HomeMy WebLinkAbout25- City Administrator CITY OF SAN BERNA 'I)INO REQUEST FC' COUNCIL ACTION
From: Fred Wilson Subject: Agreement with American Cemetery/
Assistant City Administrator Mortuary Consultants, Inc. for
Dept: representation of City in sale
of Pioneer Memorial Cemetery.
Date: October 4 , 1995
Synopsis of Previous Council action:
r
Recommended motion:
1 . Adopt resolution.
2 . Direct staff to proceed with sale of Pioneer Memorial Cemetery.
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Signature
Contact person: F�� -a .,; i air Phone: 5122
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Supporting data attached: yes Ward: 1
FUNDING REQUIREMENTS: Amount:
Source:(Acct. No.)
(Acct. Description)
Finance:
Council Notes:
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75-0262 Agenda Item No. R5
STAFF REPORT
The City of San Bernardino has owned and operated Pioneer Memorial Cemetery since 1852.
In recent years, the cemetery has not generated enough revenue to meet expenses, and has begun
to accumulate a negative fund balance. By the end of fiscal year 1995-96, the deficit is
projected to reach $87,000. While a cemetery rate increase is on this same agenda, this increase
is only expected to generate an additional $20,000 - 40,000 in annual revenue.
It is the recommendation of staff that the City seek to divest itself of the cemetery property, and
sell it to a private operator. In the course of researching this option, one offer for the property
has already been received. It is difficult to evaluate this offer, though, because of the unique
nature of the potential transaction, and staffs lack of experience in this area.
Additionally, cemetery appraisal is a specialized field, and for the City to obtain such an
appraisal would cost in excess of $5,000. Appraisal costs are high because the value of the
cemetery's trust funds must be included. Since the City has not established separate trust fund
for pre-need accounts, which is customary among private cemeteries, it is especially difficult to
determine the cemetery's value.
In order to ensure that cemetery services to the community are not negatively impacted by the
sale, and to maximize the amount of revenue received for the cemetery, it is recommended that
a firm be retained to act as the broker in the sale. Staff contacted three potential companies, and
one expressed interest in representing the City. American Cemetery/Mortuary Consultants
(ACMC) has an extensive track record of successfully locating interested buyers, performing
appraisals, and closing the sales of cemeteries throughout the United States and Canada.
If this agreement is approved, ACMC will develop a package of information regarding Pioneer
Cemetery, and will distribute the information to potential buyers. This package will include an
appraisal of the property, which will be performed at no cost to the City. The firm will also
assist City staff in reviewing the qualifications of the buyers, evaluating the offers received, and
conducting necessary negotiations. ACMC has already identified several large, multi-national
cemetery companies that may be interested in the property.
As payment for these services, the City will agree to pay 6% of the gross sale price of the
property to ACMC. If no suitable buyer is found for the property, or the Council does not
accept any of the offers received, no fee will be paid to ACMC.
It is recommended that the Mayor and Common Council:
1. Direct staff to proceed with the sale of Pioneer Memorial Cemetery; and
2. Adopt the resolution executing the agreement with American Cemetery/Mortuary
Consultants, Inc., to represent the City in the potential sale of Pioneer Memorial
Cemetery.
1 RESOLUTION NO.
2 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING
AN AGREEMENT WITH AMERICAN CEMETERY/MORTUARY CONSULTANTS,
3 INC. , TO REPRESENT THE CITY IN NEGOTIATIONS FOR THE SALE OF PIONEER
4 CEMETERY, A CITY OWNED PROPERTY.
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF
5 SAN BERNARDINO AS FOLLOWS :
6 SECTION 1. The Mayor of the City of San Bernardino is
7 hereby authorized and directed to execute on behalf of said City an
8 agreement with AMERICAN CEMETERY/MORTUARY CONSULTANTS, INC. , to
9 represent the City in negotiations for the sale of Pioneer
10 Cemetery, a city-owned property.
11 SECTION 2 . The authorization to execute the above
12 referenced agreement is rescinded if the parties to the agreement
13 fail to execute it within sixty (60) days of the passage of this
14 resolution.
15 I HEREBY CERTIFY that the foregoing resolution was duly
16 adopted by the Mayor and Common Council of the City of San
17 Bernardino at a meeting thereof, held on the day
18 Of 1995, by the following vote, to wit:
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AGREEMENT WITH `4ERICAN CEMETERY/MORTUARY ')NSULTANTS, INC.
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2 Councilmembers AYES NAYS ABSTAIN ABSENT
3 NEGRETE
4 CURLIN
5 HERNANDEZ
6 OBERHELMAN
7 DEVLIN
8 POPE-LUDLAM
9 MILLER
10
11 City Clerk
12
13 The foregoing resolution is hereby approved this day of
1995.
14
15 Tom Minor, Mayor
City of San Bernardino
16 Approved as to form
17 and legal content:
18 JAMES F. PENMAN
City Attorney
19 By:
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-2-
PROPOSED SUCCESSION PLANNING PACKAGE
FOR
PIONEER MEMORIAL CEMETERY
SAN BERNARDINO, CALIFORNIA
SEPTEMBER 20, 1995
According to a Fall, 1989 article in the Pre-Arrangement Association
magazine,
. . "if you're selling your funeral home, take control of the process by building a case for
your business - before talking to a single possible buyer. It's ten times more complicated
to sell than to buy. If you want to set the conditions and terms for a sale that will bring
the most benefits to you, then it takes a lot of work and preparation."
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CONTENTS
P- ale
1• Summary of Proposal
i I1. Project Description 2
M. Project Team 4
IV. The ACMC Advantage 5
V. Succession Planning Package and Fees 6
VI. Exclusive Succession Planning Agreement 7
I- SUMMARY OF PROPOSAL
American Cemetery/Mortuary Consultants (ACMC) is pleased to present this proposal to the
City of San Bernardino for the succession planning of Pioneer Memorial Cemetery
Bernardino, California. ry in San
Our objective is to sell the cemetery on a timely basis while maximizing the financial retu
to the City of San Bernardino. Accordingly, our services encompass the following: rn
A. "Sellers Package." We will compile an information package to be distributed to
potential buyers. The package will put the cemetery in the best possible light and
emphasize the benefits of ownership. This prospectus", and who it will be sent to
will be approved by the City of San Bernardino before distribution.
B. National Exposure. We will achieve the maximum potential exposure for the
cemetery through a two phased packaging approach that will not involve any
advertising in cemetery/funeral home trade magazines. This approach will also
ensure confidentiality which will help avoid disruptions in relationships with
employees, customers and suppliers.
Through our international reputation and contacts the initial phase will involve an
offer process which will allow the potential buyers to submit an offer for the
purchase of the assets/stock of Pioneer Memorial Cemetery. We believe that the
offer process will create a competitive atmosphere causing the buyers to make their
best offer.
C. Close The Sale. After the City has identified the best offer, we will work with the
buyer and seller to facilitate a smooth and expeditious close of the sale. Our
professional experience will be helpful in avoiding problems and resolvin issues
that might otherwise impede progress and disrupt the transaction. g
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' 11. PROJECT DESCRIPTION
A. Overview. The succession planning for the cemetery as proposed by ACMC, will
consist of preparing a Seller's Package, conducting an offer procedure, and assisting
t in negotiations with the buyer leading to a close of the sale.
1 B. Seller's Package Elements. The sellers package will feature important information
about the cemetery both historical and financial information, which will help to
Iwiden the field of qualified buyers. The package includes:
1. A written prospectus. This written document will summarize in an orderly
manner, the detailed financial information on the cemetery. The financial
data will include historical results and pro-forma projections of various
scenarios for the future. The format will be easy to follow and the
projections will enable the buyer to readily understand the earning
potential of the property.
C. Identify the Buyer.
1. Qualify the Buyer. ACMC will discuss this opportunity with existing
contacts as well as new contacts to identify those prospects with the
highest levels of interest and the capability to buy the cemetery. The
r Seller's Package will only go to those deemed to be "qualified" buyers
(subject to approval by the City).
I2. Offer procedure. Only those prospects who have signed a Non-
Disclosure Agreement will be allowed to participate in the offer process.
Prospects will be sent the complete Seller's Package including the written
prospectus. In addition, prospects will receive information that sets forth
the terms for the negotiation process. Among other things, this information
will establish a time limit for acceptance of offers. Buyers will be
instructed to submit their offers in the form of a Letter of Intent with the
understanding that the seller reserves the right not to accept any offer.
Once the offers have been received, ACMC will meet with the City to
review all offers and determine the best offer considering price and
qualifications of the buyer. Also as part of this process, ACMC will meet
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with qualified buyers and give tours of the property.
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II. PROJECT DESCRIPTION (CONTINUED)
D. Assist in Negotiating and Closing the Sale.
1. Professional help in structuring the sale.
• Support with legal documents. The customary representations and
warranties in an acquisition agreement can be subdivided into six
major areas: 1) Financial statements and accounting issues 2) Legal
organization and capital structure 3) Condition and title of assets that
will cover environmental issues including underground storage tanks,
hazardous waste, etc. 4) Contractual relationships 5) Employment and
labor-related issues including union contracts, pension plans, and
health benefits 6) Lawsuits and taxes.
• Stock sale vs. asset sale. When a buyer acquires the stock of the
corporation, it takes over the entity with whatever liability the
corporation is subject to. In an asset transaction the buyer acquires
only the assets subject to the liabilities that it is willing to assume.
• Counsel the City of San Bernardino on issues relating to timing of the
sale.
• Inform potential buyer of pertinent cemetery and funeral laws of
California.
• Help draft any management contracts needed to retain key people.
2. Assist in negotiations between seller and buyer.
• As quoted from American Cemetery_ Magazine, June 1990, on
acquisitions, "The degree of responsibility a seller and buyer willingly
assume depends on the bargaining leverage of the parties. It is hoped,
that with assistance from experienced professionals, both sellers and
buyers will be in better positions to negotiate transactions and avoid
some of the problem areas.'
• Meet with the City when necessary.
• Provide ongoing stimulus to the buyer by providing recommendations
for enhancing the operations of the property.
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III. PROJECT TEAM
A. Project Management.
• American Cemetery/Mortuary Consultants, Chicago, Illinois. ACMC will
manage the project. ACMC's project team consists of:
• Lawrence C. Anspach, President and Chief Operating Officer of ACMC
and formerly Vice-President and owner of Chicago's Cedar Park Cemetery
and Funeral Home. Mr. Anspach has been active with national, state, and
regional associations in the death care industry since 1973. He has been
featured in the Wall Street lournal U.S. News and World Report US
Ma azine, USA Today and many others. He is a past board member of
the Board of Directors of the American Cemetery Association and the Pre-
Arrangement Association.
• Mr. William C. Henning, who founded ACMC in 1961 and has served
leading cemeteries and funeral homes in the United States and abroad
with appraisal, brokerage, operational analysis' and general business
consultation.
• William N. Anspach, CPA, is past treasurer of the American Cemetery
Association and its auditor for twenty five years, Mr. Anspach currently is
Chairman of the Cemetery Care Advisory Board of the State of Illinois. He
has advised many management groups, as well as federal and state taxing
authorities on cemetery tax and other matters.
• Richard B. Paskin, CPA has seventeen years of experience in management
consulting, much of it with Touche Ross & Company. He has served
companies of various sizes in diversified industries including Sears, United
Airlines, and Bekin Van Lines.
• William N. Anspach, Jr. is an attorney who specializes in pensions and
corporate law. He has drafted stock and asset purchase agreements, for
buyers and sellers in the death care industry.
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0
IV. THE ACMC ADVANTAGE
Our proposed succession planning package offers the City of San Bernardino the
following important advantages:
1. Extensive experience in the death care industry.
• Our project team has many years of experience in the death care industry.
This proven expertise offers assurance that the "sellers package" will reflect
the highest standards of quality available. The impressive credentials of
our principals include multiple national and state held offices in the death
care industry. ACMC has been in business for 35 years and has performed
over 1,000 cemetery and funeral home appraisals and brokered over
$300,000,000 in sales.
2. Proven results in acquisition/succession planning.
• Our project team has successfully completed acquisitions for local and
national buyers. This also results in smooth transitions for employees and
business associates as well as avoiding disruption in day to day operations.
Experience of American Cemetery/Mortuary Consultants over the years has
indicated that sellers get better results by using professional assistance. As
a rule this is best accomplished by using the broker in his fullest capacities.
The larger the field of prospects, the stronger the likelihood that
simultaneous interest can be created, which usually leads to a better
offer(s). A professional broker can deal objectively with all buyers, whereas
the seller is usually a "prejudiced party' in any negotiations.
3. Extensive management experience.
• Our project team possesses a breath and depth of management experience
beyond that required to help sell/buy specific businesses. These
backgrounds encompass executive and management level positions with
organizations such as Touche Ross & Company (now Deloitte & Touche).
This experience in managing the "bigger picture" ensures that the entire
package will achieve its objectives and be delivered in the established
guidelines.
4. Added value for the dollars invested.
• Our proposed package will significantly increase the price of the stock.
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V. SUCCESSION PLANNING PACKAGE AND FEES
ACMC will sell Pioneer Memorial Cemetery as described in Section II and summarized below.
As part of ACMC's package, all travel expenses, the prospectus, any other expenses, and time
of the project team are included in the following fee schedule, the BUYER will pay our fee:
Sale up to $1,000,000 Fee of 6% of gross Sale Price
Sale between $1,000,000 - $2,000,000 Fee of 6% of first
$1,000,000; plus 5% of any
amount between $1,000,000
- $2,000,000 of gross sales
price
Sale between $2,000,000 - $3,000,000 Above schedule; plus 4% of
any amount between
$2,000,000 - $3,000,000 of
gross sales price
Sale between $3,000,000 - $4,000,000 Above schedule; plus 3% of
any amount between
$3,000,000 - $4,000,000 of
gross sales price
Sale between $4,000,000 - $5,000,000 Above schedule; plus 2% of
any amount between
$4,000,000 - $5,000,000 of
gross sales price
Sale over $5,000,000 Above schedule; plus 1% of
any amount over$5,000,000
of gross sales price
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VI. EXCLUSIVE SUCCESSION PLANNING AGREEMENT
The American Cemetery/Mortuary Consultants, Inc. hereinafter referred to as Agents, are
hereby employed to sell the cemetery known as Pioneer Memorial Cemetery located in San
Bernardino, California, hereinafter referred to as Seller, together with the control of all trust
funds, all undeveloped land, and all other assets owned or controlled by said cemetery.
The cemetery shall be offered for sale on the following terms and conditions:
Cash
For their services, the BUYER shall pay the Agents a commission according to the attached fee
schedule of the gross sale, said commission to be paid when a sales contract has been
executed by the Buyer and the transaction has been closed.
It is understood and agreed that the Agents have the exclusive right to sell the above named
cemetery for a period of three months from the date of this agreement.
It is further understood and agreed that if negotiations have been started by Agents with a
prospective purchaser any time before this agreement has expired that this agreement will be
automatically extended to cover the full period of time necessary to complete negotiations and
consummate a sale.
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VI. EXCLUSIVE SUCCESSION PLANNING AGREEMENT (CONTINUED)
It is further understood and agreed by the parties hereto that if at any time within three months
after the expiration of this agreement should the Seller make a sale to any prospective Buyer
with whom Agents had previously negotiated for the sale of the cemetery, the Agents shall be
paid their full commission on the gross selling price the same as if the transaction had been
closed during the term of this Agreement.
It is further agreed that the seller is to furnish the Agents with copies of Articles of
Incorporation, current financial statements, and any other information which, in the judgement
of the agents, is needed to properly interest a prospective purchaser. Such information is to
be regarded as confidential and is to be shown only to interested prospects for the purchase
of the property.
Witnesseth our hands this day of 19
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AMERICAN EMETE Y/M RTU Y
CONS TA TS, I / SELLER
By: By:
JAuthorized Officer
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C I T Y OF S A N B E R N A R D I N O
INTEROFFICE MEMORANDUM
CITY ADMINISTRATOR'S OFFICE
TO: Mayor and Common Council
FROM: Fred Wilson, Assistant City Administrator
DATE: October 13 , 1995
SUBJECT: Agenda Item #25 - Pioneer Cemetery Sale
COPIES: Shauna Clark, City Administrator
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A recommendation was placed on the October 16 Council agenda for
the hire of American Cemetery/Mortuary Consultants (ACMC) to
represent the City in the possible sale of Pioneer Memorial
Cemetery. Since that time, it has come to my attention that the
legal issues surrounding the sale need to be researched. In order
to allow time for this research, and to ensure that the proposed
sale is done in accordance with the Charter, it is recommended that
a substitute motion be made to authorize ACMC to proceed with an
appraisal of the cemetery, with a cost not to exceed $4, 500.
This appraisal will be necessary in order to comply with the City
Charter provisions related to the sale of real property. The
appraisal process will include a site visit by ACMC staff, and a
review of the financial condition of the cemetery. During the time
it will take to complete the appraisal, we will work with the City
Attorney's Office to address the legal issues.
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