Perpetual Care - Its Establishment and Regulation by the State
In addressing the members of this Association, there can be no necessity for explanations as to what perpetual care is, nor arguments as to its necessity in every cemetery. There can hardly be a member who is not thoroughly familiar with these matters and who does not understand the vital importance to the cemetery management, and more especially to the lot and grave owners, that some adequate system of perpetual care be adopted for every cemetery in our country, from even the smallest country graveyard up to the largest metropolitan cemetery.
Those among us who are fortunate enough to be in charge of cemeteries, in which this provision was made from the first, are to be congratulated and to be envied. Those others, undoubtedly constituting a large proportion of our membership, who are in charge of cemeteries that were started and conducted for many years with no thought of provision for perpetual care and who have gone through the harrowing experience of adopting perpetual care and endeavoring to persuade the older lot owners to make this provision for their lots have found themselves confronted by a task, compared to which all the other difficulties and perplexities which come to the manager of every cemetery, pale into insignificance, and no one of us in that class but has said numberless times: "How criminal and how needless was the lack of foresight which has forced this disagreeable burden upon us."
As this paper may finally come to be read by lot owners or others who are not familiar with the subject, or by inexperienced people starting new cemeteries, who, as we all know, quite generally fail to realize that the development and management of a modern cemetery requires a high degree of technical ability and the supervision of trained men of long experience, the present audience will no doubt accept a brief definition of the subject and some explanations of facts which are already well known to them.
What is Perpetual Care?
The term "perpetual care" in cemeteries has come to mean the providing of funds, to be held in perpetual trust, the income of which is to be expended in keeping up forever the necessary care of the individual lots and graves, and the maintenance, repair and future renewal of the borders, drives, water and sewer systems, enclosures and necessary buildings. In some cases, two separate funds are provided, the income from one of which is devoted exclusively to the care of the private lots and graves and the other to the care, maintenance and renewal of the balance of the cemetery. In other cases, the funds are still further subdivided, while the more recent tendency seems to be to establish one fund and apportion the income from year to year as needed to these various purposes. The best of the argument seems to be in favor of the one fund, because every lot owner is almost as vitally interested in the upkeep of the cemetery as a whole, as he is of that of his own lot, and it would seem to make for the best interests of all to have the application of the income not too specifically tied to definite things, so that in future years the persons in charge of the trust may be free to more effectively meet varying conditions as they occur. However, the purpose of the present paper is not to open a discussion on that much disputed point.
How Large a Fund is Needed?
The theory of the establishment of a perpetual care fund is that it should be large enough, when invested in safe securities, to furnish an income sufficient to accomplish the purposes set forth above. We are all aware that the care given in different cemeteries varies within wide limits, and the nature and extent of the buildings and other improvements varies in the same way, depending upon the location of the cemetery and the demands of the patrons, so that a fund which would furnish an adequate income for one cemetery undoubtedly would be entirely inadequate for another in which the care was better and the improvements more extensive and of a higher grade.
A survey of the conditions made some years ago revealed widely varying amounts, some of them so grossly inadequate as to be of little use, and some so excessively high as to constitute an unnecessary burden on the lot buyer. The average amount at present set aside by the better class metropolitan cemeteries seems to be about 50 cents per square foot of the area sold for burial purposes. Certain rather extended investigations made by the writer indicate that where perpetual care prevails from the establishment of the cemetery, and every lot sold has paid its proportion, 40 cents per square foot would be a sufficient amount to maintain a high grade metropolitan 100 acre cemetery in most excellent condition, and half this amount should be sufficient where the care is not so complete and does not include watering of the grass, and where the buildings, waterworks and other improvements are not so extensive.
Assessment of the Perpetual Care Charge
There are two generally accepted methods of' assessing the charge for the perpetual care deposit. One is by charging a fiat rate per square foot uniformly for all lots sold, either by deduction from the selling price which is fixed to include it, or as an additional charge over and above the price of the lot. The other is to set aside a uniform percentage of the receipts for lot sales, prices of course being adjusted with that end in view.
Either method by proper adjustment may be made to yield practically the same gross total, although future increases in prices under the percentage system will give increased payments to the fund unless the percentage is reduced, which is a difficult thing to explain satisfactorily to previous buyers.
Considering the fact that the care is, or should be, uniform for all lots in the cemetery and the actual expense annually is the same tor every lot in proportion to its size, it is evident that the percentage system forces the buyer of the higher, priced lot to pay more than his share and allows the purchaser of the cheaper lot to escape paying a part of what he properly should pay, the flat rate system appears to be the better and the more equitable.
How Should the Funds Be Controlled?
Wide variance is found in the matter of the control of perpetual care funds in various cemeteries. In some cases, the handling and investment of the funds and expenditure of the income are left entirely in the hands of the cemetery corporation, and if the management is able and honest, this will result in high efficiency and economy, but there is always the danger of a change in future management which will put the funds under the control of unscrupulous persons, and it must also be borne in mind that very efficient cemetery managers may not be well posted on matters pertaining to the care and investment of large sums of money, and hence will arise the possibility of loss through injudicious investment, although the persons in charge may be scrupulously honest and sincere in their intentions.
Another method quite commonly followed is the establishment of a Board of Trustees or even another corporation, for the purpose of handling these funds, the members of which are elective by vote of the lot owners in the cemetery. This method in theory should be an equitable one, as it nominally gives the future control of the funds into the hands of those who are directly and personally interested in their proper expenditure. But the same danger from inexperience and inefficiency exists as in the control by the cemetery corporation. It is also to be noted that lot owners are certain in time, many of them, to move to far distant points of residence and all are apt to become indifferent to the matter and fail to attend meetings and elections, thus frequently rendering it possible for small minorities to acquire control, for personal, selfish and perhaps dishonest purposes.
Another method coming rapidly into favor at the present time is the placing of the funds in the hands of trust companies such as are authorized by many states to handle estates and court funds, these companies holding the funds, making the investments, collecting the income and seeing to the expenditure of the income for the purposes specified in the trust, the cemetery corporation, however, requiring all proposed investments to be submitted to it and retaining the power of forbidding any investment which does not meet with its approval. This would appear, on the whole, to be the best and safest method, as it places the investment of the funds in the hands of expert financiers who are thoroughly familiar with such operations, and who generally have wider opportunities for good investments and have expert men for investigating values.
How Should Funds Be Invested?
The first consideration in investing trust funds of this kind is safety. The question of a high rate of interest must be entirely subordinated to this supreme question of safety of the principal.
Real estate mortgages, when made for a low percentage of the actual value of the property, have always had a high and well deserved reputation for safety. Where the fund is not administered by expert and honest officials, however, there is great chance for loss by inflated values of the property and the loaning of excessive amounts. There is also the danger, when making loans on unimproved or non-income producing real estate, in case of default, of the loss of income over considerable periods through the long time necessary to acquire title in many states under foreclosure and through the possible difficulty of disposing of the foreclosed property, and so that a wise provision would be to limit real estate loans to property which produces an assured income well in excess of the interest on the loan.
Stocks in general are not proper investments for trust funds of this nature, although occasionally preferred stocks of small issue in proportion to the value of the corporate holdings may be good investments.
Bonds as a whole seem to be the better type of investments for perpetual care funds, although there are of course bonds and bonds, and there are great quantities of such securities that are to be let severely alone. Bonds of all classes issued in large amounts in proportion to the security are of very doubtful safety. Industrial bonds are to be investigated very carefully, as well as railroad bonds. Government bonds are the highest class and safest bonds that can be obtained, but the interest rate is low, especially as such bonds are quite generally in ordinary times held at a premium.
Perhaps on the whole there is no class of investment so good, both from the standpoint of reasonable return and security, as public bond issues, state, county, municipal and the like-although there are some sections of the country where the record for prompt payment of interest and principal has not been very good. Another advantage connected with bonds of this class is the tax exempt feature, as the tendency seems to be increasing in many localities to tax the income from perpetual care investments.
Why Should the State Establish and Enforce Provisions for Perpetual Care?
The histories of all cemeteries where perpetual care is not provided is practically the same. When the cemetery is new and during its early years, reasonable care, quite satisfactory to the patrons, is generally given. As time goes on, and more and more lots are sold, the burden of this care becomes greater and the management becomes unable or unwilling to keep it up. The next step is the abandonment of the care of the private lots, except where the owners are willing to pay an annual fee. By this time, a large number of the original owners are either dead or have moved away or are unwilling or unable to make the payments, so that we have a condition in which a part of the lots are more or less well cared for and the balance surrounding them and perhaps interspersed with them, are neglected, making the whole appearance shabby and unsightly. Later again, when all the lots in the cemetery are sold out, the income to the management begins to fall off until a point is reached where the expenses can no longer be met, and the cemetery is abandoned. By this time, the proportion of the lot owners who are able and willing to pay for the upkeep is so small that it is impossible for them to take over and operate the cemetery, so that the conditions go on from bad to worse. About this time, or perhaps sooner, those lot owners who are interested in having their burial plots and the surroundings properly maintained, will purchase lots in newer perpetual care cemeteries, and remove their dead and their monuments to other locations, so that in a short time the once beautiful cemetery becomes a desolate jungle of grass, weeds, un-pruned shrubbery, dead trees, tottering or overturned monuments and stonework, so that instead of being, as the Germans call it, "God's Acre," it may well be called "a God-forsaken Acre." Cemeteries in this condition can be found all over the country. This is the natural and inevitable consequence of lack of perpetual care.
On the other hand, we may glance for a minute at the future of a cemetery established and operated under adequate perpetual care provisions. The cemetery will be properly cared for from the beginning. When the lots are all sold and the annual income diminishes to the point where the management could only operate at a loss and would necessarily abandon it, the income from the perpetual care funds may be sufficient to induce them to continue the operation, or if not, the income will surely be sufficient to enable the trustees to maintain it and to retain all of its original beauties. As time goes on, new interments in the cemetery will be less and less in number and the tract itself will become more and more a beautiful, self maintaining park, furnishing to the community without cost all of the advantages of such open air breathing places except, of course, those of sports and playgrounds.
Many cemeteries are being established today without perpetual care through the ignorance of the people constituting the cemetery association, and unfortunately of late cemeteries are being established all over the country for the avowed purpose of exploiting the public and squeezing out every possible present dollar without any regard for the future interest of those whose money they are taking. In many such instances, in view of the fact that the public is coming more and more to demand perpetual care, actual fraud is committed. Lots are sold with the statement that they have perpetual care, when no funds are set aside for the purpose at all, and in other cases the fund is so grossly inadequate as to be of no value whatever, or so poorly safeguarded that it is subject to being embezzled or lost by bad investment.
These seem to be adequate and convincing reasons why the state should step in and compel all individuals, associations and corporations alike to make some definite provision in this vitally important matter, and why it should also throw the protection of the law around the proper investment and safeguarding of such funds.
What Should Be the Provisions of Such a Law?
A state law should provide that a portion of the receipts for every lot and grave sold in every cemetery in the state, whether owned by private individuals, associations, or corporations, should be set aside in perpetual trust for the care of the cemetery.
It should have much the same provisions that are in force with regard to savings banks and insurance companies in many states as to the investment of the funds.
It should provide, in a broad way, for the control of the funds and the application of the income accruing.
It should especially provide for publicity, requiring the annual publication, or at least the deposit with some public officer to be held as a public record, of sworn statements in detail as to the investment of the funds, the income arising there from and the disposition of that income.
It should provide supervision and investigation from time to time to assure that the money is being properly set aside, legally invested and the income properly expended, perhaps much in the same way that Building and Loan Associations are supervised and invested in some states.
Then finally it should provide drastic penalties for evasion or violation of the law's requirements, including the withdrawal of all tax exemption provisions for property owned by the cemetery management, of course excepting the lots in the hands of private owners and used by them for legitimate interment purposes.
How Much Money Should Be Required to Be Set Aside by Law?
We have already shown that the average amount deemed necessary by the better class of metropolitan cemeteries was 50 cents per square foot, but that in many cases a much less sum would be sufficient to meet the requirements of the case. Perhaps some method might be worked out by which cemeteries could be divided into classes, and the sums to be set aside graded upwards from a comparatively small amount, according to the class in which the cemetery falls. This, however, would be a rather difficult matter, and it might work out that the requirement of a minimum amount and uniform for all cemeteries would answer every purpose, the publicity required making it an easy matter for intending buyers to ascertain whether the funds were adequate or not, thus leading them to patronize the cemeteries making the best provision in that respect and forcing the others, through competition, to increase the amounts set aside by them in order to hold their patronage.
From the publication:
AACS - Proceedings of the 36th Annual Convention
September 18, 19, 20 and 21, 1922