SR-10-28-1975-11CSanta Monica, California,
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Acquisition of Woodlawn Mausoleum
Introduction
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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 terms 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 $278, 884.00.
Basis for Negotiations
The following considerations represent the basis for negotiations between
both parties for the acquisition of WoodlawnMausoleum:
A. The City had no interest in purchasing the assets and liabilities of the
Corporation (Woodlativn Mausoleum, Snc.) 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
To: 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. SCI wishes to recover its investment in Woodlawn Mausoleum.
D. `The City wishes to discover all potential and actual future cost liabili-
ties resulting from acquiring the Mausoleum 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 in
acquiring the Mausoleum. These benefits were outlined in the Staff
report to the Council dated February 24, 1975. By way of summary,
these benefits included:
1. Postpones need to build additional arden crypts for at least ten
(10) years.
2. Relocation of present cemetery offices to the l~Sausoleum 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 realized. Further, contributions to the perpetual. care fund
of between approximately $56, 000 to $65, 000 would occur. The
addition of these sites to those already available in Block 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 acontribution 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 but not yet needed, and the cost of Iabor for
opening and closing the crypts and niches. An audit was made of all pre-
need contracts to determine the potential cost to the City for crypt/niche
plaques, markers and lettering. The recommended.purchase Brice reflects
consideration of this cost as well as a portion of the anticipated labor costs
to open and close the crypts/niches. It should be noted that annual earnings
on investment of the Mausoleum endowment (perpetual) care funds more than
offset annual Mausoleum maintenance costs.
Mausoleum Endowment Care Fund
In addition to acquiring the physical assets of the Mausoleum, its endowment
care fund will also be transferred to the City in 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 investment of this fund will be adminis-
tered by Scudder, Stevens and Clark, Investment Counselors, who also handle
the Cemetery Perpetual Care Fund. They project an annual yield on market
value of the Fund as invested of 6. 69 percent.
Acquisition Price and Funding Schedule
The schedule below is the breakdown 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 $1,460 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 5CI at time of
acquisition of Mausoleum from Gates, Kingsley,
Gates (the assets being sold by 5CI cost them
$80, 824 more than the net book value of those
assets).
4. Less reserve funds to cover cost of crypt/niche
markers and lettering and portion of labor costs
for opening and closing crypt/niche.
Total unadjusted purchase price:
$228,236.00
2, 941.00
80, 824.00
$312, 051.00
- 33, 167.00
$278,884.00
Unit Value (Cost to construct)
Crypts: 311 singles @ $347.60 ea. Niches: 12 singles @ $25.00 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 the available inventory will be
made to ascertain the exact selling price. The Staff estimates the final sales
price to be about $268, 000. In addition, SCI is paying for necessary repairs
to the Mausoleum roof to prevent leaking and potential stain damage to marble
and erosion of file grout.
To: Mayor and Council -5- October 17, 1975
Elxnding for this proposed acquisition can come from the follo~,ving sources:
1. Amount budgeted and encumbered in 1974-75 $150, 600.00
budget to construct initial phase of garden
crypts. (As discussed earlier in this report,
acquisition of the Mausoleum postpones the
need to construct garden crypts for at least
ten (10} years.
2. Anticipated excess in revenues versus expenses - $ 29, 592.00
in Cemetery Division Budget fox 1975-76.
3. Anticipated excess in revenues versus expenses $ 71, 964. 00
in Cemetery Division Budget for 1976-77.
4. Portion of anticipated excess in revenues over $ 2b, 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 $128, 284.00. It is recom-
mended that this amount be transferred from the Capital Improvement Fund
to provide the total amount necessary to fund the purchase and that the
Capital Improvement Flxnd be repaid from the excess revenue over expenses
from Cemetery operations as described above. The Capital Improvement
Fund contains approximately $1.6 million; therefore this transfer, which
will be repaid, is a relatively small amount.
Alternative s
Alternatives include the following:
1. Do not acquire the Mausoleum. 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
1986-87, or in about ten years. At that point, cemetery operations would
shift to perpetual care of existing graves only. with no additional 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 IVlausoleum are discussed
in the update of the Staff's February 25, 1975 report on the Cemetery
Perpetual Care Fund, included with this agenda.
2. Reject t_he proposed acquisition and direct the Staff to continue negotiations.
The Staff does not feel that further negotiations will be of benefit. On the
contrary, further delay in acquiring the Mausoleum reduces the amount of
income to the City from the sale of inventory. Further, it is conceivable
that SCI would put on a concerted sales campaign to sell as much available
inventory as possible, and the City would be precluded from acquiring the
Mausoleum and the benefits it yields in terms of providing a great deal of
flexibility 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 review the cost/benefit, and
Mr. David Hepburn of Glenview Cemetery, who reviewed the Staff's basis .
for negotiations, have recommended the acquisition. of the Mausoleum.
Recommendation
It is recommended that the Council transfer $128, 284. 00 from the Capital
Improvement Fund to Account ,~37-8641-920 (Cemetery Structures and
Improvements) and authorize the City Attorney to draft escrow instructions,
Assumption Agreement for Endowment Care Fund, and Bill of Sale and
Warranty Agreement and other documents necessary to transfer the assets
of Woodlawn Mausoleum from Mark Gates, Jr. to the City, open an escrow,
and authorize the City Manager to sign these documents subject to Council
review and approval at its regular meeting of November 12, 1975. Further,
it is requested that the Council direct the City Attorney to prepare an emergency
To: Mayor and Council
-7- October 17, 1975
and regular ordinance authorizing the Council to set Mausoleum prices and
fees by Resolution, and to also prepare a resolution establishing prices. and
fees at the Mausoleum. for Council consideration at its November 11, 1975
meeting.
Prepared by: David P. Dolter
Ralph Wilson
Doug McAteer
Roy Alioth
Jim Connolly
DPD: j s