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Old May 10th, 2007, 07:26 AM   #61
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Originally Posted by geoff_diamond View Post
TIF dollars aren't intended for the City to turn a profit. They're to spur development where it's needed. In the end, that usually turns into tax dollars. Even in your scenario, they're making money after twenty years... how is that a bad deal?

Oh, and that doesn't even count the taxes being paid on the retail or office space. Oh, and then there's the hotel taxes.
This is all true, but the city can receive these tax revenues from mixed-use developments that they don't give $51 million to. How is this project going to change overall demand for condos, hotels, office space, and retail, in the city? If the post office wasn't renovated, the people who would have bought condos there, moved their offices there, etc., simply would buy lease/somewhere else and would pay taxes on those condos, retail space, etc. So while the post office will bring in tax revenues, it would be taking away tax revenues from other locations in the city. Essentially, the overall tax revenues that the city receives should not be changed as a result of this project.

Almost all other developments bring in tax revenues too, but don't need to use up the TIF money. That $51 million would have been MUCH better spent on improving the el....that would actually have a large, positive impact on the majority of Chicagoans.....and unlike this project, would create a NET positive increase in tax revenues as a much-improved public transportation system will increase the desirability to live and visit Chicago, spurring more business and more tax revenues from the new residents and tourists.
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Old May 10th, 2007, 07:53 AM   #62
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Originally Posted by geoff_diamond View Post
TIF dollars aren't intended for the City to turn a profit. They're to spur development where it's needed. In the end, that usually turns into tax dollars. Even in your scenario, they're making money after twenty years... how is that a bad deal?

Oh, and that doesn't even count the taxes being paid on the retail or office space. Oh, and then there's the hotel taxes.

The economics of a TIF fund is to break even. Redeveloping the post office will not spur much development around that immediate area. It is certainly not needed. In fact, an arguement could be made that with the increase of supply in this area, the demand is lowered, and therefore property taxes are decreased slightly.

I do not think you can repay a TIF fund with hotel taxes.

Plus, people will be moving to the neighborhood and instead of paying property taxes at a non-TIF development, their taxes will be repaying the debt instead of going to schools, park districts, or the County (the board of education is estimated to get 49% of property taxes in Chicago and therefore losing $25M in the life span of the TIF). I suppose the only good thing about this is the developer will have to provide 20% of his units as "affordable" and that we are saving the post office money (although they are shelling out $9M to help with environmental mitigation).

I really hope the city council thinks this through.
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Old May 10th, 2007, 08:37 AM   #63
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The economics of a TIF fund is to break even. Redeveloping the post office will not spur much development around that immediate area. It is certainly not needed. In fact, an arguement could be made that with the increase of supply in this area, the demand is lowered, and therefore property taxes are decreased slightly.

I do not think you can repay a TIF fund with hotel taxes.
This is falsely applied economics. "Break-even"? Over what time frame, perpetuity? The point of TIF is to spur development. The city kicks in dollars to make a proposed development feasible at the project level. "Supply"? Supply of what product? Besides, as you allude supply and demand meet at equilibrium, and hence the market is happy.

Chicago is better off with a quality development at the Post Office, as opposed to it sitting vacant to my mind. A reputable sponsor in Walton Street is a major endorsement in terms of the quality of the plan.

I think the point you may be trying to make is that $51 million does not grow trees. I agree; it is huge amount of money and the city should take it seriously. Only problem is, a deal at the Post Office isn't geting any cheaper over time. It is going to take a big investment to get something done at that site.
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Old May 10th, 2007, 08:09 PM   #64
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Guys, I was pointed out whole articles of third party web sites are being copied in full in this thread. Please refrain from doing that. The proper way to point things out is:

source: SkyscraperCity.com

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Old May 10th, 2007, 08:42 PM   #65
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This is falsely applied economics. "Break-even"? Over what time frame, perpetuity? The point of TIF is to spur development. The city kicks in dollars to make a proposed development feasible at the project level. "Supply"? Supply of what product? Besides, as you allude supply and demand meet at equilibrium, and hence the market is happy.

Chicago is better off with a quality development at the Post Office, as opposed to it sitting vacant to my mind. A reputable sponsor in Walton Street is a major endorsement in terms of the quality of the plan.

I think the point you may be trying to make is that $51 million does not grow trees. I agree; it is huge amount of money and the city should take it seriously. Only problem is, a deal at the Post Office isn't geting any cheaper over time. It is going to take a big investment to get something done at that site.
I think that most people are aware that a major purpose of TIF is to spur development. But what I would like to see is argument from people as to why they think that this will spur development. Obviously, if this project goes through, you'll have a few hundred more condos and hotel rooms and some more office space created. But is this development organically creating new and increased demand for condos, hotel rooms, and office space? Or would the development of this project simply take it's demand away from other proposed projects....and thus cause a proposed condo, hotel, and/or office project to not get built, which would have been built if it weren't for the post office development adding to the surplus of supply of condos, hotel rooms, and office space?

I currently don't see any major reasons why the former would be true, but perhaps there are actual ways that this development would spur organic growth that I am just not aware of. Perhaps this development will spur more development nearby, in the area just southwest of the loop? Or it has some other hidden benefit to it? Those that are in support of providing $51 million of TIF funds to this project - I'm curious to hear what you think the possible long-term benefits of this project would be.
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Old May 10th, 2007, 08:50 PM   #66
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Originally Posted by PrintersRowChemist View Post
This is falsely applied economics. "Break-even"? Over what time frame, perpetuity? The point of TIF is to spur development. The city kicks in dollars to make a proposed development feasible at the project level. "Supply"? Supply of what product? Besides, as you allude supply and demand meet at equilibrium, and hence the market is happy.

Chicago is better off with a quality development at the Post Office, as opposed to it sitting vacant to my mind. A reputable sponsor in Walton Street is a major endorsement in terms of the quality of the plan.
The point of a TIF is to break-even, or recapture the funds from property taxes that otherwise would not have been received. The money just doesn't come out of Daley's bank account. A separate fund is set up and repaid over the period of the predetermined TIF length (23 years I believe). I don't doubt that this TIF can break even, but at the expense that over the next 23 years, the property taxes generated by this development will 100% directly be paying off the TIF amount. None of the taxes will go towards schools, fire, the city, county, park district, etc. I don't agree that the area around this development is blighted, which basically is the law for using TIF funds. This is a textbook example of how Daley's administration have abused TIFs. The question is... will this be set up as its own TIF district or will it be annexed into an existing district?

I think this development will improve the look of the post office, even though it is altering its structure that ultimately will give it a different look as opposed to preserving the structure.

A few projects within the nearby South Loop have been tabled lately (D2, Lennar), presumably due to the slowing market and the abundance of units currently under construction in the area. I think adding the condos, if anything, will adversely effect property values by adding to the abundant supply of homes. I really feel that the city does not necessarily need more office space. There is plenty of vacant office space in the central business district and getting new tenants will most likely be robbing Peter to pay Paul.

Also, TIFs should benefit the entire neighborhood. The only thing we get is to see a cleaned up building.

I feel like they are rushing into this project (to bail out the post office?) and basically giving the developer a $51M loan that the people he sells the product to will have to repay with their property taxes at the expense of the rest of the residents of the city who are paying taxes to legitimate causes. While the building has been sitting vacant for years, I feel like they need to go back to the drawing boards to come up with a better solution (both preserving the existing look and avoiding how to ask the city for $51M and the post office for $9M). I also find it hard to believe that over the next 23 years, a developer can't figure out how to develop the property profitably that ultimately would net good tax flow into the neighborhood.

I fear that this project will set a precedent that the city will bail out developers trying to redevelop older buildings.
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Old May 11th, 2007, 12:08 AM   #67
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On the other hand, the Post Office is the size of a small neighborhood. This one project alone will add pedestrians to the streets around here, and will allow much-needed sidewalk and retail improvements. The point here isn't to spur development (that's a crap shoot anyway); the post office project facilitates development. Right now, the vacant hulk DETERS development in the area.
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Old May 11th, 2007, 01:48 AM   #68
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Originally Posted by PrintersRowBoiler View Post
A few projects within the nearby South Loop have been tabled lately (D2, Lennar), presumably due to the slowing market and the abundance of units currently under construction in the area. I think adding the condos, if anything, will adversely effect property values by adding to the abundant supply of homes. I really feel that the city does not necessarily need more office space. There is plenty of vacant office space in the central business district and getting new tenants will most likely be robbing Peter to pay Paul.
Residential is slowing down, which may be why those residential developments have been tabled. The 2 projects you mention also could have been halted for a thousand other reasons.

Institutional developers and investors largely are not concerned about absorption in Chicago. Market fundamentals are strong; the glut story does not hold.

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Also, TIFs should benefit the entire neighborhood. The only thing we get is to see a cleaned up building.
That is what we get in the deal; I think you should judge it on those merits. Most people would agree it's a big cost.

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Originally Posted by PrintersRowBoiler View Post
I feel like they are rushing into this project (to bail out the post office?) and basically giving the developer a $51M loan that the people he sells the product to will have to repay with their property taxes at the expense of the rest of the residents of the city who are paying taxes to legitimate causes. While the building has been sitting vacant for years, I feel like they need to go back to the drawing boards to come up with a better solution (both preserving the existing look and avoiding how to ask the city for $51M and the post office for $9M). I also find it hard to believe that over the next 23 years, a developer can't figure out how to develop the property profitably that ultimately would net good tax flow into the neighborhood.
Time is costly in these instances. Us sitting from afar it is hard to say, but the simple fact that this building has sat vacant for so long should tell you how challenging it is for redevelopment.

If I am not mistaken, the USPS doesn't pay the millions in upkeep every year, our tax dollars do (ironically).
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Old May 11th, 2007, 03:26 AM   #69
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Residential is slowing down, which may be why those residential developments have been tabled.

That is what we get in the deal; I think you should judge it on those merits. Most people would agree it's a big cost.
I think everyone agrees that residential is slowing down, but by adding the units, would you not agree that the extra supply would have an adverse effect on adjacent properties that are about to go on the market, and therefore would theoretically decrease the amount of property taxes?

By making the building easier on the eyes being the sole tangible advantage to the neighborhood, I fear that this sets a huge precedent for TIFs.

I understand your points, I just am having a hard time swallowing the justification for this large amount of TIF funds.
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Old May 11th, 2007, 06:10 AM   #70
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the USPS doesn't pay the millions in upkeep every year, our tax dollars do (ironically).
Why would tax dollars be used for a USPS facility?
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Old May 11th, 2007, 06:12 AM   #71
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Why would tax dollars be used for a USPS facility?
As I understand it, the building is not owned by the USPS. The city maintains the building, and taxes maintain the city.
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Old May 11th, 2007, 07:20 AM   #72
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From the Chicago Tribune:

"The stalled project garnered the attention of a U.S. Senate subcommittee last year, when Sen. Tom Coburn (R-Okla.) used the old Chicago Post Office as an example of surplus federal property that used taxpayers' dollars to maintain vacant space.

It cost the federal government $2 million a year to maintain the building, he said last year."

Source: http://www.chicagotribune.com/news/l...l=chi-news-hed
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Old May 11th, 2007, 07:42 AM   #73
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Does anyone know if by using TIF funds, does the developer need to disclose the construction costs of the project or allow an audit to show that he isn't blowing smoke up everyone's ass with the $310M construction price (nearly $200/SF)?

Doing quick math:
1,700,000 SF x $300/SF = $510M

But to be more conservative:

300 Condos @ $300,000 each = $90M
455,000 SF office @ $200/SF = $90M
400 parking stalls @ $40,000 each = $16M
240 hotel rooms @ $200,000 each = $48M
Total = $244M
Note that these unit prices are very conservative (in my opinion).

I don't doubt they will need the $51M to break even IF it truly costs $310 million to renovate.
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Old May 30th, 2007, 05:56 AM   #74
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http://www.chicagoreader.com/feature...eworks/070525/

A TIF That Might Make Sense

The city’s plan for the old main post office

By Ben Joravsky
May 25, 2007


ON THE SURFACE, the city’s recent proposal to give a real estate consortium roughly $51 million to develop the old central post office looks like another unwarranted handout to the rich and well connected. But in fact this is one of the few tax increment financing deals that actually makes some sense—which just goes to show you how demented the program has become.

Vacant since 1996, when the post office moved its distribution center, the 17-story, 2.5-million-square-foot limestone edifice just west of the Loop sits on the bank of the Chicago River with the Eisenhower Expressway shooting through its belly. The city thought it had a deal for the building in 1999, when a group of developers planned to convert the 1932 art deco structure into a hotel, loft condos, and offices. But that fell through when the economy weakened after 9/11.

Since then, other proposals have come and gone, but no one seems to know what to do with the property. The city can’t demolish it without enraging preservationists (not that this would necessarily stand in its way). And no public institution has been willing to take over the mammoth building, which covers two city blocks.

So on May 8 the Community Development Commission, the body that oversees TIFs, recommended that the city fund a new but similar plan, giving Walton Street Capital LLC $51 million in property tax dollars to convert the old post office into office space, a luxury hotel, and condos. The proposal now moves to the City Council, where approval is expected.

For Walton, headed by real estate mogul Neil G. Bluhm, the deal’s a no-brainer. The federal postal service is selling the property for ten dollars and kicking in another $9 million to yank out the asbestos. The city’s $51 million will cover about 17 percent of total construction costs, including the demolition of 800,000 square feet Walton has no use for.

Normally I’d be howling about the diversion of taxes to developers to build a bunch of condos—as if Chicago needs any more of those. But in this case it’s not so much a diversion as a conversion: the federally owned post office pays no property taxes to begin with. If the handout enables Walton to put formerly tax-exempt land on the property tax rolls, it’s a gain for the public.

Trouble is, property taxes from the new hotel and condos won’t be going to the schools and parks but to the Canal-Congress TIF, adding millions to one of Mayor Daley’s forever-expanding slush funds for years to come. I wouldn’t be so concerned if park or school district officials were at the bargaining table demanding that property taxes generated by the post office development be sent their way as soon as the city’s subsidy is recouped. But as they usually do with TIF deals, school and park officials are passively going along with the project for fear of upsetting Mayor Daley.

Surprisingly, the CDC, usually a docile bunch, showed some scrappiness at the hearing a few weeks back. Commissioner Rafael Leon asked why Walton was only setting aside 15 of 300 units for affordable housing, a number far below the city’s 20 percent set-aside requirement on TIF-funded deals. Raphael Dawson, a Walton principal, said that’s all the company could afford to build. Then a city planner reminded Leon that the developers were also contributing $4.5 million to the city’s low-income housing fund. That donation puts the firm in compliance with even the new, supposedly tougher set-aside ordinance passed by the City Council less than a week later.

Another commissioner, Anne Kostiner, raised the touchy subject of the infamous Block 37 deal. In the 1980s the city spent about $40 million buying up all the property on the block bounded by Randolph and Washington and State and Dearborn. It then paid to demolish the existing buildings and sold the land to FJV Venture, a development firm led by Bluhm and Judd Malkin, for about $12.6 million. FJV couldn’t put a deal together, so in 2001 the city bought the land back for $32.5 million. All in all, the city managed to lose roughly $60 million on the transactions.

As Kostiner pointed out, there’s no guarantee that Walton’s post office project will be a winner either. The downtown condo market’s soft, and Walton still hasn’t lined up all of its conventional financing. Noting Bluhm’s involvement in the Block 37 deal, Kostiner asked the developers what assurances they could offer that the city wouldn’t wind up on the hook once again.

Good question. After a moment of awkward silence Dawson said he didn’t know anything about Block 37 but was confident this deal would work.

I hope he’s right. With property taxes looking to go sky high in August after this year’s reassessments, the last thing taxpayers need is to throw away millions of dollars on a real estate deal gone bust.

City officials didn’t seem too concerned by this prospect, and I can understand why. Since the electorate never holds Mayor Daley accountable for anything he or his administration does, why not swing for the fences?
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Old May 30th, 2007, 06:11 AM   #75
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Talk about your axe grinders. His not so subtle hatred of Chicago's mayor has reduced "argument" to little more than enthymematic rant.
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Old August 27th, 2009, 10:59 PM   #76
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Old Post Office thread

I know we used to have a dedicated thread for the OPO but couldn't find it.


Quote:
http://www.chicagotribune.com/busine...,6687261.story

Old Chicago post office sold for $40 million


By Mary Ellen Podmolik

Tribune staff reporter

2:34 p.m. CDT, August 27, 2009

The old Chicago post office at 433 W. Van Buren St. sold Thursday for $40 million in a spirited auction.

International Property Developers North America Inc., a global company whose principals chose not to be identified, signed the contract behind closed doors.

The company's two representatives at the auction, who sat stoically in the front row, had little to say afterward.

In a prepared statement read by a U.S. Postal Service spokesman, the company said it looked forward to making the building a "focal point" for area residents and visitors. They provided little clue what they had in mind for the building.

"We are not prepared at this time to discuss our redevelopment plans, but we are looking forward to working collaboratively with the mayor, the alderman, and city staff to ensure the success of this project,'' the company said in a statement.

"To paraphrase Daniel Burnham, let me assure you that we shall make no small plans.''

The company has three days to make a 10 percent down payment, in addition to the $250,000 it posted to qualify as a bidder.

The auction attracted more than 100 people -- including bidders, media outlets, the curious and a documentary film crew.

Before the auction, the hallway outside the ballroom resembled more of a fashion show runway as people leaned against the wall to watch bidders register, grab their paddles and head into the ballroom.

The bidding started at the suggested minimum bid of $300,000 but quickly rose. By the time it reached $10 million, there were a handful of bidders participating. By the time it reached $17 million, there were only two.

The bidding pace slowed down when the price topped $20 million and then picked up again.

Forty-five minutes after it began, paddle No. 273 was declared the winner.

Most in the room were surprised at the purchase price. Auctioneer Rick Levin, whose firm handled the sale, said after the auction that there were plenty of buildings sold for vast sums in Chicago but those sales aren't transparent like the auction process.

He said he wasn't particularly surprised by the great interest because the building meets the first rule of real estate. "It's location, location, location, and this building has it," Levin said.

The building, which contains 2.5 million square feet and spans the Eisenhower Expressway and two city blocks, is so large that developers have struggled for more than a decade to come up with a workable plan for the vacant space.

The building's size, its historic designation and its proximity to nearby railroad tracks and the expressway have stalled previous attempts to use the building.

The 14-story, 77-year-old building has been vacant since 1995 when the Postal Service moved to a new building on Harrison Street. Since then, ideas floated for the space have included a casino, a water park and an auto mall.

Two years ago, the city gave initial approval to a plan that at one point was estimated to cost $300 million, including $62 million in local and federal incentives, to develop the complex into condos, offices and a hotel. However, the Postal Service was unable to finalize the deal with the developer.

The building's size falls between that of McCormick Place and Willis Tower. Since exiting the building, the Postal Service has been spending several million dollars annually to maintain the building and keep it secure.

A buyer would have to secure financing for any project -- a formidable challenge in today's tight lending environment -- as well as contend with the unknown of what the property taxes would be. Built in 1932 and once the largest postal facility in the world, the building has always been exempt from property taxes. Its assessed value would depend, in part, on its uses and the revenues derived from those uses.

Most in the room said they'd been to a real estate auction before.

Nevertheless, the auctioneer did a practice round of bidding to get people familiar with his pace and cadence. The mock auction's item was Wrigley Field. The bidding was stopped at $250 million.



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Copyright © 2009, Chicago Tribune

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Old August 27th, 2009, 11:45 PM   #77
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wow! 16$ per square foot. what a discount! of course, i guess all the cost will come into renovating the post office into something useful.

if the state and the city and the national culture weren't so against it, a nice casino/hotel would be my pick.
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Old August 28th, 2009, 12:42 AM   #78
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That's quite a price they paid.

Question is, do they really plan to develop this property or will they just hang onto in until the next real estate cycle and sell it for a profit?
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Old August 28th, 2009, 01:13 AM   #79
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".....International Property Developers North America Inc., a global company whose principals chose not to be identified, signed the contract behind closed doors...."

Who the heck ARE these guys? Is it a few players we already know who are hiding behind a generic name? Are they really developers? They seem to want us to believe that they are. Or are they flippers? They might be. The plot thickens!
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Old August 28th, 2009, 05:37 AM   #80
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wow! 16$ per square foot. what a discount! of course, i guess all the cost will come into renovating the post office into something useful.

if the state and the city and the national culture weren't so against it, a nice casino/hotel would be my pick.

From following this anything over 1M bucks is an overpay unless the buyer is looking into the long term. This could be a 2016 bet. Forget any hate for those that are unwiling to throw 40 million around just to insult people because they think they know more than the bidder. Shame on those haters that did not put up the min bid of 300K, I mean who would hate on those that bidded on this property.... really....



We can all be agast at the price but why should you care. One should be happy that this white E did not sell for 300K. At least there were 2 outside biders that wanted this thing. Be thankful and not ....

Kudos to the USPO.
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