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sr-111009-1hCity Council Meeting: Nov. 10, 2009 Agenda Item: 1 " To: Mayor and City Council From: Lee E. Swain, Director of Public Works Subject: Cemetery Price Cost Analysis, Price Adjustments and Payment Plans Recommended Action Staff recommends that the City Council adopt a resolution increasing Cemetery prices for interment property, endowment care and Cemetery services, and establishing payment plans and discounts. Executive Summary Over the last year, staff has examined various options to increase the capacity of the Cemetery and Mausoleum at Woodlawn Cemetery, and to create a plan to achieve financial sustainability in the near future and in perpetuity. The Woodlawn Cemetery Business Plan identifies amulti-phased 30-year plan to increase the capacity of the Cemetery and to achieve financial sustainability. On April 28, 2009, the City Council approved the Cemetery Business Plan and directed staff to conduct a price cost analysis in order to establish a revised rate structure for the Cemetery and to create a payment plan for Cemetery customers. The City Council also directed staff to develop a marketing strategy to increase the Cemetery demand from Santa Monica residents. Independent consultants (States West Cemetery Services and Revenue and Cost Specialists) were retained to conduct the price cost analysis. The price cost analysis indicated the Cemetery was not fully recovering costs for services provided. Additionally, the price cost analysis revealed that when compared to other cemeteries in the local area, Woodlawn sold interment property (graves, crypts, niches) below the local market (see Attachment 'A'). As a result of the price cost analysis, it was determined that it is necessary to increase the Cemetery's prices for goods and services and interment property to bring Woodlawn's prices in line with those of the comparable market and to support a sustainable business plan. 1 A comprehensive marketing strategy has been developed to expand the visibility of the Cemetery and to increase Cemetery use among local residents. The plan is comprised of community outreach, advertising via local media (City TV, print media, website, etc.). Another aspect of the sales and marketing program. will be to offer Santa Monica residents and individuals who work in the City a five percent discount toward the purchase of Cemetery goods and services or interment property. The discount offer would likely increase local resident use of the Cemetery as well as those who work here. Most of the municipal-owned cemeteries in the area offer their residents discounts. Lastly, the majority of cemeteries in the local market, including municipal-owned cemeteries offer payment plans which allow individuals to finance cemetery charges prior to a death. It is recommended that Woodlawn institute such a program which would allow individuals to finance cemetery charges up to a maximum of 60 months with a minimum 10% down payment. The payment plans would only be allowed for arrangements made before a death occurred. This is commonly referred to as a "pre- need" arrangement. Arrangements involving an actual death commonly referred to as an "at-need" arrangement would not be eligible for financing. All charges would have to be paid in full prior to interment. Background The City purchased the Woodlawn Cemetery in 1897 and the Mausoleum in 1972. Today, more than 60,000 former Santa Monica residents are interred on the 26.6 acre site. The Cemetery is operated as an Enterprise Fund under the Administrative Services Division of the Public Works Department. The Cemetery sells grave sites as well as crypt and niche spaces. The Cemetery also sells vases, urns, caskets, markers and benches. When a grave site, niche or crypt space is sold, an endowment care fee of 15% of the cost is collected and placed in the Cemetery Endowment Care Fund or the Mausoleum Endowment Care Fund, as appropriate. The funds are held in a trust account with a primary purpose to produce interest income to cover the costs of maintaining the Cemetery and Mausoleum when all space has been sold and the facility is closed to new business. The dividend and interest earnings from the funds are used to offset a portion of current Cemetery operating expenses, as well. 2 Since 1997, the Cemetery Fund has been subsidized by General Fund loans. The Cemetery is nearing depletion of all its grave spaces, crypts and niches. In fact, there are presently less than 60 graves available for sale and there are no adjoining plots which appeal to families.. Based on the depletion of inventory, projections of Cemetery operating and capital expenses indicate a continuing operating deficit that will require increased subsidies from the General Fund in the absence of taking steps to increase the amount of plots, crypts and niches available for sale. Discussion Prior to the recent Cemetery price cost analysis directed by the City Council, interment property prices at Woodlawn Cemetery had not been looked at in over 15 years. The price cost analysis ascertained that the interment property prices at Woodlawn Cemetery are well below those charged by comparable regional cemeteries. As a result, it is recommended that. the interment property, endowment care and Cemetery service prices be increased. The price increases will support the Cemetery Business Plan approved by the City Council as part of the annual budget, and these increases will allow the development of balances in the endowment care fund that will make the Cemetery self sustaining. The Consulting services of States West Cemetery Services and Revenue and Cost Specialists were employed to ensure that prices were competitively set and that prices for services recover the full cost of providing these services. Many families pre-planning for end of life issues find it difficult to pay for interment property all at once. As a result, many cemeteries, including other municipal cemeteries, offer payment plans to assist people with the purchase. Based on comparisons with competitors, staff recommends that a payment plan program be implemented at Woodlawn Cemetery for the purchase of property before a death has occurred. The terms of the payment plan would not exceed 60 months and would require a minimum 10% down payment. A monthly interest rate of one percent would be applied to all unpaid balances (APR 12.68%- local cemeteries, including municipal- 3 owned cemeteries charge anywhere between one and two .percent interest). All balances would have to be paid in full before an interment would be made in the Cemetery. To encourage City of Santa Monica residents to use Woodlawn Cemetery, it is recommended that a five percent discount be given to residents on the purchase of interment property, goods and services. Additionally, as a marketing strategy and to develop affinity partnerships with local businesses and widen the Cemetery's customer base, it is recommended that a five percent discount also be offered to individuals who work within the City. The development of additional interment property as a part of the Cemetery Business Plan will be phased in response to demand and approved by the City Council during the annual budget process. Staff recommends that as additional Cemetery inventory development is approved, it be sold on apre-developed basis up to one year prior to development. Pre-selling spaces will provide cash necessary for the development of this additional inventory, minimizing the level of General Fund funding. 4 Financial Impacts & Budget Actions The payment plan implementation will require minimal administrative costs that can be absorbed in the existing Cemetery Fund annual budget. No budget actions are required. The revenue impact of the price revisions is included in the FY 2009/10 adopted budget. Prepared by: Virgil County, Cemetery Administrator Approved: Forwarded to Council: ~~ - Lee E. Swain, Director P: a nt Ewell Department of Public Works City anager Attachments: A -Cemetery Fee Comparison B -Resolution 5 Attachment A Cemetery Price Comparison Current Competitors Cemetery Price Average Current Woodlawn Price Proposed Woodlawn Price Grave $5,980 to $23,354 Grave $5,683 Grave $9,000to $14,000 Famil Estate $63,606 to $281,817 Famil Estate N/A Famil Estate $59,000 to $88,500 Cremation Grave $2,764 to $18,071 Cremation Grave $861 Cremation Grave $3,000 to $4,500 C pt Sin le) $6,817 to $16,694 Cr pt Sin le $5,552 to $10,002 Cr t Sin le) $7,500 to $15,000 C t (Double $10,234 to $25,248 Cr pt (Double) $10,002 to $14,438 Cr pt Double) $13,125 to $25,000 Cremation Niche $16,200 to $20,000 Cremation Niche $688 to $5,829 Cremation Niche $1,350 to $18,000 Reference Resolution No. 10440 (CCS).