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Santa Monica, California, December 3, 1975
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T0: Mayor and City Council ~~""~' ''~~~~
FROM: City Attorney ~hlv <;i~]~
SUBJECT: Escrow for Purchase of Assets of Woodlawn P4ausc~z~ eta at-g~
Limited C7TY ~t~RSS°s a~wa~~
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Introduction
This report transmits the attached resolution.authorizing-.the
execution of documents necessary for the purchase of a Mausoleum
at the Santa Monica Cemetery and for the approval for close of
escrow. Also attached are the proposed sale escrow instructions
which-'comprise both the escrow and'the'contract of purchase.
Background -
At its meeting of October 28, 1975, the City Council authorized
the preparation of necessary documents to transfer the assets of
Woodlawn Mausoleum, Limited to the City of Santa Monica. The
attached proposed sale escrow .instructions accomplish such a
.transfer. The remaining steps necessary to be taken for the
city to complete its acquisition of Woodlawn Mausoleum are for
council approval of the attached escrow insructions, approval
of the close of an escrow to be open for such purpose, and adoption
of the attached resolution containing authorization for necessary
signatures. For informational purposes, a copy of,a staff report
dated October 17, 1975, outlining terms of purchase is being
provided herewith also.
Alternatives.
Not applicable..
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Recommendation
It is recommended that the City Council adopt the attached
resolution £or thepurpose of a£fectuating the purchase of the
Mausoleum to be used in conjunction with the Santa Monic City
Cemetery.
Prepared by: Richard L. Knickerbocker, City Attorney
Samuel Ie Streichman, Assistant City Attorney
-2-
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Santa Monica, California, October 17, 19 7 5
TO: Mayor and City Council
FROM: .City Staff
SUBJECT: Acquisition of Woodlawn Mausoleum
Introduction
This report discusses the proposed acquisition price for Woodlawn Mausoleum.
Background
On March 4, 1975 the City Council authorized the Staff to ,begin negotiations
with Service Corporation international .(SCI) of Houston, Texas, for the pur-
chase of the Mausoleum located at Woodlawn Cemetery, subject to future City
Council approval of the teens and conditions of the sale. On September 3,
1975 the Staff advised the Council negotiations should be completed within
sixty (60) days (November. 3, 1975). These negotiations have been concluded
and the proposed unadjusted purchase price is X278, 884.00.
Basis for Negotiations
The following. considerations represent the basis for negotiations between
both parties for the acquisition of Woodlawn Mausoleum:
A. The City had no interest in purchasing the assets and liabilities of the
Corporation (Woodlawn Mausoleum, Inc.) and then proceeding with the
time-consuming and hence costly process of paying off the liabilities.
The City's interest was in acquiring only the physical assets in terms
of unsold crypt and niche inventory, furniture and equipment, records,
structure and grounds.
B. The acquisition would be facilitated by SCI selling the stock of Wood-
. lawn Mausoleum, Inc. to a local, third party trustee, mutually
acceptable to both parties, who would liquidate the corporation and
'I'o: Mayor and Council -2- October 17, 1975
in turn sell the Mausoleum to the-City free and clear of all liabilities.
The local, third party trustee selected is Mark Gates, Jr., attorney
and son of Mark Gates, Sr. , one of the founders of Gates, Kingsley,
Gates, former owners of the Mausoleum. Mr. Gates is very familiar
with the property and will receive no portion of the sales price for
acting as the third party transferor.
C. SGI wishes to recover its investment in Woodla~i-n Mausoleum.
D. The City wishes to discover a1.1 potential and actual future cost liabili-.
ties resulting from acquiring the Mausolcu~n and either have these
future costs taken into consideration by a reduction in the. proposed
asking price or by determining that these costs were acceptable when
balanced against the overall benefits to be derived by the City iu
acquiring the Mausoleum. These benefits were outlined in the Staff
report to the Council dated February 24, 1975. 13y way of summary,
these benefits included:
1, Postpones heed to build additional garden crypts for at ,least ten
(10) years..
2. Relocation of present cemetery offices to the Mausoleum offices
and subsequent demolition of the present office structure and
maintenance building release enough property for approximately
675 additional grave sites. Depending on whether single or mul-
tiple vaults are utilized, additional revenue of $560, 000 to $650, 000
can be reaJ.ized. Further; contributions to the perpetual. care fund
of bet~i,ecu approximately $56, 000 to $65, 000 would occur. The
additian of these sites to those already available in 131ock 19, but
previously set aside for garden crypt construction, could mean
that grave sites could be available for sale through 1995.
3. There is approximately 6, 572 square feet of vacant Mausoleum
property available which will accommodate a minimum of 2, 600
additional crypt spaces.
4. Acquisition of the Mausoleum will provide revenues over the long
run to fund cemetery capital improvements and a contribution to
-the General Fund.
5. No additional staff is required to operate the Mausoleum.
` To: Mayor and Council -3- October 17, 1975
The future cost liabilities were determined to be costs of so-called pre-
need materials such as crypt or niche plaques or markers and lettering
which had already been paid for out not yet needed, and the cost of labor for
opening and closing the crypts and niches. An audit was made of all pre-
need contracts to determine the potential cost to t2xe City for crypt/niche
plaques, markers and lettering. The recomiziended purchase price reflects
consideration of this cost as well as a portion of the anticipated labor costs
to open and close the crypts/niches. It should he noted that annual earnings
on investmeixt of the Mausoleum endowment (perpetual) care funds more than
offset axmual Mausoleum maintenance costs.
Mausoleum Endowment Care .lurid
In addition to acquiring the physical assets of the Mausoleum, its endowment
care fund will also be transferred to the City iii the principal amount of
approximately $130, 000. The City will receive an audit of this fund and its
holdings at the close of escrow. The invesixnent of this fund ~vi11 be adminis-
tered by Scudder, Stevens and Clark, Investment Counselors, ~sdxo also handle
the Cemetery Perpetual Care Flxnd. They project an axmual yield on market
value of .the 1•lznd as invested of 6. G9 percent.
Acquisition. Price and Funding Schedule
The schedule below is the breakdo`vn of the purchase price and how the acqui-
sition is proposed to be funded.
To: Mayor and Council -4- October 17, 1975
1. Unsold crypt and niche inventory: as of 5-31-75
(to be adjusted at close of escrow to reflect
inventory sold since that date). The estimated
value of this unsold inventory in today's dollars
with an average crypt price of $l, 4.60 and an
average niche price of $375.00, is approximately
$1, 238, 655. 00.
2. Depreciated value of furniture and equipment
3. Excess value of assets paid by SCI at time of
acquisition of Mausoleum from Gates, Kingsley,
Gates (the assets being sold by 5CI cost them
X80, 824 more than the net book value of those
assets). -
$228,236.00
2, 991.00
80, 824. 00
$312, 051. OD
4. LessYescrveSiznds to cover cost of crypt/niche - 33, 167.00
markers a.nd lettering and portion of labor-costs
for opening and elosingcrypt~niche.-
Total unadjusted purchase price: $278, 884. 00
~~Unit Value (Cost to construct)
Cr.yptsc 311 singles @ $347.60 ea. Niches: 12 singles @ $7.5.00 ea.
113 doubles @ $695.20 ea. 594 doubles @ $50.00 ea.
7 family @ $1, 390.40 ea. 3 Family @ $100. 00 ea.
This figure will decrease slightly to reflect the value of crypt and niche sales
since 5-31-75. During the escrow, an audit of i:he available inventory will be
made to ascertain the exact selling price. The Staff estimates the final sales
p-rice to be about $268, 000. In addition, SCI i s paying for necessary repairs
to the Mausoleum roof to prevent 1_eaking and potential si:ain damage to marble
and erosion of tile grout.
To: Mayor and Council -5- October 17, 1975
Fundizig for this proposed acquisition can came from the following sources:
1. Amount budgeted and encumbered in 1974-75 ~I50, 600. 00
budget to construct initial phase of garden
crypts. (As discussed ~sax'lier in this report,
acquisition of the Mausoleum postpo~ies the
need to construct garden crypts for at least
ten (10) years.
2. Anticipated excess iii revenues versus expenses $ 29, 592.00
in Cemetery Division Budget for 19'75-76.
3. Anticipated excess in revenues versus expenses $ 71, 964.00
in Cemetery Di~~sion Budget for 1976-77.
4. Portion of anticipated excess in revenues over $ 26, 728. 00
expenses in Cemetery Division Budget for 77-78.
Revenue total: _ $278, 884.00
Amounts noted in items 2, 3 and 4 above total $1?_8, 284.00. It is recom-
mended that this axnouzit he transferred from the Capital Improvement Fund
to provide the total amount necessary to fund the purchase and that the
Capital Ixnproveinent llxrd be repaid from the excess revenue over expenses
from Cemetery .operations as described above. The Capital Improverncnt
Fund contains approximately X1.6 million; therefore this transfer, which
will be repaid, is a relatively small amount.
Alternatives'
Alternatives include the following:
1. Do not acquire the Mauso}.cum. If this alternative is selected, a decision
will need to be made to either build garden crypts as originally proposed
by the Staff and approved by the Council, or continue with ground
interments. only. Based on the Staff's rate of sale projection for ground
To: Mayor and Council -6- October 17, 1975
interments in Block 19 of the Cemetery, it should be completely filled by
1986-57, or in about ten years. At that. point, cemetery operations would
shift to perpetual care of existing graves only wiUi no z.dditional inter-
ments. If 3200 garden crypts were built in Block 19 as originally planned,
sales of interment .sites would. cease in 1993-94. The financial impact of
these decisions as alternates to acquiring-the Mausoleum are discussed
in the update of the Staff's February 25, 1975 report on the Cemetery
Perpetual Care :Lhnd, included with this agenda.
2. Reject the proposed acquisition-and direct the Staff to continue negotiations..
The Staff does not feel that further negotiations ~ai11 Ue of benefit. On the
contrary, further delay in acquiring the Mausoleum reduces the amount of
incoiize to the City front the sale of inventory. Further, it is conceivable
that SCI would put on a concerted sales campaign to sell as much available
inveiito-ry as possible, and the City would beprecluded-from acquiring the
Mausoleum and the benefits it yields in terms of providing a great deal of
f7.exibil.ity :in planning the future. operations of the Cemetery as discussed
in this report. Further, both Mr. Myron Fields, the special consultant
hired by the City prior to the negotiations-to rey~ew the cost/benefit, and
Mr. David Hepburn of Glenview Cemetery, who reviewed the Staff's basis
for negotiations, have recoiiuncnded the acquisition of t:he Mausoleum.
R c commenda ti
It is recommended that the Council transfer $.17.3, 7.S4. 00 from the Capital
Improvement. Fund to Account X37-5641-920 (Cemetery Structures and
Improvements) and authorize the City Attorney to draft escrow instructions,
Assumption Agreement for Endcwment Care Fund, and Pi11 of Sale and
War-r.anty Agrcenient and other documents necessary to transfer the assets
of ~,iTOOdlawn Mausoleum from Mark Gates, Sr. to the City, open an escrow,
and authorize the City Manager to sign these rlocunzents subject to Council
review and approval at its -regular meeting of November 11, 1975. Further,
it is requested that the Council direct the City Attorney to prepare au emergency
To: Mayor and Council -7- October 17, 1975
and reular ordinance authorizing the Council to set Mausoleum prices and
fees by Resolution, and to also prepare a resolution establishing prices and
fees at the Mausolciim {or Council consideration at its November 11, 1975
meeting.
Prepared by: David P. Dolter
Ralph Wilson
Doug McAteer
Roy Alioth
Jim Comiolly
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