Austin Cemeteries: A Comprehensive Business Analysis. Thomas Longoria, Ph.D. Texas State University. October 5, 2010

Transcription

1 AustinCemeteries:AComprehensiveBusinessAnalysis ThomasLongoria,Ph.D. TexasStateUniversity October5,2010

2 ExecutiveSummary Thisreportfocusesonindustryanddemographictrends,andtheimpactofthosetrendsonAustin s cemeteries.thereportalsoexamineshowwellaustinisrespondingtothesetrendsandinvestigatesthe existingcontractwithintercare.theinformationpresentedinthisreportalsoincludesanalysisof historicalandfuturecemeterydemand. SpecificFindingsInclude: Themid rangeforecastofthecemeteryandcrematoriesindustryoverallandforthecityofaustin indicatesslightlydecliningdemand. CityofAustincemeteriesdelivera standardofcare appropriateforamunicipalcemeteryand withcurrentpricinglevels. Thecremationratehasasubstantialimpactonthenumberoffamiliesseekingtraditionalburial services.cremationratesaretrendinghigher.thecremationrateiscurrently40percentin Austinandatcurrenttrendswillincreaseabouttwopercentayearuntilamaximumrateof approximately65percentin2021. TheCityofAustinisoneofthreelargecitiesinTexasthatoperateactivecemeteriesandisthe onlymajorcityintexasthatcontractsoutmaintenance. Industry standardsofcare specifictolocalgovernmentcemeteriesaretypicallygeneralin nature.thestandardsofcareoutlinedinthecurrentcontractwithintercareshouldeffectively guidemonitoringbutthereisnoevidencethattheseguidelinesarebeingusedforthispurpose. Basedonaroughcomparisonofjobtitles,InterCareemployeesalariesarehigherthanthe industryaverage.however,thesecomparisonsdonottakeintoaccountactualjobdescriptions. InterCare semployeesarehighlyqualified,experienced,andcredentialed. 1

3 Usingtheaveragecostforplot,CityofAustinfeesarehigherthanmunicipalcemeteriesstate average.takingintoaccountmedianpercapitaincome,austin scemeteryfeesareinlinewith othermunicipalcemeteries. Raisingfeestofundavarietyofimprovements(levelingmonuments,removingtreeballmoss,and preservationoftheperpetualcarefund)wouldpricecityofaustincemeteriesoutsideofthe publicsectormeanandatthesamelevelasprivatesectorcemeteries. Thereover35,000plotsremainingforsaleoravailablefordevelopmentandsale.Atthecurrent averagerateof600salesperyear,thissupplywillbeexhaustedin57yearsor2067.however whenpopulation,mortalityrates,cremationratesaretakenintoaccount,53percentofthesupply willstillbeavailablein

4 TableofContents Page Section1:OverviewoftheCemeteryIndustry 6 1.1IndustryTrends BurialCostsTrends.9 1.3IndustryResponsestoTrends 10 Pre SalesTrends...10 CremationTrends 10 GreenBurials TypesofCemeteries BestPracticesinMunicipalCemeteries 16 Transparency.17 StandardsofCare.17 CemeteryCommission..18 Section2:IndustryTrendsAppliedtotheCityofAustinCemeteries RegionalMarketTrendsFacingCityofAustinCemeteries.20 CremationRatesinAustinMetropolitanArea.23 AnnualBudgetandExpenditureTrends ManagementandOrganizationalModelsforMunicipalCemeteries CityofAustin suseofbestpracticesincemeterymanagement 30 Isthecityofferingpre salestocapturemorerevenue? 31 Isthecityrespondingtotheincreasedchoiceofcremation? 32 Isthecityofferinggreenburialoptions? 32 Isthecityclearlycommunicatingthegovernmentsector s?.33 Isthecityclearlycommunicatingappropriate standardsofcare? 33 Isthecitymanagingthecemeteriestransparently?...35 Isthecityfosteringcitizeninvolvementincemeterymanagement? 36 3

5 Section3:AnalysisoftheInterCareContract NumberofEmployeesandSalaries PriceStructureAnalysis ImpactonLowIncomeFamilies ImpactofHigherPricesandFees 46 Section4:Long TermViabilityofCityofAustinCemeteries SupplyandDemandforTotalPotentialCemeteryPlots SupplyForecastModel..50 4

6 TablesandFigures Page Table1:MarketSizeandAverageCharacteristicsofCemeteriesandCrematories.6 Table2:Mid RangeRevenueForecastforCemeteriesandCrematories 7 Table3:FinancialProfileoftheAverageCemetery...8 Figure1:AverageCostofanAdultFuneral...9 Figure2:CremationRatesintheUSStates(2006)...12 Figure3:NumberofDeathsandDeathRatesinTexas...21 Figure4:NumberofBurialsinCityofAustinCemeteries...22 Figure5:PercentofDeathsthatResultinCremationandTraditionalBurialinTravisCounty.24 Figure6:GrossOperatingReceipts 25 Figure7:GrossRevenueorSubsidy..26 Figure8:NetRetainedRevenueperBurial..27 Table4:MunicipalCemeteriesinMajorTexasCities(2010) 29 Table5:CityofAustin suseofbestpracticesincemeterymanagement.30 Figure9:PercentPre Sales 31 Table6:ModeClassificationSystemforAustinParkMaintenance.34 Table7:IndustryandInterCareSalaryandWagesbyJobTitle 38 Table8:PricetoOpenandCloseaGravebySector.41 Table9:PriceofaCemeteryPlotbySector.41 Table10:MunicipalBurialCostsandMedianIncome..43 Table11:CostforCemeteryServiceandFuneralbyMedianIncomeandRace 44 Table12:IncomeDistributionbyRaceinAustin,TX(percentineachcategory) 45 Table13:ImpactofFeeIncreasesbyRaceandIncome...47 Table14:TotalEstimatedPotentialAvailableSpaces...49 Figure10:ProjectedBurialsinCityofAustinCemeteries..51 5

7 Section1:OverviewoftheCemeteryIndustry Section1outlinesthemajortrendsinthecemeteryindustryintheUnitedStates.Theimplicationsfor thesetrendsforcityofaustincemeteriesareexaminedinsection2. 1.1IndustryTrends In2009,thetotalmarketforCemeteriesandCrematoriesserviceswas$2,957million.Whilethemarket forcemeteriesandcrematoriesisconsiderable,theindustryhasnotexperiencedsignificantgrowthsince 2004.Infact,comparedto2008,2009marketsizedeclinedby1percent.Whilea1percentdeclinedoes notindicaterapiddecline,forecastsfortheindustryaremodestlynegativeintermsofrevenuegrowth. Table1:MarketSizeandAverageCharacteristicsofCemeteriesandCrematories Metrics MarketSize($millions) $2,886 $2,823 $2,869 $2,951 $2,997 $2,957 TotalFirms 4,516 4,414 4,349 4,307 4,230 $4,180 TotalLocations 5,806 4,414 4,349 4,307 5,438 4,180 (Headquartersand Branches) TotalEmployees 38,051 36,416 35,417 35,099 34,893 34,112 AverageRevenuePer $639 $640 $660 $685 $708 $707 Firm($thousands) AverageEmployeesPer Firm Source:AnalysisofUSCensus,BureauofLaborStatisticsreports

8 Themid termrevenueforecastforcemeteriesandcrematoriesindustryismodestlynegative.taking intoindustrytrends,revenueisexpectedtodeclineslightlyfrom$2.96billionin2009to$2.88billionin Table2:Mid RangeRevenueForecastforCemeteriesandCrematories Forecast Revenue($billion) $2.96 $2.93 $2.92 $2.90 $2.89 $2.88 GrowthRate 0.8% 0.5% 0.5% 0.5% 0.2% Source:AnythingReserach.comEconomicAnalysis Thistrendisaccountedforbyseveralfactors.Themortalityrateisdecreasingmeaningthatthenumber ofpeoplerequiringcemeteryserviceshasremainedstableevenasthepopulationages.anotherreason forthenegativetrendisincreasedchoiceoflessexpensivecremationoptions. Despitethetrends,cemeteriesarestillprofitableenterprises.Table3presentsthefinancialprovideof theaveragecemeteryfirm.thefinancialprofileservesasaroughbenchmarkforprofitability.the averagecemeteryhasanetprofitof8%oftotalrevenue.thetypicalcemeterybusiness operating expensesare63percentoftotalrevenue. 7

9 Table3:FinancialProfileoftheAverageCemetery IndustryAverage PercentofSales TotalRevenue $707, % OperatingRevenue $678,604 96% CostofGoodsSold $183,787 26% GrossProfit $494,817 70% OperatingExpenses Pension,profitsharingplans,stock,etc. $3,077 0% Repairs $9,835 1% Rentpaidonbusinessproperty $63,680 9% Charitablecontributions $388 0% Advertising $13,315 2% Compensationofofficers $30,644 4% Salariesandwages $133,965 19% Employeebenefitprograms $10,132 1% Taxesandlicenses $25,804 4% Baddebts $1,977 0% Depreciation $19,120 3% Amortization $7,417 1% Otheroperatingexpenses $124,850 18% TotalOperatingExpenses $444,191 63% OperatingIncome $50,625 7% Non operatingincome $28,674 4% EBIT(EarningsBeforeInterestandTaxes) $79,299 11% InterestExpense $16,105 2% EarningsBeforeTaxes $63,194 9% IncomeTax $5,413 1% NetProfit $57,781 8% 8

10 1.2BurialCostsTrends Amajortrenddriveristheincreasingfuneralandburialcosts.Ascostscontinuetorise,thenindividuals purchasingdeathserviceswillbecompelledtochooseotherwaystomemorializelovedones.the averagecostofanadultfuneralhasincreasedfrom$708in1960to$6,195in2006.intermsofinflation adjusteddollars,thecostofafuneralhasincreasedfrom$4,822in1960to$6,195in2006.thecostofa funeralinrealdollarshasbeenaround$6,000since1995eventhoughthepriceisactualdollarshas increasedfrom$4,626to$6,195from1995to2006(nationalfuneraldirectorsassociation,general PriceList). $7,000 Figure1:AverageCostofanAdultFuneral Cost $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Dollars RealDollars $ Year 9

11 1.3IndustryResponsestoTrends Threeresponsestothetrendscanbelogicallylinkedtotheincreasingpricesforanadultfuneraland burial:(1)theincreaseincemeterypre sales,(2)increaseduseofcremationservices,and(3)green burials.oneoftheseresponses(pre sales)bringsapotentialrevenuebenefittothecemeteryindustry andonerepresentsapotentialthreattorevenue(cremation).greenburialsareanattempttogrowthe marketbyrespondingtoincreasingenvironmentalism. Pre SalesTrends Pre salesproviderevenueincurrentyearsthatcanbeusedtoaddressincreasesincoststomaintaina cemetery.pre salesalsoenablelower incomeresidentstopayforburialcosts(cemeteryplot)overtime. Becauseoftheunexpectednatureofmanydeaths,low incomefamiliesexperienceconsiderablefinancial stresstopayforacemeteryplotinfullpriortointerment.withpropermanagementpre salesrevenues canbeusedtohelpbuildaperpetualcarefund. AnAmericanAssociationofRetiredPersonsstudyfoundthat27.5percentofpeoplepaidinadvancefor funeraland/orburialservices.pre salesareoftenaggressivelymarketedbyprivate sectorcemetery businesses.aggressivemarketingangersmanypeopleandpre saleshaveabadpublicimage,butthe increasingpurchaseofcemeterypre salessuggestsaneedanddemand.municipalcemeteries,iftheyare tofollowthisindustrytrend,mustmoreactivelymarketpre sales.failuretoclearlyofferanattractive pre salesprogrammayleadfamiliestochooseprivatesectoroptionseventhoughtheymaybehigher priced. CremationRatesandTrends Anotherresponsetoincreasingfuneralandburialcostsisthetrendtowardcremationovertraditional burial.thirty fourpercentofdeathsresultedincremationintheunitedstatesin2006.incomparison, 10

12 24percentofdeathsinTexasin2006resultedincremation.Thecremationratevariesgreatlyacrossthe US.Texas cremationrateislowwhencomparedwithstatessuchasnevadaandwashingtonthatboth reportacremationrateof68%(seefigure2). 11

13 Figure2:CremationRateintheUSStates(2006) Mississippi Alabama Kentucky Tennessee Louisiana WestVirginia NorthDakota Arkansas SouthDakota Indiana SouthCarolina Georgia Oklahoma Utah Iowa Texas Ohio Missouri NorthCarolina Virginia NewYork NewJersey Kansas Maryland Nebraska Pennsylvania Illinois Massachusetts Wisconsin RhodeIsland Delaware US Connecticut D.C. Michigan Minnesota NewMexico Idaho Wyoming California Florida NewHampshire Vermont Alaska Maine Colorado Montana Arizona Oregon Hawaii Washington Nevada CremationRate 12

14 AccordingtotheCemeteryAssociationofAmerica,44percentofdeathsintheUnitedStatesin2025will resultincremation.therearereasonstoexpectthatthecremationratewillbemuchhigherin communitieslikeaustin(seeforecastmodelbelow).thecremationratewilllikelyincreasebeyond50 percentandoverthenextdecadeandeventuallyapproachthe70percentrange. Willingnesstopayhighcostswilldeclinewithincreasedacceptanceofcremation.Withoutadoubt,there isincreasedchoiceofcremationovertraditionalcasketburial.fullyunderstandingrequires considerationofcultural,religious,andcontextualfactors. Forexample,thereareracialandreligiousdifferencesincremationrates.Asapercentageofall cremationsintheunitedstates,88percentwerewhite,comparedto6percentafricanamericans,3 percenthispanics,and3percentasians(cremationassociationofnorthamerica1996/97cremation Container,DispositionandServiceSurvey).Basedonthisdata,andtakingintoaccountthepercentof totaldeathsacrossracialcategories,whitesareslightlyoverrepresentedintermsofcremation(the percentofdeathsin1991thatwerewhitewas81%andthepercentofcremationswas88%). Theassertionthatminorities,Catholics,andotherreligious,racial,andethnicgroupsareopposedto cremationshouldbecarefullyreexaminedgivenitsrelevancetodemandforcemeteryservicesandthe futuredemographicprofileoftheusandtexas.whilethereareobservableethnicandracialdifferences increationrates,africanamericansandlatinosmaycometoacceptcremationasthisoptionbecomes thenormamongthe dominant community.thisprocessofacculturationispowerfulevenondeeply embeddedculturalandreligiousvalues.forexample,nearly100percentofjapanesearecrematedin Japan,whereas50percentofTravisCountyresidentsofJapaneseancestryarecremated(TDSHSTrends inmethodsofdisposition).inminnesota,ethnicdifferencesincremationratespresentin had essentiallyvanishedby (MinnesotaDepartmentofHealth,CenterforVitalStatistics, MinnesotaVitalSignsApril2008,Vol4,No.1). Approximately46percentofthecrematedremainsaredisposedofbyburialinaplot,placedina columbarium,scatteredondedicatedproperty,notpickedupandstoredinthecremationfacility,or 13

15 placedinacommongrave.theremaining54percentofcremainsaretakenhomeorscatteredonwater orland(cana1996/1997).inotherwords,thereisnowaytogeneraterevenuefromaround54percent ofcremations. Assuming50percentoffamilieschoosecremationand50percentofthoseindividualschoosetotake cremainshome,25percentofalldeathswillnotconsumecemeteryservicesandthecemeterieswill competefortheremaining75percent.cemeteries,includingmunicipalcemeteries,ignorethistrendat theirfinancialperil. GreenBurials Thegreenburialmovementis,inpart,aresponsetothetrendofincreasingcostsaswellasthecultural shifttowardenvironmentalism.greenburialservicesrepresentanotherimportantindustrytrendthat municipalcemeteriesmustaddress. Greenburialsareconductedinwaysthatdonotusetoxicchemicalsandnon biodegradablematerials. Thistrendtowardgreenburialshasthepotentialtoaccelerateaspeoplebecomeincreasingly environmentallyconscious.accordingtoa2007aarpsurvey21percentofamericansolderthan50 statedtheywouldpreferan eco friendlyendofliferitual (Dulai,June15,2010,HoustonChronicle). YoungerAmericanswhohavebeensocializedtobemoreenvironmentallyconsciouswilllikelyexpress anevengreaterpreferenceforgreenburials. Therehasbeensomeresistancetogreenburials.Forexample,somecitieshavepassedordinances banninggreenburials.thisoppositionisoftencouchedintermsofpublichealthconcerns.however, thereisnoevidencethatgreenburialsareharmfultopublichealthandadvocatesofgreenburials attributepoliticalpressurefromfuneralandcemeteryindustryforanti greenburialsentiment ( 14

16 Traditionalburialdoeshaveasizeableeconomicandenvironmentalimpact.Americansspend$15billon ondeathcareserviceseachyearleadingtoburialof enoughembalmingfluidtofilleightolympicsized pools,moresteelthatwasusedtobuiltthegoldengatebridge,andenoughreinforcedconcreteto constructatwo lanehighwayfromnewyorktodetroit. Allprovidersofcemeteryservices,especiallylocalgovernmentsthataresubjecttopoliticalinfluence, mustrespondtothistrend.thedistinctroleoflocalgovernmentprovisionsincemeteryservicesis addressedinthenextsection. 1.4TypesofCemeteries Aswithmanyservices,cemeteriesservicesareprovidedbythepublic,private,andnonprofitsectors.In this mixed economy,provisionbymultiplesectorsoccursforreasonsthatcanbeidentifiedin economic,political,andsocialtheory.thesetheoriesinformandclarifylocalgovernment srolein cemeteriesandmaintainfocusonthenichethatpubliclyprovidedservicesoccupy. Private sectorcemeteriestypicallyofferahigherservicequalitybasedonwhatpeoplearewillingtopay. Ingeneral,private sectorcemeteriestendtohavehigherstandardsofcare,chargemore,andfund perpetualcare.provisionofgoodsandservicesataparticularservice levelrespondstomarket demands. Foravarietyofreasons,theprivate sectorcanfailtoproducethegoodsandservicesdemandedby consumers.forexample,smallcommunitieswithoutsufficientpopulationorincometosupportaviable privatesectorcemeterywouldgoun orunder servedbyaprivate sectorcemetery.thisisanexample of marketfailure. Thepublicsector sinvolvementisjustifiedbecauseofmarketfailure orthe inabilitytoprovideagoodorserviceatapricethatconsumersarewillingtopay.becauseofthishigher price,governmentgetsinvolvedinthemarket. 15

17 Publicinvolvementincemeteriesprovidesasubsidyforlocalresidents.Publicsectorcemeteriesare moreresponsivetocitizendemandsforfreeexpressionofbereavementbecause,asapublicfacility, usersfeelthattheyhaverightsascitizensaswellasconsumers.asaresult,public sectorcemeteriesare usuallylessrestrictiveintermsofrulesandregulationsthanprivatesectorcemeteries. Memorializingthedeadisareligiousactivityandasareligiousactivitytherearemanyritualsassociated withparticularreligions.incaseswhenthereareparticularisticcommunitypreferences,thennon profit sectororganizationsgetinvolveddueto governmentfailure. Governmentcannotrespondtothe particularisticpreferencesofthewiderangeofdifferentgroupstotheextentthatsomenarrowinterests desire.forexample,acatholicnonprofitcemeterywouldbemustmorewillingtoallowfordayofthe Deadcelebrationswithfood,music,alters,candles,andothertraditionsthanapublicsectororprivate sectorcemetery.nonprofitcemeteries,becausetheycanrelyonvolunteersandmembersofvoluntary associations,canaffordtoprovideservicesatmuchlowercoststhatpublicandprivatesectorcemeteries. Thereisnocleartrendtowardonemethodofserviceprovisionoranother.Whilefew ifany large citiesarecontemplatinginitiatingprovisionofcemeteryservices,thereisnothinginherentlyoutsideof thelogicofthemarketmodelthatwouldpreventthemfromdoingso.thekeyinthisregardisthatifa localgovernmentiscurrentlyinthecemeterybusiness,itshouldattempttofulfilltheirsector specific role.aproperfocusonsector specificroleispartofmeetingbestpracticesformunicipalowned cemeteries. 1.5BestPracticesforMunicipal OwnedCemeteries Bestpracticesformunicipalcemeteriesincludeastrategicplanthataddressesthemarkettends identifiedabove.inaddition,whenlocalgovernmentsprovidecemeteryservices,theymustfulfillcitizen expectationsforservicequality,transparency,andresponsiveness.localgovernmentsthatprovide cemeteriesserviceshavemadeuseoftechnologytoenhancetransparencyanddevelopedcommissions tofacilitatedirectcitizeninvolvementinthemonitoringofcemeterymaintenanceandotherissues. 16

18 Transparency TwocitiesinTexashavedoneaparticularlyeffectivejobinusingtechnologytoenhancetransparency. TheCityofLubbockmakesextensiveinformationaboutcemeteryoperationsreadilyavailableonthecity website.forexample,thecityoflubbockpostsmonthlysalesdataonthewebsite.rulesand regulations,standardoperatingproceduresandallformsarealsoposted.thecityoflubbock slevelof informationdisseminationisnodoubtpartiallyafunctionofthefactthatcemeteriesoperateasan independentdepartmentandtheappointedofficialsareclearlyresponsibleforcemeteryoperations.in thisregard,anindependentdepartment,whilenotfeasibleinmanycases,isabestpracticeaswell. Lubbockprovidesanexcellentservicetocitizensinterestedinpurchasingcemeteryplotsandallowfor peopletomonitorthemanagementofthecemeterieson line.theseservicesareimportantgiventhe mobilityofthepopulation. TheCityofGrandPrairiesetsthestandardforbestpracticesintwoways.First,theirwebsiteisofthe highqualityandhastheappearanceofaprivatesectorcemetery.ingrandprairie,thecemeteryappears tobeanindependentidentityandthefactthatgrandprairiememorialgardensiscityownedand operatedisnotedasanafterthought.thereasonsthatgrandprairiecanbeseenasabestpracticein transparenceisthattheyofferafullrangeofproductsincludingacolumbariumwall,mausoleumcrypts, andcremationniches.therearealsodifferentpricinglevelsbasedondifferentsectionsofthecemetery. Thesedifferentpricinglevelsareassociatedwithwhatisallowedintermsofmonumentsandthe aestheticbeautyofthearea.thebestpracticeofsettingclearlyserviceexpectationsisalsoabest practiceintransparency. StandardsofCare Thebestcontractsincludestandardsofcarethatallowforeffectivecontractmanagement. Standardsof care usea reasonableperson standard.thereasonablepersonstandardisgaugedintermsof professionalnormsandexpectations. 17

19 Standardsofcareappliedtoacemeterymusttakeintoaccount:(1)theageoftheproperty;(2)the resourcesavailableorwillingtobecommittedtotheproperty;(3)theclimate;and(4)theequipment availableformaintenance. Cemeteriesavoidmakingclearstatementsregardingstandardsofcarebecausethenatureofpublic sectorconsumptionofcemeteryserviceswouldunderminethesestandards.forexample,certainforms ofmemorializationunderminehigh standardsofcare. Familymembersoftenplacefencesandbenches inandaroundcemeteryplotsinclearviolationofregulations.thispracticecreatestheappearancethat standardsofcare arenotbeingmet.inaddition,theseformsofmemorializationareobstructionsthat makemaintenancemorecostlyanddifficultandarebarrierstoa highstandard of care. A reasonable person standardsuggeststhattheseformsofmemorializationassociatedwiththegrievingprocessmust bebalancedagainstthe standardsofcare. Communicatingstandardsofcareinthecontextofamunicipalcemeteryisthekey.Forexample,onecity statesthatthe TownCouncilwillmaintainthehighestpossiblestandardsofcareanddignity,whilstat thesametimerespecttherightsoftheindividualandnotplacingunduerestrictiononindividualchoices (Bondmin,UK).Aformalrecognitionofthisbalancingapproachisanimportantbestpractice. CemeteryCommission Anotherbestpracticeiscitizeninvolvementinmonitoringthroughacitizenadvisoryboard.Incases whencemeterymaintenanceandotherservicesarecontractedout,citizeninvolvementisevenmore important.thecityofsanmarcoshasaveryactivecemeterycommissionthatgivesvoicetocitizen concernsandpreferencesandcommunicatesthesepreferencestoboththecityparksdepartmentand thecontractor(intercare). CemeteryCommissionmembershaveahighlevelofinterestandexpertiseintheareaofcemetery management.inthecaseofsanmarcos,thecemeterycommission:(1)reportstothecitycouncilonthe existingcontract;(2)conductsmonthlyinspectionswithintercare;(3)makesrecommendationsonfees; and(4)followsuponcomplains. 18

20 Thecemeterycommissionalsoworkswithanonprofitorganization(FriendsoftheSanMarcos Cemetery)thatisfocusedonraisingfundstosupportthepreservationofthecemeteries.Becauseofthis relationship,theover$20,000israisedperyearincludinga5kruncalled FromHeretoEternity. This eventincludednumerouscorporatesponsorsincludingbanksandfuneralhomes. Thislevelofcitizeninvolvementislikelyaresultofthisinstitutionalizedlinktocemeterymanagement (thecemeterycommission).citizensaremorelikelytotreatthecemeterieslikeaparkorcommunity amenityiftheyareinvolvedincemeterymanagement. 19

21 Section2:RegionalTrendsFacingCityofAustinCemeteries ThissectionappliestrendsandissuesidentifiedinSection1anddiscusseshowtheCityofAustinhas respondedtothetrends.overall,therehasbeennoresponsetotheseindustrytrendsandbestpractices. ThislackofaclearbusinessstrategyexposesCityofAustinCemeteriestoconsiderableriskintermsof thefinancialsoundness.regionalmarkettrendsalsosuggestdecliningrevenues.asaresult,the revenuemodelisalsoexaminedinthissection. 2.1RegionalDemographicandIntermentTrends In2007,themortalityratefortheUSoverallwas803.6deathsper100,000population(CDCdeaths.htm) oracrudedeathrateof8.0per1000residents.texas deathratein2007was6.7per1000.ascanbe seeninfigure3,deathrateshavebeensteadilydecliningintexas.however,giventheincreasing populationthenumberofdeathshasbeensteadilyincreasing. 20

22 21 InTravisCounty,thecrudedeathratein2007was4.7per1000or4,468deaths.Ofthe4,468deathsin TravisCounty,3,674wereinAustinTexas. Figure4presentsthenumberofburialsinCityofAustincemeteriesovertime.Thecitytrendsreflectthe nationaltrendsofaslightdeclineinthenumberofcemeteryburials.thenumberofburialsinaustin cemeterieshasdeclinedfrom677in1991to461in2009.thisdeclineislikelyduetothesametrend ,000 40,000 60,000 80, , , , , , NumberofDeathsper1000 NumberofDeaths Year Figure3:NumberofDeathsandDeathRatesinTexas NumberofDeaths DeathRate

23 driversdefinedabove increasingfuneralandburialcostsareleadingmorefamiliestochosecremation andotheroptions. Figure4:NumberofBurialsinCityofAustinCemeteries NumberofBurials Year Bi variateregressionanalysisonburialdatafrom1991to2009,findsastatisticallysignificantnegative trendinthenumberofburials.eachyearpredictsadecreaseof10burialseachyear.aftertenyears (2020),theforecastednumberofburialswouldbe100lessor361[Y=724 10X].Thisrelationshipis statisticallysignificantatthe.01levelsuggestingthisdecliningtrendisnotoccurringbychance.ther 2 is.69whichindicatesthatthefactoroftimeaccountsfor69percentofthevariationinthenumberof burials. 22

24 AccordingtoInterCarestatistics,585peoplewereburiedinAustincemeteriesin2007andtherewere 4,468deathsinTravisCountyis2007.ThisindicatesthattheCityofAustincemeterieshavea13percent marketshareassumingthatallpeoplewhodiedreceivedatraditionalburial.whenacremationrateof 35percentisassumed,thentheCityofAustin smarketshareof2,904potentialburialsis20percent. CremationRatesintheAustinMetropolitanArea Theanalysisaboveindicatesthatthecremationrateisanimportantregionaltrenddriverformarket shareandpotentialrevenue.thissectionexplorescremationtrendsinthestateandregion. InTexas,burialisthemostfrequentformofdispositionofremains.AfricanAmericansaremostlikelyto chooseburial(91%),followedbyhispanics(84%),whites(77%)and Others (56%)(TDSHSTrendsin MethodsofDispositioninTexas, ). Basedonavailabledata,thecremationrateinTravisCountywas24percentin1999and32percentin 2003.AnindividualwhoworksinthecremationindustryinTravisCountyestimatedthecremationrate isnowapproximately40percent.thecremationrateisassumedtohaveincreasedby1.6percentper yearbetween1999and2010.after2010,thecremationrateisestimatedtoincreaseatarateof2 percentperyeargiventhelikelihoodthatthetrendwillaccelerategivencurrenteconomicconditions. ThecremationrateinAustinshouldsteadilyincreaseuntilthecremationratereachesamaximumof between60and70percentobservedinotherstates.figure5presentsaforecastmodel.ifthecremation ratecontinuestoincreaseabouttwopercentperyearthecremationrateintraviscountywillbe50 percentin2019and70percentin

25 0.8 Figure5:PercentofTraditionalBurialandCremation Percent PercentTraditionalBurial Year PercentCremated AnnualBudgetandExpenditureTrends NationalandregionaldecreasesinthenumberofburialssuggestthattheCityofAustinmaybefacing futurebudgetshortfalls.figure6presentsthebudgetdataforthecityofaustincemeteriesfrom1992to 2009.GrossOperatingReceiptshaveincreasedfrom$729,248to$1,301,053in2009.ThepeakinGOR 24

26 was$1,491,657in2008.thecityofaustinhasnotseenadeclineinrevenuesduetoincreasesinfees associatedwithcemeteryplotsandothercostsassociatedwithburial.someevidenceoftheslight declineinthenumberofburialscanbeseenafter2007,whenrevenuesflattenedandthendeclined. While,thelastthreeyearsdonotconstituteatrend,thereispotentialforcontinuingdeclinesinrevenue. Dollars Figure6:GrossOperatingReceipts Year TherelevanceofthesetrendsfortheCityofAustinwithrespecttothecontractismanifestedinthe amountthecityreceivesasrevenuefromintercareorpaysassubsidytointercare.figure7presentsthe amountofrevenueorsubsidyovertheentirecontractperiod.netsubsidy/revenuetocityofaustinis notusedbecausethisamountisadjustedbythecostoftheamountofadditionalservicesrequestedby thecityofaustin. 25

27 Figure7:GrossRevenueorSubsidy Dollars Overthelifetimeofthecontract,therehasbeen$19,652,126ingrossrevenuefromthesaleofcemetery servicesbyintercare.duringthissameperiod,thecityofaustinhasreceivedanetof$196,218in paymentsfromintercareor1percentofthetotalrevenue.assumingthatintercare snetprofitmarginis thesameastheprivatesectoraverageof8percent,thenthecityisreceiving12.5percentofthenet profits.[note:intercare sactualprofitmarginwasnotmadeavailable] TheimpactofadeclineinthenumberofburialsandGORcanbeseenin2009.Prioryearsincluded substantialpaymentstothecityofaustinbyintercare($93,970averagefrom2005to2008),but2009 indicatedat$43,523subsidypaymentbythecityofaustintointercare. ThecontractwithInterCarehaspreventedthecityfromspendingthousandsofdollarstosubsidize cemeterieswithpublictaxdollars.however,pastperformanceandsavingthecitymoneydoesnot automaticallyguaranteeamutuallybeneficialarrangementinthefuture.giventhatthecontractisfixed 26

28 butthedemandforcemeteryservicesisdynamic thereareanumberofpotentialimbalancesthatmight emerge. TheimportanceofthisfactorishighlightedinFigure8.ThecitypaysasetamounttoInterCarefor managementofcemeteryservicesregardlessofthenumberofsalesinagivenyear.thisimposesa degreeofrisktothecityofaustin. Figure8:NetRetainedRevenue(NRR)PerBurrial Dollars TotalBurrials RevenuePerBurial TotalBurials Year Ineffect,theCityofAustinpaid$726perburialtoInterCarein1992.In2009,theamountpaidto InterCareincreasedto$1,999.Thetrendlineafterthe2006contractcanbeclearlyseeninFigure8.The causeofthischangeinthetrendlineisingreatpartassociatedwiththedeclineinthenumberofburials. 27

29 Thisanalysispromptsanimportantquestion:Whatdoesthecitygetfor$2000perburial?This questionisansweredbyreviewofthecontract.thecontractliststhefollowingduties:(1) administration;(2)salesactivities;(3)intermentactivities;(4)groundsmaintenance;(5)monument installation.intercareisalsoresponsibleforinsurance,taxes,andpurchaseandmaintenanceof equipment.thecityofaustinalsobenefitsfromintercare sexpertiseandexperienceintheareaof cemeterymanagementandmaintenance. BycontractingwithInterCare,theCityofAustinalso purchases decreasedriskofusingthegeneralfund tomakeupshortfalls.thecityofsanantonio sproposedfy2010budgetisillustrative.cityofsan AntoniorevenuesforthecitymanagedSanJoseBurialParkfundtotal$532,303.Thisamountincludesa $100,000transferfromthegeneralfundtosupplement$432,303inrevenuefromsalesoflots,feesfor interments,andotherminorfundingsources.thecityofsanantonio soperatingexpensestotalforthe cemeteryis$513,825(cityofsanantonio,fy2010budget).sanantonio scurrentexperienceis representativeofthecircumstancesthatledthecityofaustintocontractwithintercareintheearly 1990s. 2.2ManagementandOrganizationalModelsforMunicipalCemeteries ComparisonsoftheCityofAustin scemeteriesaremadewiththemodelsandpracticesfoundamongthe 10largestcitiesinTexas.Only2ofthe10largeTexascitieshaveanactivemunicipalcemetery(Austin andsanantonio).othertexascitiesthathavemunicipalcemeteriesincludelubbock,grandprairie, Abilene,SanAngelo,SanMarcos,andNewBraunfels.ExceptforLubbock,thesecitiesoperateacemetery outofaparksdepartment.thecityoflubbockhasaseparatecemeterydivisionresponsiblefor managementofthecitycemetery(seetable4). Ofthelargecitiesthathavecemeteries,onlyAustincontractsoutoperations.Smallercitiestendtobe morelikelytocontractoutincludingsanmarcos,newbraunfels,andlockhartthatcontractoutwith InterCare.SanAngeloandAbileneoperatemunicipalcemeteriesbutareconsideringcontractingout maintenanceand/orsales.severalcitiesthatcontractmaintenanceserviceshaveacemetery commissionorareconsideringestablishingacemeterycommission. 28

30 Table4:MunicipalCemeteriesinMajorTexasCities(2010) City Total Population PublicSectorCemeteries Houston 1,953,631 Citymaintains Founder s Cemetery closed Responsible Department Parks Department Dallas 1,188,580 Nocity ownedcemetery NotApplicable SanAntonio 1,144,646 SanJoseBurialParkCemetery Parks Department OldCityCemetery(full) Austin AustinMemorialPark Evergreen Oakwood OakwoodAnnex Plummers(full) Parks Department [Contractwith InterCare] ElPaso Nocity ownedcemetery Notapplicable FortWorth Nocity ownedcemetery Notapplicable Arlington ArlingtonCemetery(full) Parks Department CorpusChristi OldBayviewCemetery(full) Calltoverify Plano No No Garland No No 29

31 30 2.3CityofAustin suseofbestpracticesincemeterymanagement ThissectionassessestheCityofAustin sresponsetotheindustryandlocaltrendsidentifiedaboveand makesrecommendationsforamoreeffectiveresponse.table5summarizestheissuesaddressedinthis section. Table5:CityofAustin suseofbestpracticesincemeterymanagement Question CityofAustin sresponse Recommendations Isthecityofferingpre salestocapturemore revenue? Somewhat:TheInterCareofferspresalesbuttheyarenotactively marketed. Activelymarketpre salesinnonaggressiveways. Isthecityrespondingtotheincreasedchoice ofcremation? No:Therearecurrentlynoareas tailoredtothecremationmarket. Buildacolumbariumwallanda scattergroundfor memorializationofcremated remains. Isthecityofferinggreenburialoptions? No:Therearecurrentlynoprovisions forgreenburialoptions. Passanordinancetoallowfor greenburialandmarketthis option. Isthecityclearlycommunicatingthe governmentsector sroleincemetery provision? No:Thereisagreatdealofconfusion aboutthepublicsector srolein cemeteryservices. Developandpostastatementthat clearlyindicatestheneedto balancestandardsofcareand individualchoice. Isthecityclearlycommunicatingand managingappropriate standardsofcare? No:Thecityhasstandardsofcarebut theyarenotusedtomanagethe contract.thisissueisimportantgiven increasedscrutinyoflocalgovernment maintenanceofcemeteries. Developanassessmenttoolthat willguideregularinspectionof cemeteryfacilitiesanddocument anddistributetheresultsofthese inspections. Isthecitymanagingthecemeteries transparently? No:TheParksDepartmentwebsite includesminimalcemetery information. Modernizeandupdatethe website,increasethevisibilityof thewebsiteandinclude documentsfollowingidentified bestpractices. Isthecityfosteringcitizeninvolvementin cemeterymanagement? No:Thereisnocemeterycommission orinstitutionalizedrelationshipwith citizensorcitizengroups. Establishacemeterycommission withclearrolesand responsibilities.

32 Isthecityofferingpre salestocapturemorerevenue? Thecity sresponseismixedandissomewhatrespondingtothepre salestrend. InterCarebeganofferingtimesalesin1993.Pre salesareaccountedforaspartofaccountsreceivable. InterCareAccountsReceivableincreasedfrom$54,979in1993to$98,117in2009.Asapercentageof GrossOperatingReceipts,thepercentageofrevenuefrompre saleshasremainedaboutthesame(see Figure9). 25 Figure9:PercentPre Sales(AR/GOR) 20 Percent Year InterCaredoesnotactivelymarketpre sales.pre salestypicallyoccurwhenafamilybuysanewplotfor arecentlydeceasedfamilymemberandbuysaneighboringspaceforaspouseandotherfamilymembers. 31

33 Thepercentageofpre salespeakedin1995at21percentbuttypicallyrangesbetween10and15percent andaverages13percent.intercareprovidedaroughestimateofaround50time salesspacesperyear, orabout17percentoftotalspacesalesin2009. Customersmaybelesslikelytoconsiderpre salesfromamunicipalcemetery.however,pre sales revenuessignificantlyinfluenceoperatingrevenue.accordingtointercare,therehasbeen approximately$1.1millioninpre salessince1994,whichtranslatestobetween550and600spaces. Thecityshouldconsidermarketingpre saleswithabetterwebsite(seecityofgrandprairieasan example)andinawaythatavoidsoverlyaggressivepre salesmarketing.priortoattemptingtoincrease pre sales,astateoftheartcemeterymanagementinformationsystemmustbeimplementedtokeep trackofownershipandmaintaincontactwithownersofthecemeteryplots(see,forexample,cims CemeteryInformationManagementSystem; ownershipisanendemicprobleminthecemeterybusiness. Isthecityrespondingtotheincreasedchoiceofcremation? Thecityhasnotrespondedtotheincreasedchoiceofcremation. TheCityofAustincurrentlydoesnothaveanycolumbariumspaceorareadedicatedtospreadingof cremains.inorderforthecitytomaintaintheviabilityofitsinvolvementinthecemeterybusiness,the cityshouldconsiderdevelopingthesetypesoffacilities.failuretodosomeansnotcompetingforthe25 percentofthemarketthatchoosescremation,butadedicatedpropertyfordisposition. Isthecityofferinggreenburialoptions? Thecitydoesnotoffergreenburialoptions. TheCityofAustinisnotrespondingtothetrendofgreencemeteries.OurLadyoftheRosaryCemeteryin GeorgetownistheonlyrecognizedgreencemeteryinTexas.TheCityofAustincemeteriesshouldtake 32

34 intoaccountthetrendtowardgreenburialsandconsiderpassingordinancesthatallowandpromote greenburials.greenburialsaremoreenvironmentallyresponsibleandaffordableandwilladvancethe city sgoalstoservethepublic. Isthecityclearlycommunicatingthegovernmentsector sroleincemeteryprovision? Thecityhasdoneanespeciallypoorjobcommunicatingthegovernmentsector sroleincemetery provision.duringathree hourfocusgroupsessionwithcommunityresidents,anumberofissues emergedthatcanbelinkedtopoorcommunicationofsectorrole. ParticipantscomparedcityofAustincemeteriestoawiderangeoffor profitandnon profitcemeteries fortheirbasisofcomparison.anumberofparticipantsfavoredrigidenforcementofcemeteryruleseven thoughthisapproachtocemeterymanagementisinconsistentwiththepoliticalnatureofpublic provisionofcemeteryservices.thisconfusionisinparttheresultofthepassiveapproachtocontract managementonthepartoftheparksdepartment.whengovernmentinvolvementincontract managementisweak,viewingcitycemeteriesasaprivatesectorbusinessisalogicalconclusion. Asnotedabove,aclearstatementthatacknowledgestheneedtobalancestandardsofcarewith individualchoicewillimprovethecommunity sunderstandingoflocalgovernment sroleinthemixed economy. Isthecityclearlycommunicatingandmanagingappropriate standardsofcare? TheCityofAustindevelopedafour modeclassificationsystemforthemaintenanceofcityparkfacilities. ThesestandardswereincludedinthecontractwithInterCare.ModeIisdeemed idealandpreferred, butpracticalitiesoffiscalrestraintsandconflictingprioritiesnecessitateacompromise (Contractforthe ManagementandOperationsofCityofAustinCemeteries). 33

35 Table6:ModeClassificationSystemforAustinParkMaintenance Mode MaintenancePosture ModeI Stateoftheartmaintenancelevel.Thisleveldictatesapreventativeposturein schedulinggroundsmaintenanceactivities.associatedwithdesignateareasinhighly usedurbanlocationssuchaspublicbuildings,administrativeoffices,library,museums, recreation/leisurecenters,swimmingpools,sportscomplexesandotherselectparkland. ModeII Highmaintenancelevel.Thislevelofmaintenancedictatesacorrectiveposturein schedulinggroundsmaintenanceactivities.associatedwithallnon selectdevelop parkland,streetmediansandtriangles,servicecentercompounds,utilitysubstations, andimprovedstreetrightofways. ModeIII Maintenanceappropriateforminimallydevelopedparkland,cityownedsurplus properties,alleyways,unimprovedstreetright of waysanddrainageways,including retention/detentionponds.thislevelofgroundsmaintenancedictatesascheduled approach.maintenancewillbepostponeduntilnecessaryresourcesareavailablei.e., materialsandstaff. ModeIV Groundsmaintenanceappropriatefornaturalorundevelopedparklandrural surpluscitypropertyandutilityright of ways.maintenanceisveryminimalandwill typicallybeperformed1 2timesperyeartoaddresshealthandsafetystandards. TheCityofAustinspecifiedModeIIforallcemeterymaintenanceexceptforrestrooms(ModeI)and undevelopedareasofthecemeteries(modeiii).thereappearstobenodocumentationtrackinglevelsof carebasedonthemodeservice levelcategories. BasedoninterviewswithInterCare,servicequalityisinModeII.Visualinspectionofcemeteriesalso suggeststhatmodeiiistheoverallmaintenancequalitylevel.interviewswithcommunitystakeholders suggestlowermaintenancelevelsapproachingmodeiii;howeverthereisnoevidencethatintercare maintainsthecemeteriesatmodeiii. 34

36 Ofthe12standardsinModeIIIaplausiblecasecanbemadeforlitterdebrisremoval,butthefinancial aspectofremovingspoilsmakesiteconomicallyinfeasibletoremovespoils3 4timesweekly.In addition,cityofaustinwaterrestrictionsmakeitinfeasibleforthecontractortoattainmodeistandards andwouldrequiretheinvestmentinnewsprinklersystem. HouseBill2927affirmsthejurisdictionofamunicipalityoverapubliccemeteryandrequiresthatcities maintainthecemeteryinaconditionthatdoesnotendangerthepublichealth,comfort,orwelfare. SpecificresponsibilitiesidentifiedinHB2927include:(1)repairingandmaintainingfences,walls, buildings,roads,orotherimprovements;(2)levelingorstraighteningmarkersormemorials;(3) properlymaintaininglawnsshrubbery,andotherplants;(4)removingdebris,includingdeadflowersand deterioratedplasticornaments;and(5)promptlyresortinggravesitesfollowinganinterment. Thecityshoulddevelopspecificplansfortheassessmentofcemeteriesbasedonthecategoriesoutlined inhb2927assoonaspossible.thecityshouldusetheseplanstodocumentthatprogressisbeingmade tomeetthe standardsofcare thata reasonableperson wouldconductgiventhelimitationof resourcesandtheexistingconditionofthefacility.thesereportsshouldbemadepublicallyavailable.a neutralauditorwithexpertiseincemeterymanagement,anonprofitorganizationorconsortiumofnonprofitorganizations,oracemeterycommissionshouldreviewthesereports. TheCityofAustinshouldalsoconsiderhiringapersonresponsibleforcollectinganddisseminating informationtothepublicincollaborationwiththecontractor.acommitmenttodatacollectionand disseminationwillalsopromotemoreactivemonitoringandenablethecitytomorequicklyidentify changesinrevenueandexpendituretrends. Isthecitymanagingthecemeteriestransparently? Thecitydoesnotmanagecemeteriestransparently. Thecurrentwebsitefallsfarbelowthebestpracticesidentifiedabove.Thereisminimalinformation presentedonthewebsite.citizensdonothavesufficientinformationtomakeinformedchoicesabout 35

37 usingcityofaustincemeteriesortokeepthecityandcontractoraccountableforpropermanagement practicesandresponsivetocitizenpreferences.thislackofinformationunnecessarilycomplicatesand politicizescemeterymanagement. Isthecityfosteringcitizeninvolvementincemeterymanagement? TheCityofAustinisclearlynotfollowingbestpracticesformanagementofmunicipalcemeteries.There isnocemeterycommissionandminimalformalinvolvementofnonprofitgroups. TheCityofAustinshouldpursueactiveandsustainedinvolvementfromnonprofitsinterestedin supportingthecity scemeteries.whilenonprofitpartnersmaynotbeasourceofsubstantialfinancial resourcesorsustainedvoluntaryinvolvement,theycancommunicatecommunitypreferences. 36

38 Section3:AnalysisoftheInterCareContract Theabilityofthecitytoeffectivelyrespondtotheindustryandregionaltrendsisinfluencedbythe contractwithintercare.ascurrentlystructured,neitherintercarenorthecityhasasubstantial incentivetoimprovethemanagementofcitycemeteries. 3.1NumberofEmployeesandSalaries AccordingtoInterCare s2005requestforproposalsresponse,intercareemploys21individuals includingtwoofficers.thistotalnumberofemployeesisgreaterthantheaveragecemeterybusiness thatemployseightpeople.giventhatintercareisresponsibleforfivefacilities,thishighernumberof employeesisunderstandable.inaddition,manycemeteriesaresmallfamily ownedfacilities.ifthe numberofintercareemployeesisdividedbythefivecemeterylocations,thentheaveragenumberof employeesperlocationiswellbelowtheindustrymean. Salariesandwagesarethelargestsingleexpenditurecategoryfortheaveragecemeterybusiness(19%). InterCare ssalaryandwagestructureiscomparedwiththenationalaveragecemeterybusiness. 37

39 Table7:IndustryandInterCareSalaryandWagesbyJobTitle Title Percentof Workforce Bottom Quartile Median Upper Quartile InterCare Salaries* Managementoccupations 21% $40,810 $55,580 $74,710 Chiefexecutives 0% $74,060 $111,630 N/A Notavailable Generalandoperations managers 2% $57,010 $77,460 $110,420 Superintendent ofoperations: Buildingandgrounds cleaningandmaintenance occupations Landscapingandgrounds keepingworkers Officeandadministrative supportoccupations Secretaries,exceptlegal, 16% $18,540 $23,310 $30,230 12% $18,410 $23,030 $29,420 $55,000 Supervisor: $35,000 Worker: $22,000 19% $19,650 $25,030 $32,160 OfficeManager: $45,000 5% $20,760 $25,410 $31,590 medical,andexecutive Officeclerks,general 6% $17,800 $22,360 $27,280 AssistantOffice Manager: $35,000 Transportationand materialmoving occupations 5% $17,600 $21,480 $27,780 BureauofLaborStatisticsandInterCareRFPResponse2005.*Jobclassificationsmatched basedoncomparisonofjobtitles.notincluded:regionalmechanic:$45,000 Withtwoexceptions,InterCareappearstobein linewithaveragecemeterybusiness.theofficemanager andtheassistantofficemanagerarehigherthantheupperquartile.basedonadiscussionwithintercare, thededicatedofficemanagerstakeonmanytasksbeyondnarrowlydefinedofficeorclericalduties(sales, accounting,reportwriting,customerservice,coordinatingwithfuneraldirectors,etc).theoffice 38

40 managersalsohavemanyyearsexperienceandoneisalicensedfuneraldirectorwithskillsandexpertise toworkeffectivelywithfuneralhomesandfamilies. Salariesandwagesexcludingofficersfortheindustryaverageis19percentoftotalsales.InterCare s totalsalaryandwagesforthe14individualsemployeeslistedintherfpresponsetotaled$400,000or31 percentofgrossoperatingreceiptsin2006($1,267,357). 3.2PriceStructureAnalysis PartoftheresponsetoregionalindustrytendsisevaluatedbasedonhowCityofAustinCemeteriesare pricedcomparedtootherprovidersofcemeteryservicesandwhetherpricesaresetproperly. Makingcomparisonsofcemeteryfeestructuresiscomplicatedbyanumberoffactors.Forexample, somecemeteriesrequirelinersandothersdonot.administrativecostsvaryandaresometimesbuiltinto thepriceandsometimesarenot.somecitiespriceintermentservicesbasedondifferenttimesofday andholidayswhileothercemeteriesdonothavetheseprovisionsordonotpermitburialsonholidays. Somecemeteriespriceplotsbasedonlocationandsurroundingamenities.Stillothersofferdiscountsto residents. Whileimperfect,comparisonsacrosssectorandcemeteryshedinsightonhowtheCityofAustinfitsinto theregionalandmunicipalcemeterypricing.incaseswhendifferentpricingwasfoundforthesame cemetery,theaveragewaschosenastheprice.forexample,thecityofaustincharges$2,075foraustin MemorialParkcemeteryplotand$1,450foracemeteryplotatEvergreenCemetery.TheCityofAustin cemeteriesareassignedanaveragevalueofaplotof$1,763andthisamountisusedtomake comparisonswithpricingatothercemeteryfacilities. Twoburialarecompared:(1)thecosttoopenandcloseagraveand(2)theaverageplotcost.Otherfees arenotcompared.dataisdrawnfromtwosources.austinmemorialandburialinformationsociety (AMBIS)conductedacemeterysurveyin2008.TheAMBISsurveyincludeddatafrom24ofover200 39

41 public,private,andnonprofitcemeteriesinfivecountyregion(travis,bastrop,caldwell,williamson,and Hays)andinthisregionfivecitiesprovidecemeteryservices(Austin,SanMarcos,Georgetown,Bastrop, andlockhart).inordertoincludebetterunderstandcityofaustinpricing,datawascollectedfrom municipalcemeteriesinothertexascitieswithmunicipalcemeteriesincludingsanantonio,lubbock, SanAngelo,andAbilene,andGrandPrairie.Thefinalpoolofcemeteriesincludes31cemeteries(45% nonprofit,39%municipal,and16%for profit). Theaveragecostforaplotforallcemeteriesinthepricingsurveyis$1,233andtheaveragecosttoopen andcloseagraveis$862.thesemeansmaskaconsiderableamountofvariation.forexample,thecosts ofopeningandclosingagraverangefrom$375to$1,495andthecostofacemeteryplotrangesfrom $100to$3435. Cemeteryclassification(perpetualcareversusnonperpetualcare)andcemeterysector(public,private, ornonprofit)accountforcostdifferencesamongthecemeteriesincludedinthestudy.acemeteryis coded perpetualcare basedonself reportingtoambisorbasedoninformationavailablefromthe pricingsheetoracustomerservicerepresentative. Perpetualcarecemeterieschargemore($964)toopenandcloseagravecomparedtonon perpetualcare cemeteries($726).intermsofpriceperplot,perpetualcarecemeteriescharge$1,291comparedtononperpetualcarethatcharge$1,138perplot. Thepricetoopenandcloseagraveforthenonprofit,public,andprivatesectorcemeteriesarepresented below.asexpected,nonprofitcemeterieschargetheleast,followedbypublicandprivatesector providers.thedifferencesinthesamplemeansforthethreesectorsarestatisticallysignificant(f=6.58; sig=.009)indicatingthatthesedifferencesarerealandnotduetostatisticalchance. 40

42 Table8:PricetoOpenandCloseaGravebySector Sector Numberof ValidCases Mean Standard Deviation Nonprofit 5 $520 $41 Public 8 $882 $83 Private 5 $1,171 $199 ThepricetoopenandcloseagraveinAustinis$850,$32lessthanthepublicsectormean(4%less). SanAngelocharges$1,100toopenandcloseagrave,butthisincludesaperpetualcarefund contributions.thelowestpublic sectoropenandclosechargeis$500insanantonio. Priceofasinglecemeteryplotfordifferentsectorsispresentedinthenexttable.Again,asexpected, nonprofitcemeterieschargetheleastforcemeteryplotsfollowedbypublicandprivatesectorproviders. Thesedifferencesarestatisticallysignificant(F=3.81;sig=.04). Table9:PriceofaCemeteryPlotbySector Sector Numberof Cases Mean Standard Deviation Nonprofit 9 $844 $93 Public 11 $1,228 $669 Private 5 $1,942 $455 Austinhastwoavailablecemeteries AustinMemorialParkandEvergreen.Thesetwocemeteriesserve differentmarketsandthereisadifferenceinthecostperplot($2,075versus$1,450).inbothcases, Austinchargesmoreperplotthanthepublicsectoraverage.AustinMemorialParkchargesmorethan severalprivatesectorcemeteriesintheregion.thecityofsanmarcoscharges$550perplotandisthe 41

43 lowestintheregionamongpublicsectorproviders. AnincreasepriceswillputAustinoutoflinewithpublicsectorcemeteries.Pricingandcustomer expectationsarelikelycorrelated.whenaustincemeterycustomerspayasmuchasprivatesector cemeteriestheymaylogically perhapsinaccuratelygiventheissuesdiscussedabove expectthesame standardsofcare.raisingmorerevenuebyincreasingthepriceswillplacemorepressureonthecityto increasemaintenance.meetingthesehigherexpectationswouldrequireraisingmorefeesandprices, leadingtomoredemands. Anyattempttoraiserevenuesbyincreasingpricesandfeesshouldbepresentedinawaythatclearly signalstothebuyerdifferentstandardsorcareandregulationsassociatedwithdifferentpricesandfees. Forexample,thecitycouldchargemoreforaplotthatallowsplacementofuprightmonuments,benches, anddifferentformsofmemorializationthanforplotsthatarestrictlyregulatedandonlyallowflush monuments. 3.3:ImpactonLow IncomeFamilies DeathhasdistributionaleffectsontheincomesofU.S.households(Banks1998:270).Unexpecteddeath producesstressandpoordecision making.inaddition,consumptionoffuneralandcemeteryservicesis influencedbyconsumerpreferencesthatareshapedbysocialandreligiouscustoms(banks1998:272). Asaresultofthesefactors,demandforcemeteriesandfuneralservicesareinelastic.Inelasticdemand meansthatpeoplearewillingtopayfortheseservicesregardlessoftheprice.non consumptionor delayingconsumptionofcemeteryandfuneralservicesisnotanoption. BurialcostsintheCityofAustincemeteriesandothermunicipalcemeteriesareexaminedintermsof incomeandrace.burialcostsareexaminedseparatelyaswellaswithtotalfuneralcoststomeasurethe impactofadeathonfamilyincome. TheCityofAustinchargesmorethanallothermunicipalcemeterieswiththeexceptionofSanAngelo. SanAngeloincludesacontributiontoaperpetualcarefund.However,thecityofAustin sfeesarelower 42

44 whenconsideredasapercentageofmedianhouseholdincome.forexample,whilelubbockchargesonly $1,495forburialcostscomparedto$2,925inAustinMemorialPark,thepercentofthesecostsasa functionofmedianhouseholdincomeare18.0%and17.5%respectfully.highercosts,forexamplein GrandPrairieareassociatedwithahigherlevelofserviceandlowerpricesareassociatedwithalower standardofcare(e.g.,sanantonio). Table10:MunicipalBurialCostsandMedianIncome City Median Household Income 2008 (est.) Families Below Poverty BurialCost (Plotand open/close fees) Percentof Annual Household Income Total Funeral Costs+ all Burial Costs Percentof Annual Household Income Austin Evergreen: $8, % 16.3% $2,300 $51, % AMP: $8, % 17.5% $2,925 Abilene $39, % $1, % $7, % San $9,600 $38, % $3,600* 9.3% 24.7% Angelo Lubbock $41, % $1, % $7, % Source:USCensusandCemeteryPricingSurvey*includesperpetualcarefund TheimpactofadeathonincomebyraceisexaminedindetailfortheCityofAustin.Detaileddataon medianincomebyraceisavailablefromthe2000census.medianhouseholdincomeinaustinis$48,979 forwhites,$31,952forafricanamericans,$35,632forhispanics(uscensus2000).itisclearfromthe standpointofincome,thatminoritieswillpayahigherpercentageoftheirannualincomeinfuneraland cemeteryservices. 43

45 Table11:CostforCemeteryServiceandFuneralbyMedianIncomeandRace MedianFamily Income White AfricanAmerican Hispanic Source:USCensusSF 3 $48,979 $31,952 $35,632 BurialCosts (plotand open/close fees) Percentof Annual Income TotalFuneral andburial costs Percentof Household Income Evergreen: $2, % $8, % AMP:$2, % $8, % Evergreen: $2, % $8, % AMP:$2, % $8, % Evergreen: $2, % $8, % AMP:$2, % $8, % IfthefamilychoosestousecityofAustincemeteries,theaverageWhitefamilypaysanestimated16.9to 18.2percentoftheirannualincomeinfuneralandburialscostscomparedtobetween26.0and28.0 percentofannualincometheaverageafricanamericanfamilyandbetween23.3and25.0percentof annualincomefortheaveragelatinofamily. Atthecurrentpricingforcemeteriesandtheaveragetotalfuneralcosts,asubstantialpercentageofCity ofaustinresidentsareatriskforspendingnearly50%oftheirannualhouseholdincomeonfuneraland burialcosts(incomelessthan$20,000).twentypercentofallresidents,17percentofwhites,29percent ofafricanamericans,and24percentofhispanicsareatriskforspendingnearly50%oftheirannual incomeintheeventofadeathinthefamily. 44

46 Table12:IncomeDistributionbyRaceinAustin,TX(percentineachcategory) IncomeCategory Total White African Hispanic Population (Not Hispanic) American Lessthan$10, $10,000to$14, $15,000to$19, TotalPercentBelow$20, $20,000to$24, $25,000to$29, $30,000to$34, $35,000to$39, $40,000to$44, $45,000to$49, $50,000to$59, $60,000to$74, $75,000to$99, $100,000to$124, $125,000to$149, $150,000to$199, $200, NumberofFamilies 265, ,648 24,452 58,848 Source:USCensus,2000,SummaryFile2 45

47 3.4ImpactofHigherPricesandFees Thedesiretoimprovethemaintenanceofthecemeteriesismotivatedbyavarietyoffactors.Regardless ofthemotivation,higherpricesandfeeswillhavelargerpercentageimpactonlowerincomeresidents. Threemajorareasofimprovementhavebeendiscussedinavarietyofcommunityforumsandexpressed bycitizengroups:(1)levelingofmonuments;(2)removalofballmoss;(3)preservationoftheperpetual carefund. InterCarehasdevelopedcostestimatesforlevelingmonumentsandremovingballmossfromthetrees. Thesecostestimatedareusedtodeterminetheincreaseinfeesthatwouldberequiredtotakeinto accounttheadditionalcoststothecitytoimplementintercare srecommendations. Theaveragecosttolevelamarkerisapproximately$168.Giventhescopeoftheproblem,thecostto levelallmonumentsisestimatedbyintercaretobe$125,000.thecitywouldberequiredtopay InterCareforthisserviceaslevelingmonumentsisbeyondthescopeofthecontract.Ifthesettingfee wereincreasedfrom$.05to$.15persquareinch,theincreaseinrevenuefortheaveragemonument wouldbe$234and,accordingtointercare,wouldpayforamonument levelingprogram. Removingballmossisestimatedtocostanannualfeeof$171,600foryearoneandthenon going negotiatedfeestothecityofaustin.intercarehasalsoproposednocostapproachestoballmoss removal,buttheremovalwouldtakeplacemoreslowly.ifthecitychoosesamoreaggressiveballmoss removalprogram,thenthecitywouldbeforcedtoimposeadditionalfeestocemeterycustomers.afeeof $57wouldpayfortreemaintenance. Aperpetualcarefundof$250hasalsobeenproposedbyacommunitystakeholder.Perpetualcarefunds areintendedtofundfuturemaintenancefromtheinterestearnedthefund.replenishingandgrowing thisfundwouldcreateafundthatcouldaddressothermaintenanceissues(fencerepairs,roadrepairs, andotheritems). 46

48 Addingthesefeeswouldberequiredtomaintainthecemeteriesatahigherlevelofservicequality withoutimposingadditionalcostsontaxpayers.adoptionofthesethreefeeswouldadd$541tothecosts ofcemeteryservicesinaustinmemorialpark.eachoftheseoptionsisaddedtothecurrentcostsandthe impactontheeconomicsofdeath(seetable13). Table13:ImpactofFeeIncreasesbyRaceandIncome Median Family Income AllBurial Costs Including newfeesof $541 Percentof Annual Income Total Funeraland burialcosts +$6,000 Percentof Household Income White Evergreen: 18% 4.7% $8,841 $48,979 $2,841 AMP:$3, % $9,466 19% African Evergreen: 28% 7.2% $8,841 American $31,952 $2,841 AMP:$3, % $9,466 30% Hispanic Evergreen: 25% 6.5% $8,841 $35,632 $2,841 AMP:$3, % $9,466 27% Ascanbesee,thereisnotamajorimpactonthepercentageofincomeassociatedwithincreasingfees. However,increasingcostsandfeesmayincreasedemandsforhigherstandardsofcareandleadpotential usersofcitycemeteriestochooseotheroptions.inbothcases,theunintendedimpactofincreasing pricesfeesmaybehighercostsandlessrevenue. 47

49 Section4:ForecastModelofViabilityofCityofAustinCemeteries Onceacemeterynolongerhasspacestosell,thecemeterywillbeaconstantdrainoncityresources becauseofthecommitmenttocustomersandstatutoryobligationstomaintainthecemetery.available burialspacesrepresentfinancialviability.somecemeteryadvocateshavesuggestedexpandingexisting cemeteriestoaddressthisproblem.theanalysispresentedbelowindicatesthatthisexpansionislikely notrequired.thereisadequatesupplytomeetfuturedemandaswellaslow costandspace savingways toexpandthesupplyincurrentfacilities. 4.1SupplyandDemandforTotalPotentialCemeteryPlots Supply Thereareapproximately86totalacresinAustinMemorialPark.Ofthese86totalacres,thereare30 acresavailableforfuturedevelopment.attherateof plotsperacre,therearebetween 30,000and45,000plotspotentiallyavailableforfuturesale. AccordingtoInterCare,thecurrentlydevelopedareaisapproximately90%issoldout.In2008,Block5A has325spacesavailable,block5bhas940spacesavailable,block6has3375spacesavailable,andblock 11has865spacesavailable.EvergreenSectionKalsohas250spacesleftforsale.Basedonthismore detailedcalculation,thereare35,755spacesavailableforsale. 48

50 Table14:TotalEstimatedPotentialAvailableSpaces Source NumberofSpaces AMPBlock5A 325 AMPBlock5B 940 AMPBlock AMPBlock AMPUndeveloped30Acres 30,000 EvergreenSectionK 250 Total 35,755 Source:InterCareEstimates Overthelast20years,thenumberofburialsinthecityofAustinhasaveraged623peryear.Ifthe numberofburialsperyearremainsapproximately623peryear,thenthesupplywillbeexhaustedin57 yearsor2067.thereasonswhythisapproachtoprojectingthelifespanofcityofaustincemeteriesis inappropriatearediscussedaboveandareexaminedinthenextsection. Demand Demandisafunctionofpopulationgrowth,mortalityrates,deathcarechoices(traditionalburialversus cremation),andthepercentageofthemarketthatchoosestoburyfamilymembersinaustincemeteries. InordertodevelopanestimateofthefuturedemandforthecityofAustin ssupplyofcemeteryplots,a forecastmodelwasdeveloped. 49

51 Theassumptionsoftheforecastmodelinclude: 1.TotalpopulationforecastfromthecityofAustindemographer 2.Constantcrudemortalityrateof4.7per1000residents 3.Cremationrateincreasesby2percentperyearandcapsat65% 4.Austincemeteriesmaintaina30percentshareofmarketfortraditionalburialplots 4.2SupplyForecastModel Basedontheseassumptions,after10years,theCityofAustincanexpectapproximately6,151burialsor 17percentofthetotalpotentialsupply.After30years,theestimatednumberofburialsis16,698or47 percentofthetotalpotentialsupply. Theforecastmodelillustratestheimportanceofthecremationrate.ThenumberofburialsinAustin cemeteriesdeclinesuntil2021.after2021,whenthecremationrateisassumedtobestableat65 percent,thenthepopulationgrowthdrivestheincreaseinthenumberofburialsinaustincemeteries. 50

52 51 Ifaconstantcremationrateof40percentisassumed,thenafter10years,theCityofAustincanexpect approximately7,838burialsor22percentofthetotalpotentialsupply.after30years,theestimated numberofburialsis25,902or72percentofthetotalpotentialsupply. AustinMemorialPark ssupplycanbeextendedwellbeyond30yearsifprovisionsaremadetoplace moreplotsperacreandmandatingorincreasingtheincentivestoplacetwocasketsinasingleplot.a columbariumwallwillalsoexpandthelife spanofcityofaustincemeteries.tobuildacolumbarium spacefor500nicheswouldcostbetween$100,000and$175,000(architarium,austintx) NumberofBurials Year Figure10:ProjectedBurialsinCityofAustinCemeteries 65%Cremation 40%Cremation

53 TheCityofMarbleFallshasacolumbariumwallanddependingontherowandlocation,thepriceranges from$1,300to$1,600perniche.furtherresearchindicatesthat$1,500isacommonprice.ifthecityof Austinsellsthese500spacesfor$1,500pernicheonaverage,thetotalrevenuetothecitywouldbe approximately$750,000.thereisatremendouspotentialforincreasedrevenuetothecityofaustin.as thecremationmarketgrowsitwouldtakethecityapproximatelyfiveyearstofillacolumbariumwall with500spaces. 52