Title
A Resolution Repealing Resolution No. 24-18 and Establishing Fees and Charges for the Parks, Recreation and Cultural Services Cemetery Enterprise for 2021
Presenter:
Kimberly King - Recreation and Administration Manager
Karen Palus - Parks, Recreation and Cultural Services Director
Body
Summary:
The attached fee schedule establishes the proposed fees effective January 1, 2021, for the Parks, Recreation and Cultural Services Cemetery Enterprise. The attached proposed fee schedule (Exhibit A) reflects an 85-90% cost recovery rate before the addition of Cemetery Endowment funds. The proposed fee schedule will generate an additional $199,340 in revenue based on the same level of business as occurred in 2019.
Background:
The City of Colorado Springs owns two cemeteries, Evergreen and Fairview. The cemeteries are enterprise operations and, as such, revenues must cover expenses and add to the Enterprise fund balance when feasible. As the cost of providing cemetery services and meeting perpetual care responsibilities increases over time, the Enterprise must adjust fees and charges to continue to cover the costs of operations, and to fund a growing list of capital needs.
The proposed fee schedule aligns with the City’s Revenue Policy and User Fee Policy, ensuring that the Cemetery Enterprise is collecting fees at an appropriate cost recovery level. The proposed 2021 fee schedule reflects an 85-90% cost recovery of all operational expenses. With the addition of endowment funds, cost recovery will meet or exceed 100%. Staff analyzes the demand for services, as well as periodically compares pricing within the local market, to determine pricing levels.
Parks Department staff have reviewed fees of other comparable cities, and the proposed fees are competitive. This comparison of fees with other cemeteries in Colorado can be found in the attached PowerPoint presentation. The proposed fees and charges for 2021 are included in Exhibit A. Revised fees are highlighted in yellow. Fees that are being removed are highlighted in orange.
Items to note include the following:
- Continuing to monitor military burials to determine impact with the establishment of the Pikes Peak National Cemetery, which opened in October 2018. Staff is utilizing updated software to track the military interments occurring at Evergreen and Fairview to better estimate the potential impact to the enterprise’s bottom line. In 2018, we had 35 military burials and in 2019, we had 39. So far, the impact does not appear to be occurring. As the National Cemetery matures, there may be more interest in burial there, but Evergreen continues to be a popular site. The 10% discount for veterans on select items and services will continue in 2021.
- Enhancing cremation offerings through capital improvement projects at Evergreen including installation of a new columbarium and exploring the conversion of the old stone office into an indoor columbarium. A grant through the State Historic Fund is funding historic structure assessments for the old stone office, the chapel and the stone wishing well. This information will inform the potential conversion of the stone office as well as provide necessary information to submit additional grants to the State to support needed repairs for all three structures.
- Exploring the possibility of selling the undeveloped southern section of Fairview Cemetery since the focus going forward is on Evergreen Cemetery due to its available inventory and the current limitations of the irrigation system at Fairview. If a sale were made, proceeds would go toward automation of the Fairview irrigation system as well as needed capital improvements such as a new columbarium at Evergreen.
This item supports the City’s strategic goal of excelling in City services by supporting the initiative relating to evaluating regulations, fees, and rules using best practices.
Previous Council Action:
City Council approved revisions to the Cemetery Enterprise’s fees and charges by Resolution No. 24-18 with an effective date of April 15, 2018.
Financial Implications:
Since the cemeteries are an enterprise operation and as such, revenues must cover expenses, analysis of the financial condition of the operation is ongoing. As the cost of providing cemetery services and meeting perpetual care responsibilities increases over time, the Enterprise must periodically adjust fees and charges as well as explore ways to increase market share to continue to be self-sufficient.
In terms of expenditures, salaries and benefits are a key expense since cemeteries are inherently labor-intensive. At the end of 2019, the Enterprise broke even with a total expenditure of $1.4M. While improvements have been made to Evergreen in terms of an irrigation system, and both cemeteries have contracts for mowing, there is still a significant amount of manual labor required. As in all City General Fund Enterprise operations, personnel are paid the same scale as the general City and receive the same benefits. Thus, when benefit costs and pay increases are approved, the Enterprise must absorb these increases.
Revenue includes sales for plots, foundations and niches. It also includes services such as openings, closings and supervision fees. At the end of 2019, revenue equaled $1.1M. Approximately $300,000 from the endowment account is budgeted each year to offset a portion of our operational expenditures that brought total revenue for the year to $1.4M. Due to a change in accounting practices related to preneed sales, a correction was made at the end of 2015 where the revenue associated with preneed sales that have been paid for, but not used, is placed in a “liability” account until the actual service is utilized which accounts for a significant dip in 2015 revenue. However, based on results since then, the adjustment appears to be a one-time occurrence and the revised accounting process does not appear to be hurting our bottom line going forward.
The purpose of the endowment fund is to provide funds to care for, preserve and maintain endowed spaces in perpetuity. The fund has been trending higher with the 2019 EOY value at $11.5M. Through 2015, endowment interest supported the maintenance operations of the enterprise. A new investment policy approved in 2016 calculates the fund balance on a 60-month average and then allows 3% of that amount to support maintenance operations. Staff believes this will provide more stable funding over time that will allow better planning for maintenance and capital needs. The initial calculation was $280,000 annually. In 2019, $300,000 was budgeted and $304,300 was transferred.
Additionally, with the recommended change regarding how preneed sales are accounted for as well as GASB (Governmental Accounting Standards Board) 68 related to pension liabilities, a correction was made at the end of 2015, which resulted in a negative balance in revenues that put the fund balance into the negative as well. During 2018, the City implemented GASB75, which is the same idea as GASB 68, only related to OPEB (Other Post-Employment Benefits) rather than pensions. Without these adjustments, the Cemetery unobligated fund balance would have been trending positively at just over $900K.
City Council Appointed Board/Commission/Committee Recommendation:
The Parks, Recreation and Cultural Services Advisory Board reviewed the proposed fees and charges at their June 11, 2020 meeting. At that time, they asked for an additional review to consider greater increases where appropriate based on market reviews. As a result, a few fees were further increased. The Parks, Recreation and Cultural Services Advisory Board unanimously recommended approval at their July 9, 2020 meeting.
Stakeholder Process:
The Parks, Recreation and Cultural Services Advisory Board meetings serve as an opportunity for the public to comment upon proposed changes. There were no citizen comments regarding this proposal during the meeting.
Alternatives:
1. Pass the resolution as recommended by staff.
2. Pass the resolution with changes.
3. Do not pass the resolution.
Recommended Action
Proposed Motion:
Move to approve a resolution rescinding Resolution No. 24-18 and establishing fees and charges for the Parks, Recreation, and Cultural Services Cemetery Enterprise for 2021.
Summary of Ordinance Language
N/A