Post office in Hinkley, CA to close: What would Erin say?

March 14, 2015

The Postal Service is closing the post office in Hinkley, California, on March 20 for an emergency suspension.  According to the local news report, the building housing the post office is being sold to Pacific Gas & Electric.  Hinkley's only gas station and market are also in the building, and they'll be closing too, so this will be a big loss to the community.

While it’s possible that the Postal Service will eventually find a new location in Hinkley, that doesn’t appear likely.  The news report says PG&E offered to help find another location, but the Postal Service is installing a cluster box unit instead, and it has told residents that if they need to do business at a post office, they’ll have to drive over 14 miles to Barstow. 

Hinkley is a small, unincorporated community in the Mojave Desert, with a population of about 1,900 (as of 2000).  The new owner of the post office building is not just any business in town, and one wonders why PG&E wanted to buy the building in the first place.

According to the Wikipedia article, Hinkley is the location of a compressor station for PG&E's massive natural gas transmission pipelines.  Between 1952 and 1966, the water used to cool the compressors contained hexavalent chromium to prevent rust in the machinery. The water was stored in unlined ponds and ultimately contaminated the groundwater in the area.

Residents of Hinkley filed a class action suit against PG&E, which resulted in a multi-million-dollar settlement in 1996.  

If any of this sounds familiar, it’s probably because the legal case was the subject of Erin Brockovich, the 2000 film starring Julia Roberts.

Unfortunately, the legal settlement wasn't the end of the story.  The cleanup of the underground plume of contaminated water is still going on, and the plume is apparently just getting bigger.

Regarding the closing of the market and post office, PG&E issued a statement saying, "PG&E understands that the market is an important part of the Hinkley community, and that it will be missed by many Hinkley residents. PG&E remains committed to working with Hinkley residents on other community-focused initiatives.”

The letter PG&E wrote the Postal Service gives March 24 as the date for vacating the building.  Coincidentally enough, that’s also the date that the Postal Service’s lease on the space ends.

More than likely, then, the Postal Service knew long ago that it would not be renewing the lease, so it it’s not clear why residents are being informed just one week before the post office is closing. 

For those who can't make the long drive to Barstow, the Postal Service says that they can have stamps mailed to them by making orders on the U.S. Postal Service website at www.usps.com.  

(Photo credits: Hinkley market and post office (Google street views); Julia as Erinmailboxes in Hinkley)

Things are looking up: The Postal Service's financial report for January 2015

February 26, 2015

The Postal Service released its financial statement for January 2015 yesterday.  It shows that for the first four months of Fiscal Year 2015 (Oct. – Jan.), the Postal Service posted a $1.325 billion profit in Controllable Operating Income.  That’s compared to a $912 million profit for the same period last year (SPYL).

During this period, the Postal Service owed $1.9 billion to the Retiree Health Benefit Fund (RHBF) and $1.496 billion for an adjustment to its Workers Compensation fund due to “the impact of discount and inflation rate changes and the actuarial revaluation of new and existing cases.”  There were also some income and expenses associated with interest.

All told, the net loss so far in FY 2015 is $2.125 billion, compared to $1.38 billion for the same period last year.  The main source of the difference was the Workers Comp adjustment, which was only $336 million last year at this time.

The news reports will of course say that the Postal Service has lost over $2 billion so far this year.  A few of them may mention the $1.3 billion profit in “controllable” income.

The report also has some good news in terms of mail volumes.  In January, First Class volumes were actually up 1.4 percent compared to last January, and for the year so far, they’re down only 0.5 percent.  Perhaps the steady slide of about 4 percent a year has come to an end, and volumes have found their “new normal.”

On the other hand, the numbers on First Class mail need to be taken with a grain of salt.  As the report notes, “Actual Vs. SPLY for revenue and volume may not be comparable due to a large PIHOP adjustment that occurred in Jan-14 related to a price increase.”  That refers to the effect of Postage in Hands of the Public, i.e., Forever stamps purchased prior to the effective date of the exigent surcharge.

Standard mail volumes are up 2 percent for the year so far, periodicals are down 5.3 percent, and shipping and package services are up 11.1 percent.  Total volumes are up 0.8 percent so far.

Revenues are also doing well, thanks largely to the exigent rate increase that went into effect a year ago.  First class revenues are up over 4 percent, Standard mail revenues are up 2 percent, and total mail revenues are up 3.8 percent.

As we suggested in a post back in November 2014, it appears that the exigent rate increase has not had the disastrous effect on mail volumes that some opponents of the increase predicted.  That may be because the increase is only temporary (it ends sometime this summer), or perhaps improvements in the economy have helped out the mail.

Whatever the explanation, mail volumes for FY 2015 look to be better than the Postal Service was projecting in September 2013, when it presented testimony to the Postal Regulatory Commission.  At that time, the Postal Service was seeking a permanent 6 percent rate increase — 1.7 percent for the CPI increase and 4.3 percent for the exigent increase.

The following table compares the projections from 2013 with what has actually happened.  

Beware of false assumptions: The OIG looks at the Postal Service's "unfunded liabilities"

February 17, 2015

The USPS Office of Inspector General has just released a new report about the Postal Service’s unfunded liabilities for its pension and retiree health benefit funds.  It's entitled "Considerations in Structuring Estimated Liabilities."  As with previous OIG reports on the topic, the Inspector General suggests that concerns about unfunded liabilities are way overblown.  

The OIG’s report provides a refreshing reminder that the Postal Service is actually in very good long-term financial condition and certainly not in the dismal shape that critics claim — or, for that matter, as maintained by the new Postmaster General, Megan Brennan, who said recently, "“Our current financial situation is untenable when you consider that we have 35 cents in assets for every dollar of liability."  

The OIG shows that the estimates of the liabilities, which are done by the Office of Personnel Management, are based on highly uncertain assumptions that have inflated what the Postal Service owes.  In addition, Congressional mandates that the obligations be funded at 100 percent are unreasonable and unique to the Postal Service.  Plus, the Postal Service's assets are considerable — and significantly more than the PMG seems to believe.

The report may be intended to refute one of the points made in a recent GAO report that put the Postal Service on the GAO’s High Risk list.  In addition to the decline in First Class mail volumes and annual deficits, the GAO says the Postal Service is high risk because of $102 billion in unfunded liabilities — $87 billion in liabilities for retiree health benefits, pensions, and workers’ compensation liabilities, plus $15 billion in outstanding debt to the Treasury.

The OIG’s report shows that there’s much more to the liability story than the GAO acknowledges.  The OIG makes three basic points:

1. The current estimate for long-term pension and healthcare liabilities is about $404 billion.  The Postal Service has already set aside $335 — 83 percent of the liabilities.  The pension plans are nearly 100 percent funded, and the retiree healthcare liability is 50 percent funded.  All these funds are doing much better than comparable funds in other parts of the federal government.

2. The three funds are unfunded by about $86.6.  The Postal Service owns real estate assets with a fair market value close to $85 billion, which could be sold to cover the liabilties.  That's not likely to become necessary, but it shows how misleading it is to cite liabilities without mentioning assets.

3. The liabilities are calculated based on estimates that involve variables that can change in ways that would make the liabilities smaller. 

For example, the low interest rates we’ve witnessed over the past few years significantly skew long-term assumptions.  If interest rates were to go up just 1.25 percent, the unfunded liabilities would be reduced by $72 billion and 85 percent of the liability would disappear.

If postal retirees were required to participate in Medicare, the retiree healthcare liability would drop from $98 billion to $55 billion, and the fund, which currently has $49 billion, would be fully funded as is.

If the liabilities were calculated using demographics specific to postal workers — rather than using demographics for all federal employees (which is how the OPM does the estimates) — the liabilities would be reduced by $8.5 billion.

The OIG summarizes these points in the following chart. 

Sale of historic Princeton post office moves forward

February 14, 2015

The sale of the historic Palmer Square post office in Princeton, New Jersey, is moving forward. 

Earlier this week the Princeton Packet revealed that the post office would be relocating a few blocks away to a former West Coast Video building on Nassau Street.  The Postal Service will share the leased property with a 7-Eleven.  The move will take place once the sale is completed and the new location is made ready for business.

As we reported back in December 2013, the sale of the Palmer Square post office has been in the works for a long time, at least since 1997

According to an article in Planet Princeton, the Postal Service completed a study and informed postal workers and elected officials of its plan to sell the building back in September 2011.  Letter carriers and other operations were moved to other locations back that same year.  A public meeting about the relocation was held in December 2011, but it didn’t mean much since a decision to sell the building had been made long before.

The sale was initially blocked by the Historic Preservation Office, a branch of the New Jersey Department of Environmental Protection.  According to an item in the Jersey Journal, the Preservation Office “believed the Postal Service had not taken adequate steps to ensure its history was preserved.”

That obstacle has apparently been overcome, and, as news reports revealed in December 2013, the building is being sold to a company called LCOR Ventures, based in Oakland, California.

When we reported on the story in 2013, we examined the connections between LCOR Ventures in Oakland and LCOR, Inc., a large real estate investment and development company based in Berwyn, Pennsylvania, an hour's drive from Princeton.  It was difficult disentangling the two companies.  

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