StoneMor
Partners, a Pennsylvania based cemetery company, has been quietly
talking with Springfield Mayor Mike Houston and other top city
officials about taking over management of Oak Ridge Cemetery.
Calling
StoneMor “a good company,” Houston acknowledged Tuesday that he
has spoken with no other firms about taking over cemetery operations.
He has said that the city plans to issue a request for proposals
aimed at soliciting bids to privatize Abraham Lincoln’s final
resting place. The city council must approve any management deal.
StoneMor,
which runs 277 cemeteries and 90 funeral homes in 28 states and
Puerto Rico, is a publicly traded firm known for a relatively stable
stock price and high dividends. Wall Street, however, is not entirely
enthralled and considers the company’s debt less than investment
grade.
Moody’s
Investors Service last May attached a B3 rating to $175 million in
bonds issued by StoneMor, meaning that analysts considered the
company a high-risk, speculative investment. The issue, Moody’s
said, was a high level of debt. The rating issued last spring was
just one notch above junk-bond status.
The
company that went public in 2004 has had both success and failures in
taking over cemeteries in other states.
The
company in 2010 struck a deal with the Archdiocese of Detroit to take
over three Catholic cemeteries, but the archdiocese canceled the deal
last year. StoneMor chief executive officer Lawrence Miller told
analysts last week that the Detroit archdiocese canceled the deal
because the church had raised sufficient money to relieve financial
pressure on the cemeteries that had led to putting the cemeteries
under StoneMor management.
More
recently, the Archdiocese of Philadelphia in September agreed to a
60-year contract with StoneMor to take over 13 Catholic cemeteries,
with StoneMor paying an upfront fee of $53 million and another $36
million over the life of the deal.
“For
all intents and purposes, we looked at it (the Philadelphia deal)
like it’s an acquisition,” Miller told analysts. “We are paying
them a lot of money for the right to have 100 percent of the benefit
and bear 100 percent of the risk. … Obviously, we did a pretty good
job (in Detroit) because when we entered into the discussions with
Philadelphia, part of their due diligence was to talk to the
archbishop in Detroit to make sure we were the right people to deal
with, and he gave us a very solid endorsement.”
The
company’s critics point to the involvement of top StoneMor
executives with The Loewen Group, a Canadian company that was once
one of North America’s largest funeral companies. The company
declared bankruptcy in 1999, two years before the Minnesota state
auditor issued a critical report stating that cemeteries owned by the
company had underfunded trust accounts established to keep two
cemeteries solvent.
In
one case, the Minnesota auditor determined, the company claimed that
a burial vault had been sunk into the ground but no vault was found
when investigators probed the ground with metal rods. After the state
began its investigation, Loewen in 1997 acknowledged that it had
underfunded a funeral trust fund by nearly $3.8 million in the space
of three years. Loewen also installed a new management team and
replaced executives who now work for StoneMor.
In
the course of bankruptcy proceedings, Loewen said that it owed $2.1
billion, that it had mortgaged funeral homes to secure loans and that
it had cut back on acquisitions to take care of existing operations.
Between 1995 and 1998, the company had acquired 651 properties,
including 348 cemeteries, which resulted in massive debt.
“In
short, the liabilities are staggering,” Loewen officials wrote in a
press release. “As of the commencement of insolvency proceedings,
Loewen’s credit sources were fully tapped.”
Five
StoneMor executives, including Miller, were top Loewen managers while
the company tanked. All left the troubled firm in 1998 or 1999, after
Minnesota regulators began their investigation while the company’s
finances unraveled en route to bankruptcy. Neither Miller nor the
other executives could be reached for comment on Tuesday night.
Loewen emerged from bankruptcy in 2002 and is now known as the
Alderwoods Group.
Some
Springfield aldermen are concerned about handing Oak Ridge over to
StoneMor, and critics showed up at Tuesday’s committee-of-the-whole
council meeting to blast the proposal that first surfaced during an
executive session at last week’s council meeting. The proposal
didn’t become public for two days.
“I
think the entire community has concerns about this as news trickled
out, however it trickled out,” said Ward 3 Ald. Doris Turner.
No
alderman, however, has publicly supported putting the cemetery under
private management.
“We
just learned about this last week,” said Ward 1 Ald. Frank Edwards.
“No decision’s been made.”
Roger
Griffith, an official with the American Federation of State, County
and Municipal Employees that represents eight cemetery workers, told
aldermen that private management by StoneMor is a bad idea.
“They
don’t care about the city of Springfield, they don’t care about
Oak Ridge, they only care about making money,” Griffith said.
Houston
has said that the city is spending $400,000 a year to subsidize the
cemetery, but cemetery executive director Michael Lelys said that
just $220,000 of that has been spent with three months left in the
fiscal year. However, Lelys said that he could not guarantee that
there would be money left over. That depends on how many people die
and whether they have already paid burial expenses.
Ward
7 Ald. Joe McMenamin said that the cemetery is a basic city service,
no different that the fire department, police department or library.
“The
fire department doesn’t break even, the police department doesn’t
break even, the library doesn’t break even,” McMenamin said.
P.J.
Staab, whose family runs Staab Funeral Home in Springfield, told the
council that there is no money in running a cemetery.
“I’m
not aware of any cemetery in the country that is a cash cow,” Staab
said. “A management company will have to make a living off sales
because they have Wall Street to answer to.”
At
least one city has said no to StoneMor.
In
Lansing, Mich., opponents of a 2011 proposal to put three city-owned
cemeteries under StoneMor management succeeded in scotching the
proposed deal that came about when the company was the sole bidder to
take over the graveyards. According to the Lansing
State Journal, the
consultant who wrote the Michigan city’s request for proposals had
once worked for StoneMor.
“We
fought it and we stopped it,” said Loretta Stanaway, a leader of a
Lansing group called Friends of Lansing’s Historic Cemeteries. “We
did our research. … StoneMor was not financially strong.”
Stanaway
said her group teamed with funeral home operators, florists and
gravestone makers, all of whom feared losing business, to help
convince the city to keep the cemeteries under public management.
Among other things, Stanaway said that critics were concerned that
StoneMor would prohibit grave markers that stood vertically as well
as other memorial displays.
“Park
‘em and mark ‘em, mow and go,” Stanaway said. “They don’t
want headstones, they don’t want anything that’s going to slow
down a mower or a weed whacker. If you like a green lawn with plastic
flowers, it’s right up your alley.”
Contact
Bruce Rushton at brushton@illinoistimes.com.
This article appears in Nov 7-13, 2013.
