BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |SB 317                           |Hearing    | 5/6/15  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |De León                          |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |4/23/15                          |Fiscal:    |Yes      |
           ------------------------------------------------------------------ 
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          |Consultant|Grinnell                                              |
          |:         |                                                      |
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              THE SAFE NEIGHBORHOOD PARKS, RIVERS, AND COASTAL PROTECTION  
                             BOND ACT OF 2016 (URGENCY)



          Enacts the Safe Neighborhood Parks, Rivers, and Coastal  
          Protection Bond Act of 2016, which places a $2.45 billion bond  
          on the November, 2016, ballot.


           Background and Existing Law

           I.  Bond Acts.  When public agencies issue bonds, they  
          essentially borrow money from investors, who provide cash in  
          exchange for the agencies' commitment to repay the principal  
          amount of the bond plus interest.  Bonds are usually either  
          revenue bonds, which repay investors out of revenue generated  
          from the project the agency buys with bond proceeds, or general  
          obligation bonds, which the public agency pays out of general  
          revenues and are guaranteed by its full faith and credit.  

          Section 1 of Article XVI of the California Constitution and the  
          state's General Obligation Bond Law guide the issuance of the  
          state's general obligation debt.  The Constitution allows the  
          Legislature to place general obligation bonds on the ballot for  
          specific purposes with a two-thirds vote of the Assembly and  
          Senate.  Voters also can place bonds on the ballot by  
          initiative, as they have for parks, water projects, high-speed  
          rail, and stem cell research, among others.  Either way, general  
          obligation bonds must be ratified by majority vote of the  








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          state's electorate.  Unlike local general obligation bonds, the  
          state's electorate doesn't automatically trigger an increased  
          tax to repay the bonds when they approve a state general  
          obligation bond.  Article XVI of the California Constitution  
          commits the state to repay investors from general revenues above  
          all other claims, except payments to public education.   
          California voters approved $38.4 billion of general obligation  
          bonds between 1974 and 1999, but approximately $95 billion since  
          2000.  Additionally, the Legislature enacted and voters approved  
          Proposition 1, which authorized $7.1 billion in bonds for water  
          quality and supply infrastructure (AB 1471, Rendon, 2014).

          Bond acts have standard provisions that authorize the Treasurer  
          to sell a specified amount of bonds, and generally include  
          several uniform provisions that:

                 Establish the state's obligation to repay them, and  
               pledge its full faith and credit to repayment, 

                 Set forth issuance procedures, and link the bond act to  
               the state's General Obligation Bond Law,  

                 Create a finance committee with specified membership,  
               chaired by the State Treasurer,  

                 Charge the committee to determine whether it is  
               "necessary or desirable" to issue the bonds,

                 Add other mechanisms necessary for the Treasurer and the  
               Department of Finance to implement the bond act, including  
               allowing the board to re-quest a loan from the Pooled Money  
               Investment Board to advance funds for bond-funded programs  
               prior to the bond sale, among others.

          In bond acts, the Legislature generally:

                 Sets forth categories of projects eligible for bond  
               funds, such as library construction or school facility  
               modernization, 

                 Chooses an administrative agency to award the funds,  
               such as the State Librarian or the State Allocation Board,   
                










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                 Details the criteria to guide the administrative  
               agency's funding in each category, 

                 Enacts enforcement and audit provisions, and

                 Provide for an election to approve the bond act.

          Should the voters approve the bond act, the Legislature then  
          appropriates funds to the chosen agencies to fund projects  
          consistent with the criteria, generally as part of the Budget  
          Act.  The Department of Finance then surveys agencies to  
          determine need for bond funds based on a project's readiness,  
          and then asks the Treasurer to sell bonds in a specified amount.  
           After the bond sale, the Department of Finance determines which  
          bond acts and agencies receive bond proceeds.  

          In recent years, the Legislature has enacted, and voters  
          approved the following bonds for parks:

                 Safe Neighborhood Parks, Clean Water, Clean Air, and  
               Coastal Protection Act of 2000 of $2.1 billion (AB 18,  
               Villaraigosa), and

                 California Clean Water, Clean air, Safe neighborhood  
               parks, and Coastal Protection Act of 2002 of $2.6 billion  
               (AB 1602, Keeley), 

          The following bond act was placed on the ballot by initiative:

                 The Safe Drinking Water, Water Quality and Supply, Flood  
               Control, River and Coastal Protection Bond Act of 2006 of  
               $5.4 billion (Proposition 84).


           Proposed Law

           Senate Bill 317 enacts the Safe Neighborhood Parks, Rivers, and  
          Coastal Protection Bond Act of 2016, which places a $2.45  
          billion bond on the November, 2016, ballot.  After bonds are  
          issued and sold, the measure allows the Legislature to  
          appropriate funds according to the following schedule:

                 $1.45 billion for parks in the following categories:










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                  o         $800 million to the Department of Parks and  
                    Recreation for creating and expanding safe  
                    neighborhood parks in park-poor neighborhoods, in  
                    accordance with the Safe Park Development and  
                    Community Revitalization Act of 2008 (AB 31, De Leon,  
                    2008)

                  o         $200 million for grants for local governments  
                    for local park rehabilitation and improvement,  
                    allocated on a per capita basis,

                  o         $200 million to the Department for grants for  
                    the restoration, preservation, and protection of  
                    regional parks and parklands,

                  o         $200 million to the Department for restoration  
                    and preservation of existing state park facilities,  
                    and units to preserve and increase public access and  
                    to protect natural resources, and

                  o         $50 million to the Department for enterprise  
                    activities to increase revenue generation to support  
                    the department.

                 $370 million for rivers, lakes, and streams in the  
               following categories:

                  o         $100 million to the Natural Resources Agency  
                    to restore, protect, and expand river parkways,

                  o         $100 million to the Agency to implement the  
                    Lake Tahoe Environmental Improvement Program,

                  o         $100 million for restoration and protection  
                    projects, and the development of river parkway  
                    projects on the Los Angeles River and its tributaries,

                  o         $50 million for deposit into the Salton Sea  
                    Restoration Fund.

                  o         $20 million for urban stream restoration  
                    pursuant to AB 2704 (Aroner, 2002).

                 $350 million for coast and ocean protection to fund  









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               protection in two categories:

                  o         $300 million to the state coastal conservancy  
                    to protect beaches, bays, and coastal watershed  
                    resources, including agricultural resources and to  
                    complete the California Coastal Trail,

                  o         $50 million to the Santa Monica Mountains  
                    Conservancy to protect Santa Monica Mountain coastal  
                    watersheds,

                 $280 million for climate resilience in three categories:

                  o         $100 million to the Strategic Growth Council  
                    to develop or implement regional or local greenprint  
                    or climate adaption plans, or update or develop a  
                    climate adaptation element for a general plan.  The  
                    Council can also use funds to protect agricultural and  
                    open-space resources that support adopted sustainable  
                    communities strategies.

                  o         $150 million to the wildlife conservation  
                    board for grants to protect and expand wildlife  
                    corridors,

                  o         $30 million to the Department of Forestry and  
                    Fire Protection for grants to complement existing  
                    urban forestry expenditures by covering areas not  
                    included from funding in SB 1018 (Committee on Budget  
                    and Fiscal Review, 2012).

          The measure incorporates standard provisions in general  
          obligation bond law either explicitly or by reference, including  
          charging the finance committee with determining whether it's  
          necessary and desirable to issue the bonds; however, the measure  
          neither specifies the members of the finance committee, nor its  
          Chair. 

          State agencies must seek to achieve wildlife conservation  
          objectives through projects on public lands or voluntary  
          projects on private land to the extent feasible.  State agencies  
          can use funds for payments to create measureable habitat or  
          other improvements in consultation with the Department of Fish  
          and Wildlife, including habitat exchanges.  Priority shall be  









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          given to projects that implement Natural Community Conservation  
          Plans and endangered species recovery plans.  Restoration  
          projects must include planning, monitoring, and reporting  
          necessary to ensure successful implementation.  

          The measure defines many of its terms, and also makes  
          legislative finding and declarations supporting its purposes.  


           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill  .  According to the author, "SB 317 enacts  
          into law the Safe Neighborhood Parks, Rivers, and Coastal  
          Protection Act of 2016, otherwise referred to as the Parks Bond.  
           The bond is a $2.45 billion measure that would appear on the  
          November 2016 ballot if it becomes law.  If enacted, SB 317  
          would be the first parks bond passed by this legislature in over  
          15 years (Proposition 84 of 2006 had some parks funding in it,  
          but it was a broader water and climate bond as well). Investing  
          in community parks and infrastructure is vital to communities  
          throughout the state.  It is particularly important in areas  
          where children have no green space and few recreational  
          opportunities.  The last time the Legislature provided funding  
          to help communities in parks poor areas, there were four times  
          as many requests as there were dollars.  Over time, that need  
          has only become greater.  SB 317 is focused on underserved  
          communities but it also provides funds for all areas, from San  
          Diego to Crescent City.  It reflects the fact that every region  
          of our state has different needs but all regions need parks and  
          open space."

          2.   Sixteen tons  .  Debt is an essential part of almost every  
          government, business, and personal balance sheet, as borrowers  
          seek funds from lenders in exchange for a future commitment to  
          repay them.  However, evaluating the State's general obligation  
          debt is difficult; both the State Treasurer and the Legislative  
          Analyst's Office suggest there's no correct amount.  Instead,  
          experts suggest that states should look at three criteria:  










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          affordability, comparability, and optimality<1>:

          California's debt is affordable. The State Treasurer estimates  
          that the state will spend $6.4 billion in 2014-15, and $6.8  
          billion in 2015-16.  However, these costs reduce the funding  
          that is available for other priorities.  Debt service is one of  
          the fastest growing state costs, expected to reach $8.6 billion  
          in 2017-18 assuming no new authorizations, according to the  
          Governor's Five-Year Infrastructure Plan.  The Plan proposes no  
          new general obligation bonds, instead relying on more limited  
          lease-revenue bonds because of this increased debt burden.

          California's comparability to other states is less favorable,  
          but improving.  The State Treasurer's 2014 Debt Affordability  
          Report contains the following chart, adjusted for recent  
          upgrades:

           ---------------------------------------------------------------- 
          |Debt Ratios Of 10 Most Populous States, Ranked By Ratio Of Debt |
          |To Personal Income                                              |
          |                                                                |
           ---------------------------------------------------------------- 
          |-----------------+------------+---------+---------+------------|
          |      State      |  Moody's/  | Debt To |Debt Per |Debt As A % |
          |                 |   S&P/     |Personal |Capita(b)|            |
          |                 |  Fitch(a)  |Income(b)|         |  Of State  |
          |                 |            |         |         | GDP(b)(c)  |
          |-----------------+------------+---------+---------+------------|
          |Texas            |Aaa/AAA/AAA |  1.5%   |  $614   |    1.2%    |
          |                 |            |         |         |            |
          |-----------------+------------+---------+---------+------------|
          |Michigan         |Aa2/AA-/AA  |  2.1%   |  $785   |    1.9%    |
          |-----------------+------------+---------+---------+------------|
          |North Carolina   |Aaa/AAA/AAA |  2.1%   |  $806   |    1.7%    |
          |                 |            |         |         |            |
          |-----------------+------------+---------+---------+------------|
          |Florida          |Aa1/AAA/AAA |  2.5%   | $1,088  |    2.5%    |
          |-----------------+------------+---------+---------+------------|
          |Pennsylvania     | Aa3/AA/AA  |  2.6%   | $1,172  |    2.5%    |
          |-----------------+------------+---------+---------+------------|
          ---------------------------
          <1> Robert Wassmer and Ronald Fisher "Debt Burdens of California  
          State and Local Governments: Past, Present and Future." As  
          requested and supported by the California Debt and Investment  
          Advisory Commission.  July 2011.








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          |Ohio             |Aa1/AA+/AA+ |  2.7%   | $1,087  |    2.5%    |
          |                 |            |         |         |            |
          |-----------------+------------+---------+---------+------------|
          |Georgia          |Aaa/AAA/AAA |  2.9%   | $1,064  |    2.5%    |
          |-----------------+------------+---------+---------+------------|
          |California       | Aa3/A+/A+  |  5.3%   | $2,465  |    4.7%    |
          |-----------------+------------+---------+---------+------------|
          |Illinois         | A3/A-/A-   |  5.6%   | $2,580  |    4.8%    |
          |-----------------+------------+---------+---------+------------|
          |New York         |Aa1/AA+/AA+ |  6.0%   | $3,204  |    5.2%    |
          |-----------------+------------+---------+---------+------------|
          |                 |            |         |         |            |
          |-----------------+------------+---------+---------+------------|
          |Moody's Median   |            |  2.6%   | $1,054  |    2.4%    |
          |All States       |            |         |         |            |
          |-----------------+------------+---------+---------+------------|
          |Median For The   |            |  2.7%   | $1,076  |    2.5%    |
          |10 Most Populous |            |         |         |            |
          |States           |            |         |         |            |
          |-----------------+------------+---------+---------+------------|
          |                 |            |         |         |            |
          |(a) Moody's,     |            |         |         |            |
          |Standard &       |            |         |         |            |
          |Poor's, and      |            |         |         |            |
          |Fitch Ratings as |            |         |         |            |
          |of August 2014   |            |         |         |            |
          |                 |            |         |         |            |
          |(b) Figures as   |            |         |         |            |
          |reported by      |            |         |         |            |
          |Moody's in its   |            |         |         |            |
          |2013 State Debt  |            |         |         |            |
          |Medians Report   |            |         |         |            |
          |released May     |            |         |         |            |
          |2014. As of      |            |         |         |            |
          |calendar year    |            |         |         |            |
          |end 2012.        |            |         |         |            |
          |                 |            |         |         |            |
          | State GDP      |            |         |         |            |
          |numbers have a   |            |         |         |            |
          |one-year lag.    |            |         |         |            |
           --------------------------------------------------------------- 

          Determining optimality or whether government is investing in the  
          quantity and quality of public capital desired by residents, and  









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          financing the appropriate share with debt, is very difficult.   
          LAO recommends that the Legislature consider the recently  
          released Five-Year Infrastructure Plan as a starting point to  
          developing a coordinated approach to infrastructure funding, and  
          establish a committee to focus on statewide infrastructure. 

          3.   The good news  .  Investors ultimately determine a state's  
          creditworthiness and the interest rate paid on a bond when they  
          bid to purchase one.  However, ratings issued from the three  
          major ratings agencies often inform investors and the public  
          regarding the investment risk of purchasing a California general  
          obligation bond.  These ratings change over time in response to  
          a state's fiscal situation and economy, among other factors.   
          Last year, ratings agencies Standard and Poor's and Moody's both  
          raised its ratings, and ratings agency Fitch has increased the  
          state's rating twice in the last three years.  Agencies  
          identified improving revenues and fiscal discipline when making  
          the upgrade.  Additionally, California sold $1.2 billion of  
          general-obligation bonds in November with its lowest relative  
          borrowing cost measured by interest rate since 2007. 

          4.   The bad news  . SB 317's bond authorization amount of $2.45  
          billion is consistent with the two most recent legislatively  
          enacted park bonds, less than half of the last bond enacted by  
          initiative, and modest compared with other recently enacted  
          bonds.  However, California has a distinct problem: of the $135  
          billion that voters have authorized, almost $30.4 billion hasn't  
          been issued yet.  The state hasn't issued almost $4.5 billion in  
          transportation bonds, and $9 billion in high speed rail bonds,  
          plus $7.5 billion from the recent water bond.  The principal  
          reason for this amount is that many bond-funded projects have  
          not received required approvals.  The Treasurer generally sells  
          about $1 billion in new money bonds twice per year, so even if  
          the Legislature enacts and the voters approve SB 317, many of  
          its purposes may have to wait several years for funding as  
          projects funded by previously authorized bonds get up and  
          running.

          5.   Consistent  ?  California generally repays general obligation  
          bonds over a 30 year period, reflecting sound public finance  
          principles whereby a borrower repays debt incurred to construct  
          an asset over its useful life.  Many projects Californian built  
          with bond proceeds are still in use long after the bonds have  
          been repaid.  While SB 317's funds parks with that will provide  









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          long-term benefits to many communities across the state, it does  
          propose to fund planning efforts by the Strategic Growth  
          Councilv (SGC) and local agencies to implement regional or local  
          greenprint plans, climate adaptation plans, or to update or  
          develop a climate adaptation element for a general plan.  While  
          these plans will have long-term impacts, they're not a  
          traditional use of bond proceeds, which have typically been for  
          infrastructure projects like high speed rail, levees, and  
          housing.  The Legislature could more easily fund these planning  
          efforts by appropriating funds in the Budget Act.

          6.   Another  .  The Committee approved SB 114 (Liu) at its April  
          15th hearing, which places a bond of an unspecified amount on  
          the November, 2016, ballot to fund K-12 school facilities.

          7.  Incoming  !  The Senate Committee on Natural Resources  
          approved SB 317 on April 28th, 2015 by a vote of 7 to 1.

          8.   Urgency  .   On April 23rd, the author amended SB 317 to  
          insert an urgency clause.  As an urgency statute, SB 317 would  
          take effect immediately.  
          
                          Support and Opposition (4/30/15)
                                           
           SUPPORT
          
          Advanced California Park & Recreation Profession

          Amigos de Bolsa Chica
          Amigos de los Rios
          Anahuak Youth Sports Association
          Anderson Marsh Interpretive Association
          Association of California Water Agencies
          Audubon California
          Anza-Borrego Foundation
          Audubon California
          Benicia State Parks Association
          Benicia Tree Foundation
          Big Sur Land Trust
          Bolsa Chica Land Trust
          California Association of Local
          California Association of Commissioners & Board Members
          California Association of Recreation and Park District
          Conservation Corps









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          California Climate and Agriculture Network
          California Council of Land Trusts
          California League of Conservation Voters
          California League of Parks Associations
          California ReLeaf
          California State Parks Foundation
          California State Railroad Museum Foundation
                                                              California Tahoe Alliance
          California Trout
          California Urban Forests Council
          California Yacht Brokers Association
          Californians for Western Wilderness
          Canopy
          Central Coast Lighthouse Keepers
          Chino Hills State Park interpretive Association
          City of Benicia
          City of Encinitas
          Clean Water Action
          Common Vision
          Community Services Employment Training
          Conejo Recreation and Park District
          County of Placer
          Crystal Cove Alliance
          Defenders of Wildlife
          Ducks Unlimited
          East Bay Regional Park District
          Eco Farm
          Empire Mine Park Association
          Environment California
          Environmental Defense Fund
          Environmental Justice Coalition for Water
          Fiesta de Reyes
          Fort Tejon Historical Association
          Friends of Balboa Park
          Friends of China Camp
          Friends of Lakes Folsom and Natoma
          Friends of Mt. Tam
          Friends of Palomar State Park
          Friends of Pico State Park
          Friends of Santa Cruz State Parks
          Friends of Sutter's Fort
          Friends of the Folsom Powerhouse Association
          Friends of the Urban Forest
          Hills for Everyone









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          Hollywood Beautification Team
          Humboldt Redwoods Interpretive Association
          Huntington Beach Tree Society
          John Marsh Historic Trust
          Just one Tree
          Keep Eureka Beautiful
          Koreatown Youth and Community Center
          Land Trust of Santa Cruz County
          Latino Outdoors
          Los Angeles Conservation Corps
          Malibu Creek Docents
          Marina Recreation Association
          Marin Agricultural Land Trust
          Mendocino Woodlands Camp Association
          Mid Peninsula Regional Open Space
          Mojave River Natural History Association
          Mono Lake Committee
          Mountains Recreation and Conservation Authority
          Napa County Regional Park and Open Space District
          National Marine Manufacturers Association
          National Parks Conservation Association
          National Trust for Historic Preservation
          Natural Resources Defense Council
          Nature Conservancy
          North East Trees
          Occidental Arts and Ecology Center
          Open Space Authority Santa Clara Valley
          Our City Forest
          Outdoor Afro
          Outdoor Outreach
          Pacific Forest Trust
          Palos Verdes South Bay Audubon
          Paradise Recreation and Park District
          Peninsula Open Space Trust
          Pine Ridge Association
          Plumas-Eureka State Park Association
          Point Cabrillo Lightkeepers Association
          Poppy Reserve/Mojave Desert Interpretive Association
          Portola and Castle Rock Foundation
          Rails to Trails Conservancy
          Regional Parks Sonoma County
          Richmond Trees
          Roseville Urban Forest Foundation
          Sacramento Tree Foundation









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          Santa Ana River Trail and Parkway
          Santa Clara County Parks Partnership
          San Francisco Parks Alliance
          San Francisco Recreation & Parks
          Santa Clara Valley Open Space Authority
          Save Our Forest
          Save Our Shores
          Save the Bay
          Save the Redwoods League
          Sea and Desert Interpretive Association
          Shasta historical Society
          Sierra Club California
          Sierra State Parks Foundation
          Solano Advocates Green Environments
          Sonoma County Trails Council
          Sonoma Ecology Center
          Sonoma Land Trust
          South Yuba River Citizens League
          Southern California Mountains Foundation
          Sports Leisure Vacations, LLC
          State Parks Partner Coalition
          Stewards of the Coast and Redwoods
          Sustainable Tahoe
          Tahoe Resource Conservation District
          Team Sugarloaf
          The Malibu Adamson House Foundation
          The Trust for Public Land
          Topanga Canyon Docents
          Torrey Pines Association
          Tree Davis
          Tree Foundation of Kern
          Tree Fresno
          Tree Lodi
          Tree Musketeers
          Tree Partners Foundation
          Tree People
          Tree San Deigo
          Trout Unlimited
          Urban Conservation Corps of the Inland Empire
          Urban ReLeaf
          Urban Tree Foundation
          Valley of the Moon Observatory Association
          Victoria Avenue Forever
          Waddell Creek Association









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          Watershed Conservation Authority
          West Hollywood Tree Preservation Society
          West Marine Environmental Action Committee
          Western Chapter, international Society of Aboriculture
          Will Rogers Ranch Foundation
          Woodland Tree Foundation
          Worldwide Boaters Safety Group
          Your Children's Trees












































          

           Support in Concept or with Concerns
           Bear Yuba Land Trust
          California Association of Park and Recreation Commissioners and  
          Board Members
          California Association of Recreation and Park Districts
          California Park and Recreation Society
          Carbon Cycle Institute
          County of Kern
          County of Santa Clara
          East Bay Regional Park District
          Latino Outdoors
          Midpeninsula Regional Open Space District
          OutDoor Afro
          Placer Land Trust
          San Francisco Parks Alliance
          San Francisco Recreation and Park District
          Sequoia Riverlands Trust
          Sierra Business Council
          Sierra Foothill Conservancy
          Sonoma County Regional Parks
          State Park Partners Coalition
          Truckee Donner Land Trust
          Watershed Conservation Authority
          Western Region, Tail-to-Trails Conservancy

          OPPOSITION
          Unknown
          
                                      -- END --