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BILL # HB 2726 |
TITLE: severance tax; distribution; cities; towns |
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SPONSOR: Martinez |
STATUS: As Introduced |
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PREPARED BY: Hans Olofsson |
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HB 2726, as introduced, would allocate 2.5% of the distribution base for the severance tax on metalliferous metals to cities and towns with a population of less than 15,000 that are not located in the counties of Maricopa and Pima (hereafter referred to as "rural counties"). The bill would become effective on July 1, 2023.
Estimated Impact
The bill is estimated to reduce the distribution of the severance tax to the General Fund by $(245,600) in FY 2024. The reduction in state revenues distributed to counties is estimated to be $(288,500). While the total distribution of state revenues to municipalities would increase by net amount of $534,200 under the bill, the impact by city would vary depending on the population and location of the city, as displayed in Table 1 below.
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Table 1 |
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Impact of HB 2726 on State Revenue Distribution to Cities/Towns
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Distribution |
Distribution |
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City Population |
County |
Current Law |
HB 2726 |
Difference |
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< 15,000 |
Maricopa/Pima |
$83,100 |
$81,100 |
$(2,000) |
|
< 15,000 |
Rural counties |
$253,400 |
$959,300 |
$705,900 |
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> 15,000 |
All counties |
$6,785,500 |
$6,615,800 |
$(169,700) |
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Net Impact |
|
$7,122,000 |
$7,656,200 |
$534,200 |
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As shown in Table 1, the distribution to cities with a population of less than 15,000 and located in rural counties would increase by $705,900 whereas cities with a population of less than 15,000 that are and located in Maricopa/Pima and all cities with a population of 15,000 or more regardless of location would incur a combined revenue loss of $(171,700). Therefore, the total impact on all municipalities in the state would be a net revenue increase of $534,200.
The change in the distribution of the severance tax by city is shown in the Local Government Impact section below.
Under current law, 80% of the severance tax on copper and other metals is allocated to the distribution base and the remaining 20% to the General Fund. Of the 80% allocated to the distribution base, 25% is distributed to municipalities, 40.51% to counties and the remaining 34.49% to the General Fund.
The bill would allocate 2.5% of the severance tax designated as distribution base to cities and towns with a population of less than 15,000 located in rural counties. These monies would be allocated to each such city and town in proportion to its share of the total population among those cities/towns.
(Continued)
The amount remaining after the 2.5% allocation would be distributed to all municipalities, counties, and the General Fund based on the current statutory distribution formula, as described above. This means that cities with a population of less than 15,000 located in rural counties would effectively receive 2 types of distributions: (1) an additional 2.5% of the severance tax designated as distribution base plus (2) the regular distribution but from a 2.5% smaller distribution base.
Severance tax revenue is highly correlated with the price of copper and for this reason it tends to fluctuate considerably over time. For the purpose of this analysis, we have assumed that FY 2024 severance tax revenue will be at the same level as in FY 2021 when it was $35.6 million. The distribution base is therefore estimated to be $28.5 million [= $35.6 million x 80%].
Under the proposal, 2.5% of the distribution base, or $712,200, would first be distributed to cities and towns with a population of less than 15,000 located in rural counties. The remaining $27.8 million of the distribution base would be allocated based on the current statutory distribution formula.
The $(712,200) smaller distribution base under the bill would have the effect of reducing General Fund revenue by $(245,600) [= $(712,200) x 34.49%] in 2024; county-shared revenue by $(288,500) [= $(712,200) x 40.51%]; and city-shared revenue by $(178,100) [= $(712,200) x 25%]. The $(178,100) revenue reduction would be shared by all municipalities in proportion to their share of the total population while cities with a population of less than 15,000 located in rural counties would receive additional revenues of $712,200. The net revenue impact on all municipalities would therefore be $534,200 [= 712,200 - 178,100].
Local Government Impact
The change in the distribution of severance tax by city is displayed in the table on pages 3 and 4. As shown in the table, cities with a population of less than 15,000 located in rural counties would receive additional distributions totaling $712,200 under the bill. The smaller distribution base under the bill would reduce allocations to all municipalities from $7,122,000 to $6,943,900, or by $(178,100). For cities with a population of less than 15,000 located in rural counties, the regular distribution would be reduced from $253,400 to $247,100, or by $(6,300). This means that the overall net impact on such cities would be $705,900 [= $712,200 in additional distributions - $6,300 in reduced regular distributions].
2/10/22
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City/Town |
County |
Population |
% of Total Population |
Regular Distribution - Current Law |
Additional Distribution - HB2726 |
Reduced Regular Distribution – HB2726 |
Total Distribution - HB 2726 |
Change in Distribution |
|
Apache Junction |
Maricopa |
42,571 |
0.74% |
$52,352 |
$0 |
$51,043 |
$51,043 |
($1,309) |
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Avondale |
Maricopa |
87,931 |
1.52% |
$108,134 |
$0 |
$105,430 |
$105,430 |
($2,703) |
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Benson |
Cochise |
4,880 |
0.08% |
$6,001 |
$16,866 |
$5,851 |
$22,717 |
$16,716 |
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Bisbee |
Cochise |
5,225 |
0.09% |
$6,425 |
$18,058 |
$6,265 |
$24,323 |
$17,897 |
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Buckeye |
Maricopa |
79,620 |
1.37% |
$97,913 |
$0 |
$95,465 |
$95,465 |
($2,448) |
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Bullhead City |
Mohave |
40,884 |
0.71% |
$50,277 |
$0 |
$49,020 |
$49,020 |
($1,257) |
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Camp Verde |
Yavapai |
11,187 |
0.19% |
$13,757 |
$38,663 |
$13,413 |
$52,076 |
$38,319 |
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Carefree |
Maricopa |
3,927 |
0.07% |
$4,829 |
$0 |
$4,709 |
$4,709 |
($121) |
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Casa Grande |
Pinal |
58,632 |
1.01% |
$72,103 |
$0 |
$70,301 |
$70,301 |
($1,803) |
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Cave Creek |
Maricopa |
5,838 |
0.10% |
$7,179 |
$0 |
$7,000 |
$7,000 |
($179) |
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Chandler |
Maricopa |
261,165 |
4.51% |
$321,170 |
$0 |
$313,140 |
$313,140 |
($8,029) |
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Chino Valley |
Yavapai |
12,375 |
0.21% |
$15,218 |
$42,769 |
$14,838 |
$57,607 |
$42,388 |
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Clarkdale |
Yavapai |
4,391 |
0.08% |
$5,400 |
$15,176 |
$5,265 |
$20,440 |
$15,041 |
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Clifton |
Greenlee |
3,708 |
0.06% |
$4,560 |
$12,815 |
$4,446 |
$17,261 |
$12,701 |
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Colorado City |
Mohave |
4,836 |
0.08% |
$5,947 |
$16,714 |
$5,798 |
$22,512 |
$16,565 |
|
Coolidge |
Pinal |
13,130 |
0.23% |
$16,147 |
$45,378 |
$15,743 |
$61,121 |
$44,975 |
|
Cottonwood |
Yavapai |
12,253 |
0.21% |
$15,068 |
$42,347 |
$14,692 |
$57,039 |
$41,971 |
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Dewey Humboldt |
Yavapai |
4,137 |
0.07% |
$5,088 |
$14,298 |
$4,960 |
$19,258 |
$14,171 |
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Douglas |
Cochise |
16,193 |
0.28% |
$19,913 |
$0 |
$19,416 |
$19,416 |
($498) |
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Duncan |
Greenlee |
788 |
0.01% |
$969 |
$2,723 |
$945 |
$3,668 |
$2,699 |
|
Eagar |
Apache |
4,941 |
0.09% |
$6,076 |
$17,076 |
$5,924 |
$23,001 |
$16,925 |
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El Mirage |
Maricopa |
35,753 |
0.62% |
$43,968 |
$0 |
$42,868 |
$42,868 |
($1,099) |
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Eloy |
Pinal |
19,625 |
0.34% |
$24,134 |
$0 |
$23,531 |
$23,531 |
($603) |
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Flagstaff |
Coconino |
75,038 |
1.30% |
$92,279 |
$0 |
$89,972 |
$89,972 |
($2,307) |
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Florence |
Pinal |
27,422 |
0.47% |
$33,722 |
$0 |
$32,879 |
$32,879 |
($843) |
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Fountain Hills |
Maricopa |
25,200 |
0.44% |
$30,990 |
$0 |
$30,215 |
$30,215 |
($775) |
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Fredonia |
Coconino |
1,281 |
0.02% |
$1,575 |
$4,427 |
$1,536 |
$5,963 |
$4,388 |
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Gila Bend |
Maricopa |
2,100 |
0.04% |
$2,582 |
$0 |
$2,518 |
$2,518 |
($65) |
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Gilbert |
Maricopa |
254,114 |
4.39% |
$312,499 |
$0 |
$304,686 |
$304,686 |
($7,812) |
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Glendale |
Maricopa |
252,381 |
4.36% |
$310,367 |
$0 |
$302,608 |
$302,608 |
($7,759) |
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Globe |
Gila |
7,347 |
0.13% |
$9,035 |
$25,392 |
$8,809 |
$34,201 |
$25,166 |
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Goodyear |
Maricopa |
86,840 |
1.50% |
$106,792 |
$0 |
$104,122 |
$104,122 |
($2,670) |
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Guadalupe |
Maricopa |
6,631 |
0.11% |
$8,155 |
$0 |
$7,951 |
$7,951 |
($204) |
|
Hayden |
Gila |
631 |
0.01% |
$776 |
$2,181 |
$757 |
$2,937 |
$2,161 |
|
Holbrook |
Navajo |
5,084 |
0.09% |
$6,252 |
$17,571 |
$6,096 |
$23,666 |
$17,414 |
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Huachuca City |
Cochise |
1,736 |
0.03% |
$2,135 |
$6,000 |
$2,081 |
$8,081 |
$5,946 |
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Jerome |
Yavapai |
455 |
0.01% |
$560 |
$1,573 |
$546 |
$2,118 |
$1,559 |
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Kearny |
Pinal |
2,168 |
0.04% |
$2,666 |
$7,493 |
$2,599 |
$10,092 |
$7,426 |
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Kingman |
Mohave |
31,013 |
0.54% |
$38,138 |
$0 |
$37,185 |
$37,185 |
($953) |
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Lake Havasu City |
Mohave |
55,865 |
0.96% |
$68,700 |
$0 |
$66,983 |
$66,983 |
($1,718) |
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Litchfield Park |
Maricopa |
6,436 |
0.11% |
$7,915 |
$0 |
$7,717 |
$7,717 |
($198) |
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Mammoth |
Pinal |
1,687 |
0.03% |
$2,075 |
$5,830 |
$2,023 |
$7,853 |
$5,779 |
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Marana |
Pima |
49,030 |
0.85% |
$60,295 |
$0 |
$58,788 |
$58,788 |
($1,507) |
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Maricopa |
Pinal |
52,127 |
0.90% |
$64,104 |
$0 |
$62,501 |
$62,501 |
($1,603) |
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Mesa |
Maricopa |
518,012 |
8.94% |
$637,029 |
$0 |
$621,103 |
$621,103 |
($15,926) |
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Miami |
Gila |
1,780 |
0.03% |
$2,189 |
$6,152 |
$2,134 |
$8,286 |
$6,097 |
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City/Town |
County |
Population |
% of Total Population |
Regular Distribution - Current Law |
Additional Distribution - HB2726 |
Reduced Regular Distribution – HB2726 |
Total Distribution - HB 2726 |
Change in Distribution |
|
Nogales |
Santa Cruz |
20,103 |
0.35% |
$24,722 |
$0 |
$24,104 |
$24,104 |
($618) |
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Oro Valley |
Pima |
46,044 |
0.80% |
$56,623 |
$0 |
$55,207 |
$55,207 |
($1,416) |
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Page |
Coconino |
7,529 |
0.13% |
$9,259 |
$26,021 |
$9,027 |
$35,048 |
$25,789 |
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Paradise Valley |
Maricopa |
14,637 |
0.25% |
$18,000 |
$0 |
$17,550 |
$17,550 |
($450) |
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Parker |
La Paz |
3,207 |
0.06% |
$3,944 |
$11,084 |
$3,845 |
$14,929 |
$10,985 |
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Patagonia |
Santa Cruz |
874 |
0.02% |
$1,075 |
$3,021 |
$1,048 |
$4,069 |
$2,994 |
|
Payson |
Gila |
15,813 |
0.27% |
$19,446 |
$0 |
$18,960 |
$18,960 |
($486) |
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Peoria |
Maricopa |
175,961 |
3.04% |
$216,389 |
$0 |
$210,980 |
$210,980 |
($5,410) |
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Phoenix |
Maricopa |
1,680,992 |
29.03% |
$2,067,212 |
$0 |
$2,015,532 |
$2,015,532 |
($51,680) |
|
Pima |
Graham |
2,558 |
0.04% |
$3,146 |
$8,841 |
$3,067 |
$11,908 |
$8,762 |
|
Pinetop-Lakeside |
Navajo |
4,469 |
0.08% |
$5,496 |
$15,445 |
$5,358 |
$20,804 |
$15,308 |
|
Prescott |
Yavapai |
44,299 |
0.76% |
$54,477 |
$0 |
$53,115 |
$53,115 |
($1,362) |
|
Prescott Valley |
Yavapai |
46,515 |
0.80% |
$57,202 |
$0 |
$55,772 |
$55,772 |
($1,430) |
|
Quartzsite |
La Paz |
3,763 |
0.06% |
$4,628 |
$13,005 |
$4,512 |
$17,517 |
$12,889 |
|
Queen Creek |
Maricopa |
50,890 |
0.88% |
$62,582 |
$0 |
$61,018 |
$61,018 |
($1,565) |
|
Safford |
Graham |
9,983 |
0.17% |
$12,277 |
$34,502 |
$11,970 |
$46,472 |
$34,195 |
|
Sahuarita |
Pima |
31,421 |
0.54% |
$38,640 |
$0 |
$37,674 |
$37,674 |
($966) |
|
San Luis |
Yuma |
34,778 |
0.60% |
$42,768 |
$0 |
$41,699 |
$41,699 |
($1,069) |
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Scottsdale |
Maricopa |
258,069 |
4.46% |
$317,362 |
$0 |
$309,428 |
$309,428 |
($7,934) |
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Sedona |
Coconino |
10,339 |
0.18% |
$12,714 |
$35,732 |
$12,397 |
$48,129 |
$35,414 |
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Show Low |
Navajo |
11,442 |
0.20% |
$14,071 |
$39,544 |
$13,719 |
$53,263 |
$39,193 |
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Sierra Vista |
Cochise |
43,045 |
0.74% |
$52,935 |
$0 |
$51,612 |
$51,612 |
($1,323) |
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Snowflake |
Navajo |
5,995 |
0.10% |
$7,372 |
$20,719 |
$7,188 |
$27,907 |
$20,535 |
|
Somerton |
Yuma |
16,554 |
0.29% |
$20,357 |
$0 |
$19,848 |
$19,848 |
($509) |
|
South Tucson |
Pima |
5,715 |
0.10% |
$7,028 |
$0 |
$6,852 |
$6,852 |
($176) |
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Springerville |
Apache |
1,978 |
0.03% |
$2,432 |
$6,836 |
$2,372 |
$9,208 |
$6,775 |
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St. Johns |
Apache |
3,512 |
0.06% |
$4,319 |
$12,138 |
$4,211 |
$16,349 |
$12,030 |
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Star Valley |
Gila |
2,308 |
0.04% |
$2,838 |
$7,977 |
$2,767 |
$10,744 |
$7,906 |
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Superior |
Pinal |
3,178 |
0.05% |
$3,908 |
$10,983 |
$3,810 |
$14,794 |
$10,886 |
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Surprise |
Maricopa |
141,664 |
2.45% |
$174,212 |
$0 |
$169,857 |
$169,857 |
($4,355) |
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Taylor |
Navajo |
4,321 |
0.07% |
$5,314 |
$14,934 |
$5,181 |
$20,115 |
$14,801 |
|
Tempe |
Maricopa |
195,805 |
3.38% |
$240,793 |
$0 |
$234,773 |
$234,773 |
($6,020) |
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Thatcher |
Graham |
5,200 |
0.09% |
$6,395 |
$17,972 |
$6,235 |
$24,206 |
$17,812 |
|
Tolleson |
Maricopa |
7,372 |
0.13% |
$9,066 |
$0 |
$8,839 |
$8,839 |
($227) |
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Tombstone |
Cochise |
1,303 |
0.02% |
$1,602 |
$4,503 |
$1,562 |
$6,066 |
$4,463 |
|
Tucson |
Pima |
548,073 |
9.46% |
$673,997 |
$0 |
$657,147 |
$657,147 |
($16,850) |
|
Tusayan |
Coconino |
580 |
0.01% |
$713 |
$2,005 |
$695 |
$2,700 |
$1,987 |
|
Wellton |
Yuma |
3,044 |
0.05% |
$3,743 |
$10,520 |
$3,650 |
$14,170 |
$10,427 |
|
Wickenburg |
Maricopa |
8,092 |
0.14% |
$9,951 |
$0 |
$9,702 |
$9,702 |
($249) |
|
Willcox |
Cochise |
3,533 |
0.06% |
$4,345 |
$12,210 |
$4,236 |
$16,446 |
$12,102 |
|
Williams |
Coconino |
3,248 |
0.06% |
$3,994 |
$11,225 |
$3,894 |
$15,120 |
$11,125 |
|
Winkleman |
Pinal |
351 |
0.01% |
$432 |
$1,213 |
$421 |
$1,634 |
$1,202 |
|
Winslow |
Navajo |
9,338 |
0.16% |
$11,483 |
$32,273 |
$11,196 |
$43,469 |
$31,986 |
|
Youngtown |
Maricopa |
6,859 |
0.12% |
$8,435 |
$0 |
$8,224 |
$8,224 |
($211) |
|
Yuma |
Yuma |
98,285 |
1.70% |
$120,867 |
$0 |
$117,845 |
$117,845 |
($3,022) |
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TOTAL |
|
5,791,407 |
100.00% |
$7,122,025 |
$712,202 |
$6,943,974 |
$7,656,176 |
$534,152 |