Archdiocese to lease 13 cemeteries to Levittown firm

The Archdiocese of Philadelphia has agreed to lease its 13 cemeteries to a Levittown company for a total payment of $89 million over 35 years, officials announced Thursday.

The 60-year deal with StoneMor Partners L.P. includes an initial payment of $53 million, plus $36 million spread over years six through 35 of the lease.

Officials from the archdiocese and StoneMor, whose chief executive attended elementary school in the former Corpus Christi parish in Philadelphia, assured Catholics that the cemeteries would retain their character and that current practices and policies would continue.

The archdiocese structured the deal to receive as much money as possible early in the term to aid its recovery from its dire financial condition - a key focus of Archbishop Charles J. Chaput since his arrival two years ago.

Other financial steps under Chaput, including a 25 percent workforce reduction at the church's headquarters last year and high-profile property sales, helped reduce the financial losses from day-to-day operations.

Leasing the cemeteries, which cover about 2,375 acres in the city and the four surrounding Pennsylvania counties, is the first restructuring step that enables the archdiocese to address the huge $350 million liability it has for pensions, self-insurance, and a parish trust fund.

"It is too big a number to kick down the road," Timothy O'Shaughnessy, chief financial officer for the archdiocese, said. "It's also a number that's so big that our approach against it can't be a small approach. We're in a position where we've got to consider significant assets.

"That's unfortunate and there's a sadness to that, but that's where we're at."

Net proceeds of the initial payment are expected to be between $52 million and $53 million. The archdiocese will use $30 million to reduce the $82 million deficit in its trust-and-loan fund, which was designed to collect deposits from parishes and either invest the money on their behalf or use it to make loans to other parishes.

From fiscal 2004 into early fiscal 2012, when Chaput replaced Cardinal Justin Rigali, some of those parish deposits were used to make up for deficit spending at the headquarters and to pay bills for parishes and schools that were falling behind.

The remainder of the initial cemeteries payment will be split between the priests' pension fund, which had an $89.9 million deficit on June 30, 2012, and a self-insurance reserve, which had a $30.4 million shortfall then.

In considering a cemetery deal the archdiocese had three nonfinancial criteria:

The archdiocese had to remain the owner because burial space is sacred to Catholics; the cemeteries had to retain their Catholic character; and the cemeteries office's 160 full-time year-around employees had to be protected.

Officials at StoneMor, which has 277 cemeteries and 92 funeral homes in 28 states and Puerto Rico, said their practice was to hire the employees when they purchase cemeteries anyway. The explicit guarantee for archdiocesan cemetery employees is two years at current base pay, plus benefits comparable to what they have now.

StoneMor chief executive Larry Miller said the company plans to hire 75 to 100 sales people over time to sell grave sites and related goods, such as burial vaults and grave stones, in advance.

That's how cemetery companies make money.

"There's an enormous opportunity to increase the revenue," Miller said.

Advance sales make cemetery accounting extremely complicated. Cemetery operators in Pennsylvania must put 15 percent of the fee from the sale of burial rights in a restricted fund to maintain the grave in perpetuity.

The rest of that money can be used immediately.

Prices for a single-grave lot at archdiocesan cemeteries range from $1,400 to $1,900, effective Oct. 1. The cost of opening and closing a grave ranges from $1,550 to $1,950.

StoneMor, whose shares on the New York Stock Exchange gained 55 cents, or 2.36 percent, to close at $23.88 Thursday, will also sell grave vaults, tombstones, and other merchandise in advance. The company is allowed to use 30 percent of those retail prices for immediate needs. The rest must be put in trust.

Miller said Catholics can expect no meaningful change in prices. "We will not raise prices to justify what we paid. Our price increases are just a function of the cost of living over time," he said.

Significant provisions of the lease, which is expected to be final by the end of this year, include:

The archdiocese will keep the $30 million currently in a fund dedicated to maintaining the cemeteries, even though StoneMor will assume responsibility for the care of the properties during the term of the lease.

StoneMor will establish a separate endowment for the grave sites it sells. At the end of the lease, both funds will be used by the archdiocese to maintain the cemeteries.

StoneMor agreed to bear the costs of burying up to 300 indigents annually. The archdiocese has been paying for 250 to 275 annually, O'Shaughnessy said. StoneMor will also pay for priests' burials.

The lease allows for certain land sales. Proceeds will be split, 51 percent for the archdiocese and 49 percent for StoneMor.