

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