Legislature(1995 - 1996)
10/24/1995 02:00 PM Senate RES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE
October 24, 1995
2:00 p.m.
Wasilla, AK
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Rick Halford
Senator Robin Taylor (Participated from Wrangell via
teleconference network)
Senator Georgianna Lincoln (Participated from Rampart via
teleconference network)
MEMBERS ABSENT
Senator Drue Pearce, Vice Chairman
Senator Steve Frank
Senator Lyman Hoffman
COMMITTEE CALENDAR
SENATE BILL NO. 162
"An Act relating to land used for agricultural purposes and to
state land classified for agricultural purposes or subject to the
restriction of use for agricultural purposes only; and annulling
certain program regulations of the Department of Natural Resources
that are inconsistent with the amendments made by this Act."
PREVIOUS SENATE COMMITTEE ACTION
SB 162 - No previous action to record.
WITNESS REGISTER
Senator Lyda Green
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Prime Sponsor of SB 162
Brett Huber, Staff to Senator Green
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on SB 162
Ron Swanson, Director
Division of Land
Department of Natural Resources
3601 C St., Suite 1122
Anchorage, AK 99503-5947
POSITION STATEMENT: Department neutral on SB 162
Billy Lemon, Jr.
HC89, Box 8107
Talkeetna, AK 99676
POSITION STATEMENT: Supports SB 162
Michael Swann
P.O. Box 987
Soldotna, AK 99669
POSITION STATEMENT: Supports SB 162
Harvey Baskin
P.O. Box 877306
Wasilla, AK 99687
POSITION STATEMENT: Supports SB 162
Henry Cole
P.O. Box 71330
Fairbanks, AK 99707
POSITION STATEMENT: Supports SB 162
Bob Franklin
P.O. Box 75184
Fairbanks, AK 99707
POSITION STATEMENT: Supports SB 162
Bill Ward
P.O. Box 350
Soldotna, AK 99669
POSITION STATEMENT: Testified in support of SB 162
Scott Schultz
HC62, Box 5440
Delta Junction, AK 99737
POSITION STATEMENT: Testified in support of SB 162
Frank Burris
HC62, Box 5780
Delta Junction, AK 99737
POSITION STATEMENT: Supports SB 162
Mike Crouch
HC62, Box 5780
Delta Junction, AK 99737
POSITION STATEMENT: Supports SB 162
Charles Fork
P.O. Box 929
Delta Junction, AK 99737
POSITION STATEMENT: Suggested legislation needs clarification
language
Mike Carlson
P.O. Box 953
Delta Junction, AK 99737
POSITION STATEMENT: Supports SB 162
Mrs. Dana Olson
HC30, Box 5438
Wasilla, AK 99654
POSITION STATEMENT: Supports SB 162
Charles Thompson, Agriculture Credit Director
Farm Service Agency
P.O. Box 2365
Palmer, AK 99645
POSITION STATEMENT: Testified in support of SB 162
Herb Simon
HC1, Box 2292
Glennallen, AK 99688
POSITION STATEMENT: Expressed concerns on AG lands
Don Quarberg
P.O. Box 349
Delta Junction, AK 99737
POSITION STATEMENT: Commented on SB 162
ACTION NARRATIVE
TAPE 95-64, SIDE A
Number 001
SB 162 AGRICULTURAL LAND
CHAIRMAN LEMAN called the Senate Resources Committee meeting to
order at 2:00 p.m. in the Mat-Su Legislative Information Office
conference room. He noted the following teleconference sites were
participating in the meeting: Juneau, Kenai/Soldotna, Fairbanks,
Homer and Anchorage.
SENATOR LYDA GREEN, prime sponsor of SB 162, said the legislation
expands the state's ability to convey interest in lands classified
for agricultural purposes that the state has conveyed or may
convey. Currently, the state conveys agriculture interests only
and the state retains all other interests. With the passage of SB
162, the state will convey fee simple title, subject to certain
restrictive covenants that would underpin the use of the land for
agricultural purposes. This change would allow owners of
agricultural parcels the opportunity to obtain financing from other
than the state.
Agricultural land disposal represents a cost effective means of
transferring public land into private ownership. Increased private
ownership expands the local tax base and reduces revenue sharing
needs while promoting community development and supporting
infrastructure development for a variety of other resource uses,
i.e.. public recreation, mining and transportation. Other
provisions of SB 162 aid future land disposals in two ways: by
allowing the use of a site-specific plan to support a land
classification for new commercial agricultural projects, and by
authorizing the sale of Ag land in parcels or tracts by aliquot
parts.
The remaining provisions of the bill emphasize a greater level of
autonomy for the individual agribusiness owner, while ensuring the
state's interests are protected. The bill also reduces the state's
direct control over individual farm development and utilization and
allows Ag land owners the ability to make business decisions
responsive to the economic factors of the marketplace and their
individual circumstances.
Concluding her overview, Senator Green said SB 162 redefines the
state's role in agricultural land disposal and development to
better enhance economic development opportunities. Its passage
will allow the state of Alaska to reap the benefits of agriculture
as an economically viable and expanding resource industry. She
respectfully requested the committee's support of SB 162.
Number 055
SENATOR GREEN then presented the following sectional analysis on SB
162:
Section 1: The primary issue is to provide title that will make it
easier for Ag producers to secure conventional financing, and to
ensure that any decisions with regard to adversionary cause be
determined by the courts with full judicial review, rather than
internally by the administration.
Section 2: It eliminates the requirement for Ag land to be
surveyed first before disposal takes place. Currently, the costs
to perform and the backlog of workload involved with surveys has
created a bottleneck slowing the process of Ag land disposal.
Section 3: It gives the department authority to use a site-
specific land use plan for agricultural development.
Section 4: It does away with pre-qualification and requirement of
farm development plans and schedules. This is to allow greater
flexibility of individual Ag producers to make determinations on
how to proceed with development in the face of changing needs and
market factors.
Section 5: It is a technical change that reflects the repeal of
the Ag Council statutes.
Section 6: It provides for Ag land disposal by aliquot parts.
Section 7: The language clarifies contract terms.
Section 8: It will lower interest on Ag land sales to 8 percent.
Section 9: It requires fee simple title be used to convey land
subject to an agricultural only covenant; provides a covenant
permitting subdivision down to 40 acres; and establishes remedies
for breech of covenants.
Section 10: It provides for Ag land transfers to municipalities.
Section 11: It allows the commissioner to require cooperation with
soil conservation districts; it restricts use of farm development
plans unless they are able to be modified for economic hardship or
other circumstances; and provides for greater autonomy in the use
of the land for construction of improvements, utilization for
incidental uses, sale of timber and use of gravel.
Sections 12 & 13: It requires the commissioner to issue new
conveyance documents on all agricultural parcels sold since August
15, 1976.
Section 14: It repeals current regulations affecting agricultural
land disposals since August 1978.
Number 090
SENATOR LEMAN asked why the retroactive application reaching back
20 years is necessary. BRETT HUBER, staff to Senator Green,
explained that part of the concern that has been heard from
industry and Ag producers that have parcels already conveyed is the
problem with securing other conventional financing, as well as
property rights issues that they are dealing with.
Number 105
SENATOR HALFORD said that in changing the conditions, you are, in
fact, granting a substantial increase in value, and he asked if any
consideration was given to that change in value. BRETT HUBER
responded that his understanding is that the reduction in values
during the previous disposal process were reflective of the use of
agriculture only, and SB 162 would not change the utilization of
these lands being designated for agricultural purposes.
SENATOR HALFORD said it changes the way the lands are designated,
and a subdivision restriction has an economic effect on the value,
which may be substantial. He pointed out that the Supreme Court
has said that you can't take away from somebody's property value by
covenants after the fact, and, if your action by a government
represents a taking, you've got to pay for it. He said in this
case, the action would represent a giving because those things
weren't given already, and he would be curious what the fiscal
implications of that are. BRETT HUBER agreed it was a point that
should be researched.
Number 161
SENATOR TAYLOR said he was primarily concerned about what the
department's plans are for the future, and are they, in fact, going
to be putting up additional acreages, whether they be restricted or
not. SENATOR LEMAN said that probably goes a little bit beyond the
topic of this bill, although it is an interesting piece of
information that he is interested in also. He then asked Ron
Swanson to address the department's concern with the legislation.
RON SWANSON, Director, Division of Land, Department of Natural
Resources, responding to Senator Taylor's concern, said the
department is currently having a land disposal, with the drawing
scheduled for the following day. They have received 31 bids on Ag
parcels, and the parcels range in size from 21 acres to 184 acres,
with a value ranging from $700 to $66,400.
Mr. Swanson stated that the administration has not taken a position
on SB 162. They do see some good points to it, but they do have
concerns with some areas of it.
Referring to Section 1, which deals with patents, Mr. Swanson said
his first concern with the section was that it wasn't meeting the
current statute, AS 30.05.321. The Attorney General's office has
said that the patent currently issued by the department does meet
state law and recommends that no changes be made. He added that
the department is neutral on the patent issue; they understand the
concerns on financing, but they are also very concerned that they
have an enforceable contract.
Turning to Section 2, Mr. Swanson stated the department is opposed
to removing the survey requirements. All disposals of state land
are presently required to be surveyed. The department has had
numerous problems with paper plats and unsurveyed land in the past,
and unless they have some kind of platting authority, those
problems will continue. He noted that HB 80, which is currently in
Senate Finance, makes DNR the platting authority within the
unorganized borough.
Addressing Section 3, Mr. Swanson stated the department opposes
excluding agricultural land from the land use planning and
classification process. The planning and classification statutes
(AS 38.04) are the result of a 1986 Supreme Court case where it was
found that disposals of state land cannot occur unless the land has
been classified as a result of an area or regional planning
process.
The department opposes Section 4, which takes away the authority to
do pre-qualification of agricultural land buyers. They do not want
to lose all control of how the land will be used and ensuring that
only viable people obtain agricultural land for that purpose.
However, the department supports the ability of the commissioner to
waive, postpone or modify contract terms based on economic
considerations.
The department does not oppose Section 5, although they do not see
the need for the provision.
The department opposes Section 6, which allows the sale of
agricultural tracts by aliquot parts, for the same reason as
outlined in their opposition to Section 2.
The department supports the language in Section 7 which will
clarify contract terms.
The department does not support lowering of the interest rate to 8
percent for Ag loans as provided in Section 8. HB 191, which is in
Senate Finance, establishes an interest rate for all land loans at
the prime rate plus 4 percent (this is currently 12.2 percent) and
not to exceed 13.5 percent. The department believes that interest
rates for all land loans should be the same. They feel the
appraisal makes the adjustments for the value of the land.
Number 360
SENATOR LEMAN commented that by lowering the interest rate, it is
not necessarily supporting the goal of creating an opportunity for
people to get their financing elsewhere. By lowering the interest
rate artificially, it may encourage people to get financing from
the state, especially if commercial rates go higher. SENATOR GREEN
said one of the goals is to see more land in agriculture, and the
budgetary climate is such that eventually the lending source for
agricultural land may not be here, so it has been set up via the
other mechanism in the bill to have it in place so that people can
go to a private lending institution. SENATOR LEMAN said he
understands and agrees with that goal, but he wasn't sure this
helps to accomplish that goal. His concern is that it creates
something that isn't financially viable and would need continued
funding by the state.
Number 400
Addressing Section 9, Mr. Swanson said the department is concerned
about somewhat allowing unlimited subdivisions. Current
regulations allow subdivisions down to 40 acres on a limited basis,
which may be too tight, but unlimited is too loose. The concern is
the balance of making sure that the land is being used for the
purpose it was intended for.
Section 10 provides that land classified fora agriculture may be
conveyed to municipalities under the Municipal Land Act without any
restrictions. Currently, only the agricultural interest in the
land may be conveyed to municipalities. The state would lose
control in making sure that Ag land is used for Ag purposes.
The department fully supports Section 11, which are major issues to
the agricultural industry.
The department opposes Sections 12 & 13, which require the
commissioner to issue new conveyance documents on agriculture
parcels sold since 1976, and which would be a major workload for
the department.
The department opposes Section 14 which repeals the executive
branch's regulations.
Number 533
SENATOR LINCOLN asked how many parcels the department would have to
go back to since 1976. SENATOR GREEN responded there are 213
parcels from 1979 to date, as well as 15 in the process right now.
SENATOR LINCOLN asked if the department was in opposition to
Section 12 & 13 because of the workload or was it because they felt
it was not fair to those who chose not to purchase agricultural
property. RON SWANSON responded that it was a little bit of each.
He does not think it is fair to people who chose not to bid because
of the restrictions, and then to give the people who did bid an
additional right without paying for it.
Number 634
SENATOR LEMAN then opened the meeting to public testimony.
BILLY LEMON, JR., a resident of Talkeenta, said if he was sold a
piece of land for $10,000, the chances are that to clear and make
it a farm, he would have to put $100,000 into it. If he sold off
40 acres of 200 acres, he may or may not get his original
investment back, but it gives him some operating capital. There
are all kinds of problems that have to be overcome to make three
acres viable in a lot of cases, and he doesn't see that there is
any value added in these cases. He acknowledged that being able
to subdivide does increase the value, but, he said chances are that
the individual is getting back less than what it cost to do that.
TAPE 95-64, SIDE B
Number 010
Mr. Lemon said that seven years from now he wants to have 15 acres
in production and a five-acre homesite. Right now, he can go to a
friend and lease 40 acres, but he can't put a house or a barn on it
and turn it into a working farm. He wants to have a truck farm,
and if there was some way he could do that, he would get going on
it.
Mr. Lemon pointed out that the Mat-Su Borough has a Title 23
program whereby he can pick some land, and, if the local people
don't object, he can go for it. He questioned that if the borough
can do that, why can't the state do the same.
Mr. Lemon spoke to the financial problems that many of the farmers
in the state are having, and he said these people need help and the
legislature needs to make good on the promises it made to them in
the 1980's.
Number 070
MICHAEL SWANN of Soldotna, representing the Alaska Soil & Water
Conservation Districts, stated their support for SB 162 and their
belief that it is a real positive effort for agriculture throughout
the state.
Mr. Swann noted that he is a land surveyor, and he pointed out that
the Kenai Peninsula Borough has an ordinance that allows for
platting waivers and they do have some paper plats. He stated he
supports aliquot parts to help get land out to the public a little
faster. He also pointed out that survey section is understaffed
and they have the whole state to look at so it takes a lot of time
to get parcels through.
Number 100
HARVEY BASKIN of Wasilla, testifying from Anchorage in support of
SB 162, stated he was one of the surviving dairy farmers from the
Point MacKenzie project. He said SB 162 is a positive approach
that people like himself have fought for since day one, because it
was such a struggle to borrow money to develop these farms. His
farm was developed through hard work, personal investment, and the
monies that they could borrow from the Agricultural Revolving Loan
Fund, which was their sole source of money.
Mr. Baskin said there is going to be a day when he will no longer
be able to run his dairy farm, but he can't talk his son or grown
grandsons into touching that farm with a patent as the ownership
document. In his opinion, a patent is just a glorified land use
permit; it is just for a longer term. He said the American way of
life has always been that the farmer would own his farm, not just
have a right to use it. He believes that one of the reasons that
the Point MacKenzie project was such a colossal flop is because
there was no future in owning a patent.
Number 142
HENRY COLE, Fairbanks, Director of the local order of the Interior
Alaska Economic Development Council, stated his support for SB 162.
He said he has been doing quite a bit of work in the Delta region
because of the base closure and he has been becoming more and more
familiar with the problems that the farmers have in that region in
trying to raise money for development, for processing, and further
value added on to their projects. He has been working with a
number of individuals who would like to borrow money either from
the bank of the Agricultural Revolving Loan Fund and the passage of
SB 162 will make it much easier for them to do so.
Number 162
BOB FRANKLIN, State President of the Alaska Farm Bureau and owner
of a meat processing facility in Fairbanks, stated SB 162 is very
important to the agricultural community statewide due to the fact
that in order for agriculture to develop, the land has to be owned
by the farmer. They cannot be state of Alaska tenants and expect
to progress, and something needs to be done to make this renewable
natural resource of agriculture survive and prosper in the future.
Number 196
SENATOR LINCOLN asked how many farms there are in the Alaska Farm
Bureau. MR. FRANKLIN answered there are approximately 260 members,
although all are not actively farming and some are just associate
members who support agriculture. He added that according to the
U.S. Census, there are 513 actual farms in the state of Alaska.
Number 205
BILL WARD, owner of Ward Farms in Soldotna, stated SB 162 is
important legislation that deserves passage this session.
Mr. Ward said ever since its inception, there has been argument and
debate over the language of the Ag rights patent and the degree of
ownership vested with the title. The existing patent does not
follow conventional land law, is vague in intent and there is
dispute regarding the ownership value. SB 162 will clarify the
issue by selling the fee simple interest in the surface estate, but
it will impose a restrictive use covenant to the title which will
limit the land's use to agriculture. This follows standard land
law, the covenant is enforceable in court and the fundamental
freedom of private property ownership in this country is protected.
Mr. Ward also stated that much of the problem associated with
agriculture in Alaska has been the direct result of the state's
mandatory requirements for development and operation of the farms.
There are already a multitude of agencies providing oversight, and
the farmers do not need the additional oversight of DNR to regulate
their businesses. He said if agriculture is to contribute to the
economy of Alaska, then it will succeed by the efforts of the
individual farmers and ranchers of the private sector and not by
the interference and manipulation of the state.
Number 270
SENATOR LEMAN stated testimony would be taken from witnesses
waiting to testify in Delta Junction.
SCOTT SCHULTZ of Delta Junction, an owner and operator, along with
his brother, of a farm in Delta Junction, said there needs to be a
change to the covenant on the Ag title to bring it in line with
common land law, which will make the land and the improvements on
the land a better asset for collateral for loans, as well as
providing a due process as to how violations can be handled.
Speaking to restrictions on a title, Mr. Schultz said it is one
thing to have restrictions on a contract when you are purchasing
something, but once it is paid off, the owners should be free to do
as they see fit on their land.
Mr. Schultz encouraged the passage of SB 162.
Number 330
FRANK BURRIS, a co-owner of Eagle Ridge Ranch in Delta Junction
testifying in support of SB 162, said they have 400 acres out of a
total of 2,800 acres that they farm every year, as well as a game
bird facility, dog training, etc. They would like to have the
opportunity to diversify so that they can make a viable business
opportunity out of the ranch they are operating. They would like
to build a lodge on their land, but they cannot have any permanent
buildings on the 20 acre homesite they currently have approved in
the farm plan for that land. They have no intentions of
subdividing their land and converting it into smaller plots that
they can sell; their intention is to farm and to run a game bird
facility.
Number 400
MIKE CROUCH with Road Creeks Ranch in Delta Junction stated he has
farmed in various locations in the state for the past 18 years. He
said one of the biggest threats to agriculture in the Lower 48 are
large corporate farms, but, to his knowledge, there is not one
large corporate farm in Alaska. Every farm in Alaska is owned by
a family and the family runs the operation. He believes passage of
SB 162 will enable the small family farm to not only continue, but
to flourish as well.
Number 435
CHARLES FORK, a part-time hay farmer in Delta, referred to Section
9, which provides that the department shall include in a document
that conveys state land classified as agricultural land: (1) a
covenant running with the land that restricts or limits the use of
the land exclusively for agricultural purposes. He suggested that
language should be referenced in Section 11, subparagraph (B)
because he believes that language is a little ambiguous standing
alone and it would be helpful if it made reference to the covenant.
Mr. Fork also referred to Section 9, paragraph (3) which provides
that the department shall include in the document provisions that
establish remedies for a breach of the covenants described in the
subsection. He said to him that goes to the heart of what Bill
Lord has been getting at about the present commissioner's ability
to take the land back. He said his understanding is that the idea
is to establish a remedy through the court system so that state can
sue the land owner and that some kind of judicial remedy would be
provided, but he doesn't see that the bill specifies what that
remedy would be. He suggested there needs to be additional
language relating to provisions that establish remedies.
In closing, Mr. Fork said he basically supports SB 162.
Number 505
SENATOR GREEN acknowledged that Mr. Fork's suggested changes had
been caught by the drafter of the legislation after its
introduction and that these changes would be made in a committee
substitute.
Number 515
MIKE CARLSON, a 28-year resident of Delta Junction, said he has
owned both fee simple parcels and Ag rights parcels, which he
subsequently got rid of. He said the original intent of Ag rights
was to protect agricultural lands, not to put restrictions on land
owners and their ability to get loans. That original intent has
been lost either through regulations or the way the bill was
written originally. He believes that SB 162 will get back to what
perhaps was the original concept of what agricultural interests in
lands was going to be.
Number 570
DANA OLSON of Wasilla, testifying from the Mat-Su LIO, spoke to the
Agricultural Homestead program, which, she said, has always been
looked at as being kind of a hobby type of agriculture. She
pointed out said there are people who saw the deficiencies in the
current commercial agricultural program and felt it would not work
and, instead, engaged in the homestead program knowing that it was
a less restrictive form of agriculture. She said the legislature
needs to decide whether or not the program of homestead agriculture
is a viable, and she also suggested adding a section to the
legislation that would provide a remedy for people who participated
in the 1984 homestead lottery.
TAPE 95-65, SIDE A
Number 025
CHARLES THOMPSON, Agricultural Credit Director for the Farm Service
Agency, stated their mission is to support farming and to promote
the family farm concept. They particularly provide assistance to
beginning farmers and to other farmers who have financial
difficulties of one type or another, particularly when there is a
disaster. As a lender, they like to see fee simple land as the
vehicle to put land into private ownership because it provides them
the greatest flexibility in coming up with a feasible and
successful operation.
Mr. Thompson pointed out that the agency has had many applicants
request assistance on Ag rights land, but, due to the state's
present policy, they have not be able to help these individuals
because of the inability to secure a lien on the property. It
appears from their standpoint that if this is corrected, then
considerable assistance from their agency and probably from the
commercial sector will be able to promote agriculture and provide
needed capital in these areas that are trying to develop now such
as Delta Junction, Point MacKenzie, Mat-Su Valley, Kenai Peninsula
and other areas of the state that are yet untapped.
Concluding his comments, Mr. Thompson stated the agency's support
for SB 162.
Number 075
HERB SIMON, owner and operator of Little Nelchina Farm, stated his
family has farmed and ranched in the headwaters of the Matanuska
and the headwaters of the Copper River since right after World War
II. What land they own is fee simple and they are in a designated
non-agricultural area, according to the Division of Lands.
He expressed his contempt for the Division of Lands, stating that
his family has been denied the opportunity to secure agricultural
land since 1977, and the basic cause for this is because they don't
believe in serfdom and the tenant-type provisions that have
prevailed in the so-called agricultural development. He suggested
that the legislature consider that not only the agricultural land
but all Alaska land belongs to the people and not to the
bureaucracy. The state, in retaining ownership and erecting
barriers to the ownership of the land, mitigates any economic
development and any tax base.
Mr. Simon also suggested that the legislation should mandate that
when the state conveys fee simple title with the covenants in it,
that foremost when the state conveys land, that they convey good
title. He said a classic example is the title to every parcel of
Point MacKenzie which was let with the known encumbrance of the
mental health lands issue.
Number 198
SENATOR HALFORD pointed out that at the time the Point MacKenzie
project went forward, it wasn't encumbered.
Number 230
SENATOR HALFORD commented that he doesn't think the value
difference is going to be anything as a result of the title change
provisions, instead, he thinks the subdivision provision is going
to be the thing that has potential in the value change. He said
there has got to be some middle ground that allows for more
development and still doesn't get into all the problems with the
huge parcels being cut up into multiple 40s. SENATOR LEMAN
responded that would be something he would encourage those
interested in the bill to work on in trying to come up with
something that makes some sense.
Number 250
DON QUARBERG of Delta Junction said he has listened to the
discussion over the size of the parcels for a number of years, and
he suggested people can sit around for the rest of their lives and
try to determine what the most opportune size of a farm is. He
thinks if that land is released and made available, then the people
that are more efficient are going to buy up their adjacent
neighbors, which has happened all across the country anyway. He
said we get hung up on Delta I and Delta II Ag projects, and people
tend not to realize that there were eight small farms released in
Delta for every large one, so it is not all big parcels. He thinks
the industry will guide itself in this line.
Number 288
SENATOR LEMAN thanked all the people who had participated in the
discussion on SB 162 and then adjourned the meeting at 4:16 p.m.
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