Constructively closed: The emergency suspensions continue
January 8, 2013
The Postal Service continues to close post offices by emergency suspension over problems renegotiating leases. Many of the problems are caused by the Postal Service. A suspension is an easy way to close a post office — it avoids a lengthy discontinuance process and the possibility of an appeal to the Postal Regulatory Commission, and it makes it look like the closure is the landlord's fault.
In its annual compliance report to the PRC, issued just a couple of weeks ago, the Postal Service said it closed 237 post offices in fiscal year 2012. Nearly all of those closing occurred in October and November of 2011, before the moratorium on closures began in December. Since then, formal discontinuances have come to a virtual halt. But the emergency suspensions continue. The compliance report says that at the end of FY 2012 (September 30, 2012), there were 124 suspensions in effect. There have been several more suspensions since then.
Many of the suspensions have occurred because the Postal Service, or its real estate agent CBRE, put unacceptable demands on the landlord, like a large rent reduction (as much as 30 percent) or an early-termination clause. So whenever a post office’s lease is coming to an end, it’s at risk for an emergency suspension. During the first six months of 2013, nearly 1,900 post offices will have a lease expiring. A list is here, a table here, and a map here.
About 850 of these offices are on the POStPlan list and set to have their hours reduced. While POStPlan has been advertised as the Postal Service’s plan to save post offices, that doesn’t mean it won’t suspend a POStPlan post office. There have been numerous POStPlan offices closed by suspension over the past few months.
In its advisory opinion on POStPlan (August 2012), the PRC expressed concern that post offices would be suspended because of staffing issues and lease problems, but the Postal Service reassured the Commission that it “has no plan for using the lease negotiation process as a pretext to close Post Offices.”
The Commission hasn't had much to say about suspensions since then. In its annual report, issued just a few days ago, there’s a section on post office closings and appeals but no mention of “emergency suspensions."
The early-termination issue
Many of the post offices with leases expiring soon have already had a successful lease negotiation, but in most cases, the negotiations are ongoing. The Postal Service has been cutting it close. In years past, a lease was negotiated many months before it expired. These days, the negotiations are often completed with just a few days left on the lease, sometimes even after an emergency suspension has been announced.
The Postal Service and the landlord may disagree over a number of issues, like the amount of the rent or responsibility for maintenance, but the issue that is causing many of the lease problems these days is the Postal Service’s insistence on adding an early-termination clause to the lease. This clause permits the Postal Service to end a lease whenever it wants, and on relatively short notice too.
Traditionally, the Postal Service would sign a five- or ten-year lease with an option for another five years. The fact that the building would house a post office for a long time was one of the main reasons why investors got into the business of owning post offices in the first place.
Now the Postal Service wants to insert early-termination clauses in the leases, giving it the option to get out before the five years are up, sometimes with as little as 60 or 90 days notice. These termination clauses have been the source of a lot of controversy, and the lessors have complained vociferously to the Postal Service and the PRC about them.
Because of all the complaints over the termination clause, the Association of U.S. Postal Lessors (AUSPL) got the Postal Service to agree to make the shortest termination clause 30 months. In other words, the lease may not be terminated for the first two years, and after that the Postal Service needs to give 180 days notice.
The termination clause makes it impossible for lessors to make long-term plans for their buildings. They are put in an untenable position — accept the clause or lose a tenant — so it’s no surprise that lease negotiations have been breaking down.
But that’s apparently fine with the Postal Service. After all, if it had long-term plans to keep the post office open, why would it be insisting on the termination clause in the first place?
Closed for a quarter in Climax
The post office in Climax, Georgia, was on the POStPlan list, set to be reduced to six hours a day, but on October 31, 2012, the Postal Service suspended operations due a problem negotiating a new lease. The Postal Service should have looked around for another suitable location. There should have been several possibilities. After all, the Postal Service cited lower average rents in Climax as justification for a big rent reduction. But rather than finding another location, the Postal Service initiated a discontinuance feasibility study — the day after the suspension went into effect.
The case is currently being appealed to the PRC. The Postal Service has filed a motion to dismiss the appeal on the grounds that the post office has not yet been discontinued — it’s just under emergency suspension and only being studied for a discontinuance — so an appeal is premature.
The PRC’s Public Representative, who can usually be counted on to advocate on behalf of the community, has recommended that the case be dismissed for precisely that reason. It’s almost inevitable that the PRC will dismiss the case, just as it has in previous cases where an appeal was filed while the post office was suspended but not yet discontinued.
The Public Representative seems to think everything is fine in Climax. “Because the Postal Service has promptly initiated a discontinuance feasibility study,” writes the PR, “it does not appear that the Postal Service is keeping the citizens of Climax in limbo or abusing its suspension procedures.” The folks in Climax and the landlord of the building probably have a different opinion on that subject.
In the materials submitted by the Postal Service, there’s a copy of the letter it sent to Climax customers. The Postal Service explains that it wanted the landlord to drop the rent from its current $11.84/sq.ft. to $8.50/sq.ft., which it considered “fair market value,” with a 60-day termination clause. The landlord offered to accept $8.75/sq.ft., with no termination clause, but the Postal Service rejected the offer.
The Climax post office was thus closed over a matter of 25 cents a square foot. The landlord was willing to reduce the rent from $1,831 a month to $1,353 a month, but the Postal Service wanted $1,315 a month. They were $39 a month apart when the deal collapsed.
Given how close the Postal Service and landlord were when the negotiations broke down, it’s likely that the disagreement had more to do with the termination clause than the rental price. Or perhaps, as the landlord suspects, the Postal Service simply wanted to find any excuse it could to close the office.
In its motion to dismiss the appeal, the Postal Service says that “because the Post Office is now suspended, the Climax Post Office is no longer a candidate facility for the POStPlan initiative, and it is now undergoing a discontinuance feasibility study.”
It’s not clear why putting a post office under suspension is cause for removing it from POStPlan. When the Postal Service gave the PRC the list of 13,000 post offices it planned to study under POStPlan, there were 133 under suspension. (A list of them is here.)
It would appear that the Postal Service has already determined the outcome of its discontinuance study on Climax. If a decision to keep the office open were even a possibility, wouldn’t the post office (wherever it's located) still be a candidate for reduced hours under POStPlan?
From POStPlan to discontinuance in Paoli
The post office in Paoli, Colorado, was on the POStPlan list, set to be reduced to two hours a day. There was a meeting to discuss the future of the post office on October 30, but rather than staying open at reduced hours, the office was closed in mid November.
The Paoli post office was located in an addition on the back of the postmaster’s home. After 46 years with the Postal Service, she took the incentive and retired on July 31, 2012. A leave replacement ran the office for a few months, and then on November 16, the Postal Service closed the office and replaced it with a cluster box unit.
Paoli is one of about a dozen POStPlan post offices where the Postal Service decided to proceed with a discontinuance study rather than reducing the hours. It’s not clear if the community chose that option in the surveys that were sent out. According to the Postal Service, at least 60 percent of the respondents would have needed to choose to have the office closed as opposed to seeing the hours reduced. The postmaster says, ““I really feel badly that I let my people down,” so it sounds like the folks in Paoli would have preferred to have a post office open.
The news item doesn’t use the term, but it would seem that the Paoli office was closed for an emergency suspension, probably over the termination of the lease, and one assumes that a discontinuance study is in the works. Those cluster box units make it pretty clear how it will turn out.
No long-term commitment in Tamms
The post office in Tamms, Illinois, is on the POStPlan list, and it's set to have its hours reduced to six a day. In early December, the people in Tamms learned that their post office would be closing completely at the end of the year.
The lease on the Tamms post office expired on December 31, 2012. A note on the post office door said the post office would be suspended as of Friday, December 28. The Postal Service said it would decide what to do about providing services to Tamms sometime over the coming months. In the meantime, there’s another post office in Ullin, 7.4 miles away.
The monthly rent for the Tamms post office is less than a thousand a month, but money wasn’t the issue that caused problems with the lease negotiations. The landlord wasn’t asking for an increase, and the Postal Service wasn’t pushing for a decrease. It was all about the termination clause.
The landlord says that the Postal Service wanted to insert a clause in the lease saying that it could terminate anytime after December 31, 2014, with 180 days notice. The Postal Service would commit to remaining in the building for two years, but after that, with six-months notice, it could exit anytime it wanted. The landlord wouldn't agree to those terms, so the Postal Service declared an emergency suspension.
With just a couple of days left before the post office was scheduled to close, the landlord and the Postal Service came to an agreement to extend the lease for one year, so Tamms will remain open, at least for a while.
Moving the goal post in Darwin
The post office in Darwin, California, is on the POStPlan list, set to be reduced to a Level 6 Part-Time Post Office (PTPO). The nearest office is more than 25 miles away, so Darwin is considered “isolated” and automatically classified as a Level 6 PTPO under POStPlan, regardless of its earned workload. But it looks as though the reclassification may not happen.
In December, the Postal Service sent letters to residents of Darwin notifying them that their post office will be suspended effective Monday, December 31. The explanation? “Lease negotiations with the current landlord have failed and attempts to locate a suitable new location within the city limits of Darwin have been unsuccessful.”
The Darwin office was on the Retail Access Optimization Initiative (RAOI) list of 3,700 post offices slated for closure in 2011. In October 2011, the Postal Service decided to close the office, and it even started pouring the concrete foundation for the cluster box units that were to replace the post office. Then the plan ran into problems over where they the boxes were located and who would be responsible for maintaining them. That delayed the closure, and then the moratorium on post office closures went into effect in December 2011, so Darwin was spared — at least for a while.
Darwin resident Kathy Goss has written a letter to USPS Consumer Advocate Services in Washington, D.C., complaining about the suspension. She says the landlord was unaware that lease negotiations had failed. The landlord says that he first he learned that the Postal Service planned to close the office was after the notice was posted at the post office and someone in town gave him a call.
The lease on the post office expired back in May, 2012, but the post office remained open and the Postal Service continued paying the rent. The landlord says that when they were negotiating a new lease, he offered to drop the rent and made other concessions to keep the Postal Service happy, but “they kept moving the goal post” and passing the buck from one postal official to another.
Things may yet turn out all right in Darwin. At the end of December, the landlord received a new lease in the mail. No one at the Postal Service called or emailed to say a new lease would be coming, and it includes figures the landlord “has no idea where they came from.” It also includes a termination clause allowing the Postal Service to end the lease with 180-days’ notice. But at least there’s a lease to consider, and maybe Darwin will continue to have a post office.
The price is right in Edgard
The post office in Edgard, Louisiana, is on the POStPlan list, and it’s supposed to have its hours cut to six a day. But on December 5, residents learned that on January 1, 2013, their post office would be closed completely. The local news explained that the office would be suspended “because the U.S.P.S. is having trouble renegotiating a lease with its landlord. Capital One Bank, which shares the building, owns the property.”
The folks in Edgard quickly mobilized and enlisted the assistance of government officials, who helped broker a deal between the Postal Service and the landlord, Capital One Bank. The new lease is for five years, and the rental price is considerably less than the $6,840 per year the Postal Service had been paying. According to the local news, under the new lease agreement the Postal Service will pay Capital One $1 a year.
It appears that Capital One has agreed to give the space to the post office gratis simply as a service to Edgard. But believe it or not, it’s the Postal Service that’s claiming credit for keeping the office open. Postal Service marketing manager Rachel Cousin told the local news, "The Postal Service is losing money on every office. But it was a community service decision, as opposed to a financial decision."
Cluster boxes in Mahanoy Plane
The post office in Mahanoy Plane, Pennsylvania (in the borough of Gilberton), was closed on November 30, 2011, by emergency suspension after the landlord decided not to renew the lease because the building needed repairs and the Postal Service planned to close the post office anyway, as part of last year’s RAOI.
There was still a year left on the lease, but when the owner notified the Postal Service he wouldn’t be renewing, the Postal Service immediately declared an emergency suspension and shut down the office.
As the local news reported at the time, Postal Service spokesman Ray V. Daiutolo, Sr., said this is not considered a permanent closing of the facility. "This is not a final determination for the Mahanoy Plane office," Daiutolo said. "The district will take the next few months and evaluate to determine the next step."
The Mahanoy Plane post office never did reopen, and the Postal Service apparently never went the next step of either finding a new location or initiating a discontinuance study. For the past year, the folks in Mahanoy Plane have had to drive over three miles to the Frackville post office to pick up their mail.
Last week, the people in Mahanoy Plane got some good news. (Video here.) They will soon see mail delivery again. The bad news is the mail will be delivered to several cluster box units in various locations in town. If there's ever a discontinuance study for Mahanoy Plane, it’s pretty clear how it will turn out. The local news item concludes, "Postal officials said the cluster boxes are here to stay and there is no chance that Gilberton will see its post office re-open."
Retroactively suspended in Evansdale
The post office in Evansdale, Iowa, has a curious history. Last year, the Postal Service closed this office after a discontinuance study led to a Final Determination. But then the Postal Service suspended the office —after it was closed. The case is currently before the PRC, and a couple of weeks ago, the PRC’s Public Representative and Elaine Mittleman, an attorney working for Evansdale, filed briefs with the Commission.
In April of 2011, the Postal Service announced that it planned to study the Evansdale office, a branch of the Waterloo office, for closure. In August, it issued a Final Determination to close the office on October 21, 2011. (The letter from USPS VP Dean Granholm announcing the Final Determination notes that the decision can be appealed to the “Postal Rate Commission.” The PRC hasn’t gone by that name since 2006, so apparently someone is living in a time warp.)
The mayor of Evansdale and a resident, Craig Chilton, each filed appeals with the PRC, but rather than waiting 120 days for the Commission to issue a decision (as required by CFR 241.3), the Postal Service closed the office, as planned, on October 21.
Additional briefs were filed during November and December 2011. Then in January 2012, the PRC issued one of its few remand decisions, sending the Final Determination back to the Postal Service for further consideration.
The main reason for the remand was that the Postal Service’s cost-savings analysis was flawed. The Postal Service said it would save the cost of employee salaries, yet it also said that the employees were simply being transferred to another facility. The Postal Service also said it would save the rent costs, but the lease runs until January 31, 2016.
Rather than re-opening the post office as a result of the remand decision, however, the Postal Service did nothing for nearly a year, from January 2012 to October 2012. Then in October, it issued a Revised Final Determination to close the office. This document is noteworthy for two reasons.
First, it states, “The Evansdale Branch is currently in suspended status and will be permanently closed after the implementation of this final determination.”
In comments filed last week with the PRC, the Postal Service explains that it did not in fact close the Evansdale post office while the appeal was being heard. The Postal Service points to a notice in the August 23, 2012 Postal Bulletin indicating that the Evansdale post office had been suspended as of November 5, 2011. Thus, says the Postal Service, at the time the appeal was being considered, the office was suspended, not discontinued.
The Postal Service thus retroactively suspended the Evansdale post office some nine months after it was closed, and apparently the only thing it did to announce the suspension was to place this note in the Postal Bulletin.
According to the USPS Discontinuance Guide (Handbook 101), a copy of the suspension notice is supposed to be put into the administrative record when the office is being studied for discontinuance, but there's no such notice in the record. In all of its submissions to the Commission when the case was first appealed, the Postal Service refers to the Evansdale post office as discontinued, not suspended.
The administrative record for the revised final determination was submitted on November 23, 2012, and it contains items dated as recently as October 31, 2012, so if the suspension took place on August 23, 2012, there should be a notice in the updated record. But the only reference to a suspension occurs in the new final determination issued on November 1, 2012. In a footnote added to the original record, the Postal Service notes that "the Evansdale branch was suspended after the posting date of the original final determination."
According to Handbook 101, the Postal Service is also supposed to notify customers when a suspension is going to occur and to explain the reasons. That never happened. The customers in Evansdale first learned of the suspension in a letter announcing the revised final determination sent to them on October 31, 2012 — a year after the suspension went into effect.
A second interesting fact about the revised final determination is how the Postal Service chose to respond to the Commission’s criticism of the economic analysis. The PRC’s remand decision observed that the projected annual cost savings failed to include rent payments for the four years left on the lease. In the Revised Final Determination, the Postal Service changed its cost-savings analysis from an annual calculation to a ten-year time frame.
Thus, while there may not be any rent savings through 2016, there will be an aggregate rent savings for the ten-year period. The PRC was obviously aware of this long-term outlook but still found sufficient fault with the cost-savings analysis to issue a remand. It will be interesting to see how the Commission handles things this time around.
Constructively closed in Tyner
The post office in Tyner, Indiana, was suspended in June 2011, but the Postal Service never got around to doing a discontinuance study, so the office has been in suspension limbo for a year and a half. For much of that time, the retail counter was shut down, but customers could still get access to their boxes. In August the whole office was closed. (There’s more on the Tyner post office here and here.)
At some point over the past year, the Postal Service installed a cluster box unit, and then earlier in December, it opened a Village Post Office in Tyner, at the French Corner Market. (By the way, the 100th Village Post Office in the nation opened in Linden, Indiana, on Wednesday, December 19.)
The Tyner closing was appealed to the PRC, and a few weeks ago, the Commission granted the Postal Service’s motion to dismiss the case because the office has been suspended and has not yet received a Final Determination. The Commission’s decision observes, however, that “it appears that the Tyner post office may have been constructively closed.”
That’s putting it mildly. The “status” of the Tyner post office is illustrated rather clearly by some photos the petitioner submitted with the appeal. They show the office completely abandoned and emptied out, and there’s one that shows the replacement for the post office — what the Postal Service describes as “a centralized delivery point at the Tyner Community Building.” In other words, a cluster box unit.
The Commission’s ruling directs the Postal Service “to clarify the status of this post office” by January 4, and on that date, the Postal Service sent the PRC a note saying that “Headquarters is in the process of reviewing the administrative record and will issue a final decision in the near future.”
Unfortunately, the Commission’s ruling said nothing about how and why the Tyner office was suspended in the first place. In August 2011, the Postal Service sent customers a letter stating that the Tyner postmaster had resigned on June 17 and “a noncareer clerk from the office has served as the officer-in-charge since that time.” Because of the vacancy, minimal workload, and the decline in mail volumes, “it was necessary to suspend services at the Tyner at the close of business on 6/18/2011.”
In other words, after the postmaster retired in mid-June, an OIC operated the office for six weeks, and in August the Postal Service retroactively declared an emergency suspension starting six weeks earlier because it couldn’t find anyone to run the office, even though there was an OIC running it at that very moment.
In any case, the reasons cited for the suspension are not consistent with the USPS handbook. Low workload, declining mail volumes, and a postmaster vacancy are not cause for an emergency suspension. They don’t even sound like emergencies.
A history of suspension problems
The Postal Service has been using lease problems to justify emergency suspensions for many years. In 1997, Congress became concerned about the abuses and asked the GAO to look into it. The GAO reported that from 1992 to 1997, there were 651 suspensions, almost half due to the termination of the post offices’ lease. Only 31 of the 651 ever re-opened.
In 2009, the PRC began an investigation of the suspensions and obtained a list from the Postal Service showing that between 2004 and 2009, 300 post offices had been suspended for building-related issues, at least half of them due to a lease problem. No final report was ever issued by the PRC, and the docket is still open (PI2010-1).
Last year, CBRE became the Postal Service’s exclusive real estate broker, in charge of sales and leases. CBRE has been driving a hard bargain in lease negotiations, so hard, in fact, that many lessors have come to the conclusion that the Postal Service isn’t really interested in renewing the lease at all. It’s just looking for an excuse to close the post office, and the lease issue is only a smokescreen.
Complaints about CBRE led the USPS Office of Inspector General to put a page on its website inviting comments about the USPS-CBRE contract, but no report has yet been issued, and the page no longer appears on the OIG’s website. (Apparently a report may yet be forthcoming.)
When it was working on its advisory opinion on POStPlan, the PRC expressed concern about the Postal Service declaring emergency suspensions due to the inability to find suitable staff and breakdowns in lease negotiations. The Postal Service replied that it “has no plan for using the lease negotiation process as a pretext to close Post Offices.”
The Postal Service may not have a written plan to use lease negotiations as a pretext to close post offices, but that seems to be what’s happening. Perhaps the PRC will return to its open docket on emergency suspensions, or perhaps the OIG will come out with a report on problems associated with the USPS-CBRE partnership. In the meantime, the emergency suspensions will continue.