HomeMy WebLinkAboutC2006-528 - 5/30/2006 - ApprovedTAX ABATEMENT AGREEMENT
THE STATE OF TEXAS
CO~JNTY OF NUECES
This T'ax Abatement Agreement (hereinafter referred to as the "AgreemenY') is made and
entereci into by and between the CITY OF CORPUS CHRISTI, TEXAS (the `Governmental
L'nit') and ULLAH [NVESTMEI~TS, INC. (the 'Owner'), the owner of taxable property in the
Citv of Corpus Christi, Texas, Lot i, Block 8. River Square Unit 2(the "Property").
I. AUTHORIZATION
This Agreement is authorized by the Texas Property Redevelopment and Tax Abatement
Act. Texas Tax Code, Chapter 31 ~. as amended (the `Act'), and is subject to the laws of the State
of Texas and the charter, ordinances, and orders of the Governmental Unit.
[I. DEFINITIONS
As used in this A~-eement, the following terms shall have the meanings set forth below:
A. "Base Year Value" means the assessed value of the Improvements on the Property as
certified by the Nueces County Appraisal District as of the January 1 preceding the
~xecution of this Agreement plus the agreed upon value of Improvements made after
:f anuarv 1 but before the execution of this Agreement.
B. "Improvements" means the buildings or portions thereof and other improvements,
~ncluding fixed machinery and equipment, used for commercial or industrial purposes
i~n the Property.
C. "Construction Phase" means the period during which a material and substantial
improvement of the Property occurs which represents a separate and distinct
construction operation undertaken for the purpose of erecting the Improvements. 'The
Construction Phase ends upon the earliest to occur of the following events:
i 1) when a certificate of occupancy is issued for the project (if within City limits); or
( 2) when commercial pruduction of a product or provision of a service is achieved at
the facility, or
i 3) when the architect or engineer supervising construction issues a certificate of
substantial completion, or some similar instrument, or
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(4) two (2) years after the date of this Agreement.
The determination of the end of the Construction Phase shall be made by the
Governmental tlnit, in its sole and absolute discretion, based upon the above criteria
and such other factors as the Governmental Unit may deem relevant. The
determination of the end of the Construction Phase by the Governmental Unit shall be
conclusive, and any judicial review of such determination shall be governed by the
substantial evidence rule.
D. ~`Abatement" means the temporary or partial exemption from ad valorem taxes of
certain added value to real and personal property in a zone designated for economic
development purposes pursuant to the Act
E. "Eligible Property" means the buildings, structures, site Improvements, and that office
space and certain personal property necessary to the operation and administration of
the Facility to be constructed pursuant to this Ageement. A list of the Eligible
Property is set forth in the Project Description which is attached hereto as Exhibit "A"
and made a part hereof. During the Construction Phase of the Eligible Property, the
Owner may make such change orders to the Eligible Property as are reasonably
necessary to accomplish its intended use, provided that no such change order may be
made which will change the qualification of the project as a"Facility" under the
Guidelines and Criteria for Granting Tax Abatement approved by the Governmental
Unit.
F. "Ineligible Property" means land; inventories; supplies; tools; furnishings and other
forms of movable personal property; vehicles; vessels; aircraft; housing; hotel
accommodations; deferred maintenance investments; property to be rented or leased
~xcept as provided in Section 2(e); improvements for the generation or transmission of
~lectrical energy not whally consumed by a New Facility or expansion; any
~mprovements, ~ncludin~; those to produce, store or distribute natural gas, fluids or
~ases, which are not integral to the operation of the Facility; improvements to real
property which have an economic life of less than I S years; property owned or used by
the State of Texas or its political subdivisions or by any organization owned, operated
f~r directed by a political subdivision of the State of Texas; unless any of the above
types of propem are specifically authorized by the Governmental Unit.
G. '`Added Value" means the increase In the assessed value of the Eligible Property as a
a esult uf "expansion" or "modernization" of an existing facility or construction of a
'`new facility." It does not mean or include "deferred maintenance."
H. "Facility" means a Basic Manufacturing or Service Facility, Regional Distribution
Center Facility, Regional Telecommunications/Data Processing Center Facility,
Regional Visitor Amusement Facility, Central Business District (CBD) Residential
Facility, Renewal Community Facility, or Petrochemical Facility approved by the
Governmental tlnit as set forth in the Guidelines and Criteria for Granting Tax
Abatement adopted by the Governmental LJnit.
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The Guidelines and Criteria for Granting Tax Abatement adopted by the Governmental Unit are
incorporated as a part of this Agreement. Except as the same may be modified herein, all
definitions set forth therein are applicable to this Agreement.
III. PROPERTY
The Property is an area within the City of Corpus Christi, Texas, located in whole or in part
within the jurisdiction of the Governmental Unit as is more fully described in Exhibit "B"
attach~d hereto and made a part hereo£ Said Property is located within a zone for tax abatement
established pursuant to Chapter 31 ? of the Texas Tax Code, as amended, by the City of Corpus
Christi. Texas.
The Nueces County ~ppraisal District has established the following values for the Property
as of the January 1 valuation date prior to the date of execution of this Agreement.
Account No. rva
Per•sonal pr~oper•t-% $ n/a
Account No. R292018
Land $ 225,124
Improveme-ats ~ 1,300,000
The Governmental Unit and the Owner agree that the value of any additions to the Improvements
made after January 1 or not otherwise reflected on the above valuation of Improvements is:
Additional Improvements: $0
Addition of the above amount to the valuation of the Improvements as of the January 1 valuation
date prior to the date of execution of this Agreement results in a Base Year Value as follows:
Base Year Value: $1,300,000.
[V. TERM OF ABATEMENT AND AGREEMENT
The Governmental Unit agrees to abate the ad valorem taxes on the Eligible Property in
accordance with this paragraph and paragraphs V and VI hereof. The Abatement shall be
effective with the January~ 1 valuation date immediately following the date of execution of this
Agreement. The Abatement shall continue for up to two (2) years during the period of the
Construction Phase and for the next three (3) full tax years thereafter, expiring as of December3l
of such third tax year. If the period of the Construction Phase exceeds two (2) years, the Facility
shall be considered completed for purposes of Abatement, and in no case shall the period of
Abaternent inclusive of construction and completion exceed five (5} tax years. The years of
Abatement provided herein shall in each instance coincide with the tax year commencing on
January 1 and expiring on December 3 l, and in no event shall the Abatement extend beyond
December 31 of the fifth tax year. This Abatement shall also cover as Eligible Property those
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supplemental impruvements to the Eligible Property that are added or constructed during the
post-constr~etion three (3 ) year period ot' Abatement. In no event, however, shall the total
Abatement period for such Eligible Property exceed the maximum five (5) year Abatement
period for the entire project as specified herein.
The tertn of this Ageement shall continue for a period of five (5} years following expiration
oi~the abatetnent period. All terms and conditions imposed upon the Owner shall continue in
etfect during such period, and the Owner shall be obligated specifically to continue the minimum
e~nployment levels specified herein. Any default shall be subject to the provisions of Article VIII
hereof.
V. TAXABILITY
During the period that the Abatement is effective, taxes shall be payable as follows:
(1) 'The value of the land comprising the Property shall be fully taxable;
(2) The Base Year Value of existing Improvements comprising the Property shall be fully
taxable;
{3) The value of Ineligible Property shall be fully taxable; and
(4) The Added Value of Eligible Property shall be abated as set forth in Part VI herein.
VL AMOUNT OF ABATEMENT
The Abatement provided by this Agreement shall be based upon (for a Renewal Community
Facilityj for each created one (1) new permanent full-time job per $50,000 of Added Va1ue to a
property foilowing the completion of construction and maintains the same level of employment for
the tem~ of the abatement agreement, the percentage of tax abated shall be in accordance with the
f~llowing schedule_
Construction Period
(not to exceed 2 years)
Year l
Year 2
Year 3
Percenta~e of Abatement
100%
75%
75%
0%
In order to be counted as a permanent job under this Agreement, the job must be a full-time
position providing regular work schedules at least 35 hours per week. For compliance
purposes, the determination date shall be January 1 of each year commencing with the
January 1 following the date of completion of construction. The percentage of abatement
provided each year under this Ageement shall be based upon the employment information
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as~~f January 1 of such year. As a result, the actual amount of abatement may vary from
year to year based upon emplc~yment levels and property valuations.
[Note: If this project is designated as a"rehabilitation projecY' under the Guidelines
and Criteria which involves the adaptive reuse of an existing structure or building for a
Facility, the project must involve a minimum capital expenditure of $250,000. The
rehabilitation project must involve the adaptive reuse of an existing structure or building
currently on the property tax rolls so that the Base Year Value associated with the project
will include both the value c~f the land and the existing improvements. The Owner and
Owner's landlord specifically disclaim any abatement for improvements to the building, and
the cc~venants and obligations hereof shall not be binding upon Owner's landlord. T'he sole
Eligible Property subject to abatement shall be the value of personal property such as
furniture and movable equipment installed by Owner which would otherwise be considered
[neligible Property tor any other type of abatement category. In no event, however, may the
total ti~alue of such personal property subject to abatement exceed $1 million.]
At the time of execution of this Agreement, the Owner reasonably estimates and represents
to the Governmental Unit that the Added Value comprising permanent Improvements upon
c~~mpletion of the Construction Phase shall be:
$ 1,300,000 ("Estimated Added Value")
In the event that upon completion of the Construction Phase the Added Value of permanent
Improvements, as determirted by said Appraisal District, shall at any time thereafter during the
period of Abatement be less than eight-five percent (85%) of the Estimated Added Value, not
due to circumstances beyond the control of Owner, the Owner agrees to pay, as additional taxes
hereunder, an amount equal to the then current tax rate of the Governmental Unit applied to the
dit~erence between the Added Value from eighty-five percent (SS%) of the Estimated Added
V alue, multiplied by 100% minus the net percentage of Abatement provided under this
Agreement. For the purposes of this provision, the term "circumstances beyond the control of
Owner" shall include casualty losses, national economic factors, shutdowns due to governmental
regulations, strikzs, acts c~f war; and the like. The formula for calculating such additional tax is
outlined as follows:
[Tax Rate] x[(85°~"0 of Est. Added Value - Actual AV) x(100% - Abatement%)] = Additional
Tax
VIL CONTEMPLATED IMPROVEMENTS
T'he contemplated improvements are set forth in the Project Description attached as Exhibit
"A." During the Construction Phase, the Owner may make such change orders to the project as
are reasonably necessary, provided that no such change order may be made which will change
the qualification of the project as a"Facility" under the Guidelines for Granting Tax Abatement
approved by the Governmental Unit. All improvements shall be eompleted in accordance with all
applicable laws, ordinances, rules ur regulations. During the term of this Agreement, use of the
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Property ~hall be limited to operation of the Facility described in the Project Description
cc~nsistent with the general purpose of encouraging development or redevelopment of the zone
during the period of this Agreement.
Owner represents and warrants that this project will add at least 26 additional permanent or
full-time operating or contract employees to the project site. The current estimate of employment
upon completion of construction is 26. The project is not expected to solely or primarily have the
effect of transferring employment from one part <~f Nueces County to another.
VIIi. EVENTS OF DEFAULT AND RECAPTURE
A. Faailure to Commence Operation During Term of A~reement. In the event that the
Facility is not completed and does not begin operation with the minimum number of 26
permanent jobs by the January 1 following the completion of construction, no
abatement shall be given for that tax year, and the full amount of taxes assessed against
the property shall be due and payable f~r that tax year. In the event that the Owner fails
to begin operation with the minimum number of 26 permanent jobs by the next January
!, then the abatement Agreement shall terminate and all abated taxes during the period
~>f construction shall be recaptured and paid within 60 days of such termination.
B. Discontinuance of Operations During Term of Abatement. In the event the Facility is
completed and begins operation with the required minimum number of 26 permanent
jobs but subsequently discontinues operations and the minimum number of 26
permanent jobs is not maintained on any January 1 during the term of the Agreement
after the completion of construction, for any reason except on a temporary basis due to
tire, explosion or other casualty or accident or natural disaster, the Agreement may be
terminated by the Governmental Unit, and all taxes previously abated by virtue of the
agreement shall be recaptured and paid within 60 days of such termination.
G Uelinquent Taxes. In the event that the Owner allows its ad valorem taxes to become
delinquent and fails to timely and properly follow the legal procedures for their protest
and/or contest, this Agreement shall terminate and so shall the abatement of the taxes
for the calendar year of the delinquency. The total taxes assessed without abatement for
that calendar year shall be paid within sixty (60) days from the date of termination.
Penalty and interest shall not begin to accrue on the additional amount of taxes due as
the result of recapture under this provision until the first day of the month following
~uch sixty (60) day notice, at which time penalty and interest shall accrue in accord
with the laws r~f the State of' Texas. Penalty and interest on the amount of taxes
~~riginally levied based upon the Abatement shall, of course, begin to accrue as of the
ciate such taxes ~-ere due in accord with the laws of the State of Texas.
D. Notice of Default. Should the Governmental Unit determine that the Owner is in default
according to the terms and conditions of this Agreement, it shall notify the Owner that
~f such default is not cured within sixty (60) days from the date of such notice (`Cure
Period'), then this Agreement may be terminated. In the event the Owner fails to cure
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`aid default during the ('ure Period, this Agreement may be terminated and the taxes
abated by virtue of the Agreement will be recaptured and paid as provided herein.
E. Actual Added Value. Should the Nueces County Appraisal District determine that the
total level of A~led Value during any year of the term of this Agreement after
completion of the Construction Phase is lower than the Estimated Added Value such
that a lower percentage uf Abatement is applicable, for each year during which an
.~batement has heen granted the difference between the tax abated and the tax which
should have been abated based upon the actual Added Value shall be determined by the
(;overnmental t; nit and paid within 60 days of notification to the Owner of such
~ietermination. Penalty and interest shall not begin to accrue upon such sum until the
f~irst day ot~ the ~nonth following such sixty (60) day notice, at which time penalty and
interest shall accrue in accord with the laws of the State of Texas.
F. Reduction in Rollback T~ Rate. If during any year of the period of Abatement any
portion of the abated value is added to the current total value of the Governmental Unit
hut is not treated as `new property value' (as defined in Section 26.012 (17) of the
1'exas 'I'ax Code) for the purpose of establishing the "effective maintenance rate" in
calculating the `rollback tax rate' in accord with Section 26.04 (c) (2) of the Texas Tax
('ode and if the Governmental Unit's budget calculations indicate that a tax rate in
~xcess of the `rallback ta~c rate' is required to fund the operations of the Governmental
t Init for the succeeding year, then the Governmental Unit shall recapture from the
Owner a tax in an amount equal to the lesser of the following:
~ I) The amount of the taxes abated for that year by the Governmental Unit with
respect to the Property.
t 2) The amount obtained by subtracting the rollback t~ rate computed without the
abated property value being treated as new property value from the rollback tax
rate computed with the abated property value being treated as new property value
and multiplying the difference by the total assessed value of the Governmental
L'nit
If the Governmental Unit has granted an abatement of taxes to more than one taxpayer, then
the amount of the recapture calculated in accord with subparagraph (2) above shall be
prorated on the basis of the value of the abatement with respect to each taxpayer.
This event shall not constitute a`default' under this Agreement, and the sixty (60) day Cure
Period provided above shall not apply. Such recaptured ta~ces must be paid within thirty (30}
days after notice thereof has been given to the Owner. Penalty and interest shall not begin to
accrue upon such sum until the first day of the month following such thirty (30) day notice,
at which time penalty and interest shall accrue in accord with the laws of the State of Texas.
G. Continuation of Tax Lien. The amount of tax abated each year under the terms of this
~greement shall be secured by a first and prior taa~ lien which shall continue in
existence from year te~ year until such time as this Agreement between the
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C;overnmental Unit and Owner is fully performed by Owner, or until all taxes, whether
assessed or recaptured, are paid in fail.
In the event of any default by Owner, the governing body of the Governmental Unit reserves
the right to terminate or modify this Ageement. Owner shall be afforded written notice of such
default and the opportunity to cure as provided above. If Owner believes such action was
impraper, Owner may file an appeal in Nueces ('ounty district court within sixty (60) days after
written notice of the actic~n by the Governmental Unit. Owner shall remit to the Governmental
L nit, within such 60-day period, any additional or recaptured taxes levied pursuant to the
payment provisions of Texas Tax C'ode ~ 42.08. If the final determination of the appeal increases
Owner's tax liability above the amount paid, Owner shall remit the additional taY pursuant to
Tax Code § 42.4?. If the final determination of the appeal decreases Owner's tax liability, the
Governmental Unit shall refund the Owner the difference between the amount of tax paid and the
amount of tax far which Owner is liable pursuant to Tax Code § 42.43.
[X. ADMINISTRATION
It~spections. The Owner shall allow employees and/or representatives of the Governmental
Unit to have access to the Property during the term of this Agreement to inspect the Facility to
determine compliance with the terms and conditions of this Agreement. All inspections will be
made onl~~ after the givin~ of twenty-four (24) hours prior notice and will only be conducted in
such manner as to not unreasonably interfere with the construction and/or operation of the
Facility. All inspections will be made with one or more representatives of the Owner and in
accordance with Owner's safety standards.
Apprai~als. The Chief Appraiser of the Nueces County Appraisal District shall annually
determine (i} the taxable value of the real and personal property comprising the Property taking
into consideration the Abatement provided by this Agreement, and (ii) the full t~able value
without Abatement of the real and personal property comprising the Property. The Chief
Appraiser shall record both the abated taxable value and the full taxable value in the appraisal
records. The full taxable ~ alue figure listed in the appraisal records shall be used to compute the
amount ot~ abated taxes that are required to be recaptured and paid in the event this Agreement is
terminated in a manner that results in recapture. Each year the Owner shall furnish the Chief
Appraiser with such information outlined in Chapter 22, Texas Tax Code, as amended, as may be
necessary for the administration ot the Agreement specified herein.
Annual Reports. Owner shall certify to the governing body of the Governmental Unit on or
before April 1 each year that the Owner is in compliance with each applicable term of this
Agreement. Additionally. during the initial four years of the term of property tax abatement,
Owner shall provide to the Governmental Unit an annual report covering those items listed on
Schec~ule I attached hereto in order to document the efforts of the Owner to acquire goods and
sen-ices on a local basis. Such annual report shall be prepared on a calendar year basis and shall
be submitted to the Governmental Unit no later than ninety (90) days following the end of each
such calendar year. The annual report shall be accompanied by an audit letter prepared by an
independent accounting firm which has reviewed the report.
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`Buv Local' Provision. The Owner additionally agrees to give preference and priority to
lacal manufacturers, suppliers, contractors and labor, except where not reasonably possible to do
sc ~ w ithout added expense. substantial inconvenience, or sacrifice in operating efficiency. In any
such exception cases involving purchases over $10,000.00 a justification for such purchase shall
be included in the annual report. "The Owner further acknowledges that it is a legal and moral
ohligation of persons receiving property tax abatements to favor local manufacturers, suppliers,
ccmtractors and labor, all other factors being equal. For the purposes of this provision, the term
`1~-ca1' as used to describe manufacturers, suppliers, contractors and labor shall include firms,
businesses, and persons who reside in or maintain an office in either Nueces County or San
Patricio County. In the event of a breach of the buy local provision, the percentage of abatement
shall be proportionately reduced by the amount the disqualified contract bears to the total
constructicin cost for the project.
X. ASSIGNMENT
T'he Owner may assi~m this Agreement to any one or more corporation(s), 50% or more of
the outstanding voting securities of which are owned, directly or indirectly, by one of the
Owners, or any partnership(s) or limited partnership(s) in which an Owner, or a subsidiary of an
Owner, is a general partner. The Owner may assign this Agreement to any other new owner or
lessee ofi the Facility with the prior written consent of the Governmental Unit, which consent
shall not be unreasonably withheld. Any assignment shall provide that the assignee shall
irrevocably and unconditionally assume all the duties and obligations of the assignor and become
the (~wner upon the same terms and conditions as set out in this Agreement. In the event more
than one entity is Owner hereunder. the obligations of said entities shall be joint and several. Any
assi~~nment of this Agreement shall be to an entity that will provide substantially the same
improvements to the Property, except ta the extent such improvements have been completed. No
assi~nent shall be appro~ed if the Owner or anv assignee is indebted to the Governmental Unit
for ad valorern taxes or other obligations.
XI. NOTICES
Any notice required to be given under the provisions of this Agreement shall be in writing
and shall be duly served when it shall have been deposited, with the proper postage prepaid
thereon, and duly registered or certified, return receipt requested, with the United States Postal
Service, addressed to the Governmental Unit or Owner at the following addresses. If mailed, any
notice or communication shall be deemed to be received three days after the date of deposit in
thz United States Mail. Unless c~therwise provided in this Agreement, all notices shall be
delivered to the following addresses:
To the Governmental Unit: CITY OF CORPUS CHRISTI, TEXAS
1?O1 Leopard Street
P. 0. Box 9277
Corpus Christi, Texas 78469
Attn: C'ity Manager
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Tc~ the Owner: t' LLAH INVESTMENTS, INC.
5?20 Ayers
C'orpus Christi, T'exas 78415
Either party may designate a different address by giving the other party ten days' written
notice.
This Agreement has been executed by the parties in multiple originals or counterparts, each
having full force and effect.
~ ~ ~~ ~
Executed this ___ day ot- ~ z C~*~~- ,?006.
GOVERNMENT,~L UNIT:
A TTES'I':
Bv: / ~
:~rm~nndo Chapa, City Secretary
APPROVED AS 'r0 FORM:
B y~ ~~' --
G~ Smith. Assistant Citv Attorne
Y ~ Y
for Mary Kay Eischer, City Attornev
CITY OF CORPUS CHRISTI, TEXAS
By:
George oe, City Manager
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OWNER:
LILLAH INVEST~'~'~, INC.
By:
Aman
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SCHEDULE 1
`Buy Local" Annual Reports
The following information shall be reported to the Governmental Unit on a calendar-year
basis during the first four years of the tax abatement program:
Dollar amount spent for materials* (local).
2. Dollar amount spent for materials (total}.
i. Dollar amount spent for labor** (local).
~. Dollar amount spent for labor** (total).
S. Number of jobs created in the construction project (local).
~i. Number of jobs created in the construction project (total).
,. Number of jobs created on a permanent basis (local).
8. Number of jobs created on a permanent basis (total).
* `Materials' is defined to include all materials used in excavation, site improvement,
demolition, concrete, structural steel, fire proofing, piping, electrical, instruments, paintings and
scaffQlding, insulation, temporary construction facilities, supplies, equipment rental in
construction, small tools and consumables. This term does not include major items of machinery
and equipment not readily-available locally.
** `Labor' is defined to include all labor in connection with the excavation, site improvement,
demolition, concrete construction, structural steel, fire proofing, equipment placement, piping,
electrical, instruments, painting and scaffolding, insulation, construction services, craft benefits,
payroll burdens, and related labor expenses. This term does not include engineering services in
connection with the project design.
The term `local' as used to describe manufacturers, suppliers, contractors and labor shall include
firms, businesses. and persons who reside in or maintain an office in either Nueces County or
San Patricio Countv.
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Exhibit A
i~orpus Christi Project Plan
Mav 23. 200b
This project will construct and operate a LaQuinta Inn and Suites with more at least 26 positions.
The site is currentlv vacant.
Permanent improvements $ 1,300,000
Estimated capital $ 1,300,000
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EXHIBIT `B'
Lot 5, Block 8, Ri~ er Square Llnit 2, a subdivision in the City of Corpus Christi, Texas, as
shown by map or plat thereof recorded in the Map Records of Nueces County, Texas, and
being known as 3500 McKenzie Road, Corpus Christi, Texas.
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