Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.
Yesterday, August 13, 2019, the city council’s workshop was devoted exclusively to a potential sale of Glendale’s cemetery. I wanted to wait to write about the issue but waited until I had all of the information I required, including the staff presentation and my own research.
Let’s begin with some history. The Glendale Cemetery Association, comprised of 3 local churches, established the Glendale Memorial Park Cemetery in 1900. By 1962 the Association realized it was struggling financially and asked the City of Glendale to assume ownership of the cemetery. The city agreed and received all land owned by the Association to be used exclusively as a cemetery as well as $12,831.21 in cash and $40,005.00 in stock investments.
Within that agreement there was no restriction placed on the city preventing it from selling the cemetery or its assets. For the past 57 years the city has faithfully owned and managed the property. Sometimes it did it well, sometimes (during recessions), it did not. For nearly 60 years the city has supported the operation and maintenance of the cemetery from the city’s General Fund (taxpayer funds) while putting the proceeds from burial plot sales into a Perpetual Card Fund. Staff researched old records and could establish that the city subsidizes the cemetery at an estimated $30,000 to $50,000 a year. It also provides indirect support (personnel and equipment) from the Landfill, Solid Waste and Transportation departments. The Perpetual Card Fund is now about $5.8 million dollars and the city can document that an estimated $3.2 million dollars has come directly out of the city’s General Fund to pay for annual operations and maintenance. If a sale occurs, the city would retain about $2 million as reimbursement to its General Fund to offset what had been spent over the years for operations and maintenance. The buyer would retain about $3 million that would stay in the Perpetual Care Fund.
If you wish to see the workshop discussion you can go to the city’s website or the city’s Facebook page. The city is now live streaming all city council workshops and voting meetings. In my remarks from yesterday I delivered the following thoughts. The city council is not part of a nefarious plot (this was a pun…note the word ‘plot’ in reference to our discussion of the cemetery. Only the city manager got it…oh well). City council’s (and mine) decision will be based on a great deal of research and deliberation. We have a fiduciary responsibility to be wise stewards of your taxpayer dollars and that responsibility is taken very seriously.
It appears there are 3 options:
- The city can continue to operate the cemetery as is. It would continue to subsidize the operations and maintenance from the General Fund. The city would use capital only to make repairs that were absolutely necessary and would continue to only allow services Tuesday through Thursday. It would continue to do little to no marketing. There is no guarantee under this model as to what future city councils may decide to do.
- The city can enhance the cemetery operations and maintenance and make further capital investments. There are some things cities are good at doing and some things cities are not so good at doing. Running a cemetery is one of those things cities are not so good doing. It can hire a professional to run the operation and it can invest taxpayer funds to build infrastructure for cremation niches (which the city does not provide at this time). I estimate the additional cost to implement this model at an estimated $150,000 to $200,000 a year in addition to capital for infrastructure improvements. Again, there are no guarantees as to what future councils may decide to do.
- The city can sell to a professional within the industry with a proven track record of successful management. The proposed buyer and the industry are heavily regulated. It seems the state legislature takes death and burial very, very seriously.
One of the emails I received implied that the proposed buyer may not have the financial credentials necessary. So I did some research by going to Arizona Revised Statutes, Title 32, Chapter 20, Article 6 which contains all of the regulations with regard to cemeteries. I won’t cite all but I do want to highlight several regulations that should put Glendale residents’ concerns at ease.
- 32-2194.19. Investigation of applicant before granting of certificate of authority where needed. “Upon receipt of an application for a certificate of authority to operate a cemetery, the commissioner shall cause an investigation to be made of the physical status, plans, specifications and financing of the proposed cemetery, the character of the applicant, including its officers, directors, shareholders or members, and any other qualifications required of the applicant under this article.”
- 32-2194.24. Trust fund to be established before certificate of authority granted. “No certificate of authority shall issue to a corporation or limited liability company organized for the purpose of maintaining and operating a cemetery unless the articles of incorporation or organization certify to the establishment of an irrevocable trust for maintenance and operation in accordance with the provisions of this article…”
- 27. Restrictive use of income from endowed-care fund; obligation. “There shall be designated a trustee for the endowed-care fund that is a financial institution authorized to do business in this state…The principal of the trust fund shall remain permanently intact, and only the income …shall be expended…the fund shall be used solely for the care of the plots or other burial spaces sold to third persons with a provision for perpetual or endowed care…The fund or its income shall never be used for the development, improvement or embellishment of unsold portions of the cemetery…”
- 32-2194.30. Restriction on the use of endowed-care funds. “Endowed-care funds shall not be used for any purpose other than to provide for the care of burial spaces…”
State regulations require a thorough background check, including financial, of the potential buyer and associates and also require the Perpetual Care Fund to remain intact and only the interest earned on the Fund may be used for specific, regulated purposes. There are so many state safe guards to prevent fiduciary abuse and that should ease concerns of anyone who is frightened about a proposed sale.
There are positives to a sale. A professional would keep the cemetery open seven days a week. The proposed buyer has promised to keep the name of the cemetery as is and would still recognize preferences to Glendale residents. There are only 1.000 burial plots left. At an average of 100 plots purchased per year this model only has a life span of another 10 years. The buyer has indicated that his model will emphasize cremation niches and has plans to develop the infrastructure for such.
How will I vote? I don’t know. I am leaning toward a sale but council has requested further information that will result in a second workshop on the issue. Once I believe that I have all the information I need, I will make my final decision.
© Joyce Clark, 2019
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Hi Joyce, Please forgiven me as I’m ignorant on the cemetery process so I’m going to have to defer to you on the history and use of the perpetual fund.
I was reading from a 10/21/2003 City Manager Office Memorandum to the city Council regarding the use of the perpetual fund with the fund balance being $4.5 million back at that point in time.
It appears there was discussion in 2003 regarding the use of the Perpetual Care Fund to subsidize the city budget shortfall and while this is not the same situation it does contain verbiage regarding the use of the fund and since you were on the council when this topic came up in 2003 I hope you can help me to better understand the use of the fund in this particular sale.
In the memo it states a Mr Paladini clarified the Perpetual Care Fund was created by ordinance, therefore, use of the funds for any other purpose would require an amendment to the ordinance as well as notification to and agreement from all beneficiaries to the fund.
If the city now has 5.8 million in the perpetual fund, how can they now use 2 million to pay back the general fund without an amendment to the ordinance allowing this use?
Again Joyce, I have to defer to you on this particular topic as its outside my wheelhouse and perhaps the council did amend the ordinance after the 2003 memo that allowed the fund to be used for other items besides the fund itself.
I know the 2003 memo wasn’t talking about he sale of the property but rather the use of the perpetual fund for the general fund and perhaps the use of 2 million dollars is truly a justified payment. I’m just better trying to understand the repayment of the $2 million to the general fund without and amendment allowing dollars to be removed from the perpetual fund and transferred to the general fund.
Thank you in advance for providing information on this as the process moves forward. It’s helpful to have someone on the council with firsthand knowledge of this particular issue.
Bud
Bud, I believe that as long as the cemetery is owned by the city the 2003 Ordinance is applicable. However, once the city no longer owns the property the Ordinance would no longer be applicable as it specifically sets expectations as a city owned cemetery. Once the property is sold the Ordinance does not apply to anything. The potential buyer is satisfied with a Perpetual Care Fund of approx. $3 million because he is able to get a better interest rate on the investment than any municipality can. It is anticipated that the interest income on the approx. $3 million which will be controlled by a bank as trustee will be more than adequate to maintain and operate the existent cemetery. Frankly, I anticipate that the interest income will allow the potential buyer to do a better job than the city has done. Again, the 2003 Ordinance contemplates the cemetery as being city owned. Once that is not the case, the ordinance becomes moot.
Thank you for the update.
Joyce,
It appears obvious by the bias in your options that you lean toward selling. Bias may be a strong word and I use it with no negative connotation attached, so…
I agree with you. there are some things a city is good at, and some it is not. I support the sale simply because it makes good fiduciary sense. The city stepped in when it had to, and now is stepping back while it is able. Regardless of the horror stories currently floating around on NextDoor and FaceBook just because something bad happened in (insert city and state here) does not mean it will here.
You have done an outstanding job as usual in stating the facts and I for one appreciate your insights. Unless something seriously changes the scope of the current information, I agree…sell.
Joyce, isn’t the Perpetual Care Fund for taking care of the cemetery? Why would the city be expending funds to pay for maintenance? Have the city attorneys reviewed your interpretation of the applicability of the 2003 ordinance? I feel a lot of people are tiring of the change being brought on by the City Manager and Council agreeing to it. Everything seems to be reviewed as if it costs the city anything, sell it. Didn’t we try that with libraries up north? There are many things a city provides that do not make a profit but are amenities the citizens expect.
John, this is from Ordinance 1384 passed in October, 1985 “Commencing on the effective date of the Ordinance, all revenues and proceeds from sales of lots. headstones, appurtenances and services provided through the operation of Glendale Memorial Park Cemetery shall be deposited within the Perpetual Care Fund. The Fund shall be invested pursuant to the City Investment policy and earnings of the fund and additional revenues shall continue to accumulate in the Fund. Only when a finding is made that the Perpetual Care Fund is self-sufficient, may monies be withdrawn from the fund to defray the operational and maintenance costs of the Glendale Memorial Park Cemetery. Self-sufficiency shall be considered achieved when the interest and investment earning on the balance in the Perpetual Care Fund are sufficient to meet the next fiscal year’s projected operational and maintenance costs. and also to generate investment and interest earnings sufficient to increase the fund balance by an amount equal to or greater than the projected rate of inflation.”
A 1% rate of return on $5 million currently earns the city $50,000 annually. That amount does not cover the costs of Landfill, Sanitation and Streets departments, primarily responsible for the operation and maintenance of the cemetery. In fact, that does not cover the costs of the one city employee currently managing the cemetery.
No, I have not asked the city attorney to opine an opinion on my interpretation but I am quite sure I am correct in my interpretation. How can one apply a law to something that no longer exists? I am asking for confirmation from the city attorney.
The city manager did not initiate the change. It was time for an evaluation of the city’s management of the cemetery. Council had previously adopted a policy to get its assets to pay for itself.So a consultant was hired last October to review its operations and to report back to council. The consultant came back with 3 options: 1. keep doing what the city was doing recognizing that the cemetery would have to be subsidized out of the General Fund; 2. Make improvements to the infrastructure and hire a professional manager. This option would require a major capital investment. Even with upgrades the best the city could expect would be nearly revenue neutral; or 3. consider a sale of the property with the goal of preserving its use and upgrading its operation and maintenance. Council opted to consider a sale of the property for consideration dependent upon the research and information that would be provided.
I accept your comment that there are many things a city provides that do not make a profit, such as bus transportation and Dial-A- Ride but most of our amenities are designed to be used by the broadest segment of our population as possible.
John, Per the 1985 Ordinance, “Commencing of the effective date of this Ordinance, all revenues and proceeds from sales of lots, headstones, appurtenances and services provided through the operation of Glendale Memorial Park Cemetery shall be deposited within the Perpetual Care Fund. The Fund shall be invested pursuant to the City Investment policy and earnings of the fund and additional revenues shall continue to accumulate in the Fund. Only when a finding is made that the Perpetual Care Fund is self-sufficient, may monies be withdrawn from the fund to defray the operational and maintenance costs of the Glendale Memorial park Cemetery. Self-sufficiency shall be considered achieved hen the interest and investment earnings of the balance in the Perpetual Care Fund are sufficient to meet the next fiscal year’s projected operational and maintenance costs, and also to generate investment and interest earnings sufficient to increase the fund balance by an amount equal to or greater than the projected rate of inflation.”
Obviously this has not occurred. The annual operating and maintenance costs average over $200,000 a year. In addition to the annual shortfall from cemetery revenues with the deficiency covered by the General Fund, Landfill, Sanitation and Streets departments expend an additional amount of about $60,000 a year.
The change was initiated with the hiring of a consultant to look at the cemetery and to come back with all options in October of 2018. The consultant came back with 3 options: 1. continue to operate as is acknowledging that the General Fund and department subsidies would continue; 2. Invest in capital upgrades and professional management resulting in the possibility of revenue neutrality or close to it. The cost would be substantial; or 3. Consider the possibility of a sale that would preserve its use and upgrade the existing operations and maintenance. Council was willing to entertain the possibility of a sale but only after more research and information was provided.
Yes, there are amenities the city provides that do not make a profit…our parks, our bus routes, etc., but they were designed with the goal of providing an amenity to a large segment of the general Glendale population.
Joyce, if the fiscal people in the city cant get a better interest rate than 1% they should get a different job. A bank will give you 2.25% with a $25,000.00 minimum balance.
I agree with the parks, but bus service? Most buses are empty valley wide. We would be better off paying UBER to pick up the few people that ride the bus.
John, Sigh…just as in many other things, the state regulates charter city investments per A.R.S. Title 35, Article 2, Section 35-323. That’s why the interest rate is so low. The state mandates very conservative investments by municipalities.
Joyce, I just looked up the statutes you used and investments can be in CD’s, federally insured banks or savings and loan associations, interest bearing accounts in banks. The state does not mandate conservative investments, only federally protected. As you know, I have tremendous respect for you and all you do for the city but on this issue we will have to agree to disagree.
Thank you. I will ask our Fiance Director for further explanation of why the return is only 1%.
Friends still.
Joyce, Last week I visited Glendale Memorial cemetery and Resthaven cemetery because I was interested in comparing the two. Glendale Memorial looks like it is better maintained than Resthaven that looked messy and the grass needed mowing. Glendale Memorial appeared ship shape to me. Cemetery hours: The cemetery is open 7 days a week. Staff is only there Sunday through Friday 5:30 am-2 pm. Salesperson Mon-Friday 8-5 by appointment.
Joyce, we will always be friends.
I’ve been told that years ago the Perpetual Care Fund used to bring in considerably more money in interest — approximately $200K per year. At some point the fund was moved to the lowest risk, lowest return option available.
Frankly, if the city can’t get any better than 1% interest, it has no business building and holding the $50 million budget surplus it is seeking this year. Inflation is above 1%. 3.8% return on $5.8 million would bring in about $220K per year, which would entirely cover the cemetery’s operating expenses. The (presently $180Kish) annual income from sales could go toward further growing the fund until the cemetery fills. I’d imagine by then the fund would be north of $7 million.
Current ordinances allow interest from the fund to be used for regular maintenance once the fund has been deemed self-sufficient. If invested properly, the existing fund would be self-sufficient. Ordinances also allow for use of the principal for profitable cemetery expansion. Investing in more capacity for urns and ashes would increase profits.
I have a brochure from Cooperative Funeral Fund, which handles and invests cemetery care funds. There are probably other similar businesses. CFF offers various investment options from “conservative” on up with increasing risk. The lowest interest rate they show is 2.48% (1 year). I believe the current rates are actually a little higher.
Joyce, at the workshop you said the cemetery isn’t open on weekends. That’s not true. It is open 7 days a week. It is staffed Sunday through Friday. Burials are conducted Tuesday-Thursday. Ash services are conducted Monday through Friday.
If you haven’t visited the cemetery lately, you should. The workers there are friendly and do an excellent job of maintaining everything.
If the decision is still to sell, I hope the council will first insist on a valuation of the property. The city paid $100K for the house converted into the office, plus significant money for the conversion. That building alone is probably worth $200K. It could be used as a private business office. Also, the city owns the tractors, mowers, etc. that I’ve been told will be included in the deal. The equipment is worth tens of thousands of dollars.
I don’t think having a consultant offer the cemetery and $3.8 million of the care fund for sale to only a small group of potential buyers was the proper way to handle this. Nor is accepting the only offer that came in, which on the surface appears to be extremely low.
Another issue the city should clarify is whether the new owner will honor old contracts. Since Glendale took over the cemetery, it has honored contracts that had been purchased before the acquisition. The city no longer has copies of many of those old contracts. How would the new owner handle this?
The city cemetery has at least 5 community service workers out there every day working on the grounds. No wonder it looks well maintained, and better than its neighbor Resthaven Cemetery. I learned this community service is FREE LABOR, and costs the city NOTHING. About 7 thousand man hours a year donated for FREE. Calculate that in city laborer wages! If the city cemetery becomes privately owned, Community Service will not be provided – Community is only available to non-profits like the city. Look for maintenance standards to change over there, if Glendale Memorial becomes privately owned (sale to John Hassett, pending) with a vote on 8/27 at City Council.
I do not agree complete with your analysis of the cemetery fund, if we have more money in the fund that is needed then the city should be able to use those for current operations.
I also have a problem with the assumption that the cemetery is not the business of the city and should be handled over to to private sector for profit. In my view cemeteries are as much a core function of government as Parks and Rec.; senior center; library; zoning enforcement; healthcare and economic development. After all it’s taking care of people the “cradle to grave” concept. I also take exception to the notion that funding some of the operating cost with General Fund(GF) is a bad idea as you seem to be suggesting with the use of the word “subsidy”. After all what is the GF for in local government (to provide services to the people that would never be provided otherwise).
Let me dig deeper in how much GF an average resident earning a net income of $60k per year and living in Glendale for a 80 year life.
1. About $250k in state shared revenue
2. About 750k in sales taxes
3. About $200k in property tax.
“Subsidizing” the cemetery the resting place if of forefathers a $100k a year of the next ten years with $5m plus in the bank is not the worst use of our discretionary funds (GF).
Remind me again how much we give to: Hockey; Super Bowl; Cabalas; Baseball; Red Bull; BMW; Coke; Lund just to name a few.
Don’t sell the cemetery I have seen what happens to a cemetery when there is no more space to sell, it’s not pretty.
VOTE on the sale of our city-owned cemetery, Glendale Memorial, is Sept 24, 5:30 Council Voting Meeting.
If you wish to give citizen comments, fill out a card before the meeting and you may speak for 5 minutes, just prior to the vote. Democracy in action.
Vote on Glendale Memorial Park Cemetery has been DELETED from the Sept 24th voting meeting agenda.