OREM, Utah -- At the foot of the imposing Big Baldy and Squaw Mountains along the Wasatch range in northern Utah you can find the city of Orem's cemetery.
The small cluster of burial plots, which overlooks the Jordan River Valley and shimmering Utah Lake, was also at the center of a recent municipal bond issue: a $1.6 million lease revenue financing by Orem.
The money pays for acquiring an adjoining nine acres so that Orem residents have enough land to bury their loved ones for the next 25 years. Unusual as it may seem to issue cemetery bonds, it's not such a foreign concept in Utah.
"It's quite an undertaking," grinned Moody's Investors Service analyst Jerry Caden, who gave the deal an A rating.
Laura Lewis, a Salt Lake City-based investment banker with Kemper Securities Inc. who brought the issue to market last week, has heard more than her share of bad puns about Orem's cemetery debt, but has the grace not to use any of them.
"Orem's a nice town, a nice place to live," Lewis said. "It's about 80% Mormon, ultra conservative, low crime. They recently elected their first Democratic representative [to Congress] in a long time. They have enough growth to secure the bonds."
Orem, home to the entertainment world's Osmond family, was founded in 1919 by businessman and farmer Walter C. Owen. Originally known as Provo Bench because it sits and looks down on Provo to the south, Orem is 72 years younger than Provo.
Though the city of 75,000 fights an image of pollution associated with the Geneva Steel processing plant on Utah Lake, it enjoys a solid economic base. High tech company WordPerfect, a division of Novell, has a plant there and is the largest taxpayer in Orem, accounting for 2.33% of assessed value.
Orem's demographics still reflect its largely family character. The city's average age is 21.7, with 44% of the population younger than 18.
The cemetery was opened in 1943 and many World War II veterans are buried there. Many longtime married couples born as early as the 1800s also lay buried there, providing more evidence of the town's family nature. And sadly, the crib death babies are here, too, with pictures of their siblings, pets, and favorite toys adorning the headstones.
Besides the Orem deal, Lewis said the only Utah cemetery bond issue she can recall was $165,000 revenue bonds issued in 1991 by the town of Hurricane, in Washington County 15 miles northeast of the resort town of St. George. Securities Data Corp. does not track the category separately.
The actual issuer of the Orem bonds was the Municipal Building Authority of the City of Orem, a nonprofit corporation organized under state law. The authority acts as lessor under the lease and grantor under the indenture.
The annual lease payments will be subject to approval each year by the city council. At present at least, Orem doesn't have budget problems that would bury the deal. The city's revenues were $20 million in 1993, but Orem spent just $15.9 million. The actual budget surplus was nearly $3 million more than the projected surplus. It's the kind of fiscal restraint that's normal for Utah but unheard of in other parts of the country.
The cemetery bonds are backed only by a traditional "moral obligation" of the city to pay the lease. If the city fails to pay the lease, bondholders would own the property.
Maturities on the serial bonds range from 1995 to 2011. The negotiated pricing took place June 14 and the deal closed yesterday, but only after Kemper adjusted the 2009 and 2010 maturities up five and 15 basis points to yield 6.10% and 6.20%. By the end of the day, all the bonds were sold, mostly to retail clients in Utah, Lewis said.
