Postal Service to La Jolla: Sorry, the dismantling must go on

July 6, 2013

The Postal Service has issued a Final Determination to relocate retail services in La Jolla, California, thus paving the way for the eventual sale of the historic New Deal post office.  Tom Samra, Vice President, Facilities, was responsible for reviewing the appeals, and not unexpectedly, he came to the same decision that he made regarding the relocation of the Bronx GPO: the objections to the relocation “do not outweigh the financial exigencies facing the Postal Service.”  (Mr. Samra's Final Determination is here.)

Leslie Davis, chair of a task force trying to stop the sale of the landmark post office, did not mince words about her view of the Postal Service's decision.  "The USPS has behaved like an arrogant bully," she said.  "They have been dismissive, aloof, secretive and cocky. The resources of time and money they've spent on their misinformation campaign regarding their finances have succeeded, and 'the people' never stood a chance.  Realtors at CBRE will continue the sell-off of these real estate assets that once belonged to all Americans but somehow were handed over in a silent act of greed."

Mr. Samra’s Final Determination indicates that appeals were received from several elected officials and community organizations: Congresswoman Susan Davis, Congressman Scott Peters, Mayor Bob Filner, Councilmember Sherri Lightner, the Save Our La Jolla Post Office Task Force, the La Jolla Historical Society, the La Jolla Village Merchants Association, as well as a number of other individuals. 

One might think that with such important people and organizations opposing the relocation decision so vehemently, the Postal Service could look for other ways to save a few dollars and bring in some revenue, but postal management will not change course, no matter what.

Several of the appeals pointed to the Postal Service’s failure to follow federal statutes and regulations regarding the disposal of historic properties.  That’s been the case with most of the other historic post offices that have been closed, relocated, and sold, but the Postal Service has continuously maintained that it is following the law.   That claim, dubious as it is, can only be challenged in federal court. 

USPS: A wholly owned subsidiary of Mailers Inc.

June 27, 2013


I am a card-carrying member of the DAV — Disabled American Veterans.   The organization has been a wonderful source of support over the years and does fine work on behalf of veterans.

So I was disappointed to discover DAV on the membership list of PostCom, the postal lobbying association that represents businesses and organizations that use the mail for business and commerce.   PostCom has been a vocal advocate for cheap mail rates, which come at the expense of Postal Service employees, consumers, and communities.

PostCom recently released a white paper on postal reform.  The paper offers nine principles that the Board of Directors of the lobbying group feel should be the basis of future postal reform.  The paper reads like a Christmas wish list from an industry that already enjoys healthy profits. 


Postal reform, the PostCom way

The first three principles, presumably the most important given their place at the top of the list, directly attack the wages and benefits of postal workers: pull postal workers from their federal health care program, allow the Postal Service to offer a defined contribution retirement plan instead of FERS, and require arbitrators in labor disputes to consider the Postal Service’s fiscal position.  The remainder of the proposals — like giving the Postal Service authority to reduce the days of delivery — place the interests of PostCom and its members above those of the American public generally.

Over the last several years PostCom and its executive director Gene Del Polito have consistently taken positions that seek to solve postal issues at the expense of postal workers.  They have advocated for the end of postal participation in FEHB — an idea that was debunked by, of all places, the conservative AEI, in this testimony before Congress in 2012.  They would also like postal workers to be withdrawn from the current federal retirement system, and they would like to tilt the collective bargaining process — a process that already restrains labor and mandates arbitration — in ways that would ensure unfair disposition of labor issues.

Del Polito and PostCom have taken the position that their members — they call themselves the “stakeholders” — should have preferential treatment when it comes to postal issues.  In their view cheap mailing rates are the only reason for the existence of the Postal Service.  They acknowledge no role of public service, no greater mission of binding the nation together, and no activity other than the distribution of advertising mail for the Postal Service.  In service of this laser-like focus on cheap preferential rates for their members, they have advocated beggaring the workforce, service reductions for first class mail, and the removal of essential services and infrastructure from America’s communities.

In some ways PostCom is no different than any of the industry lobbying groups that exist to lobby on their members’ behalf, such as the Affordable Mail Alliance, a group of 700 publishers, direct mailers and non-profits; the Alliance of Non-profit Mailers; and various trade associations like the National Newspaper Association.  In fact, many of these groups have members in common with PostCom, although many of them do not publish a list of their participating members as PostCom does. 

What all these groups have in common is the conviction that their financial interests not only supersede but essentially extinguish any other interests in the American postal system.  Even when PostCom offers proposals that might coincide with others’ interests — for example, the return of overpayments into the various retirement systems — their arguments are wholly self-centered and self-interested.  In their view, those overpayments are their money and should be returned in the form of even lower rates. 


Brands at risk: The OIG looks at the USPS-CBRE contract

June 23, 2013

The USPS Office of Inspector General has just issued an audit report about the Postal Service’s contract with CB Richard Ellis.  CBRE became the Postal Service's exclusive real estate agent in June 2011.  Considering that the Postal Service leases 24,000 properties and owns 9,000, that's a big portfolio to manage, and outsourcing to CBRE was a big step.  

The OIG's report, “Contracting of Real Estate Management Services,” identifies three areas of concern in the relationship with CBRE: conflicts of interest, no maximum contract value, and a lack of oversight.  “As a result,” writes the OIG, “it is difficult for the Postal Service to determine whether the outsourcing effort has been or will be effective in reducing costs.” And it's not just about costs.  “Ineffective contract oversight," says the OIG, "poses an increased risk to the Postal Service’s finances, brand, and reputation.”

(The OIG also issued a report recommending that the Postal Service stop contracting work to Accenture, an information technology and consulting firm that's one of the Postal Service's largest contractors, because of the risk of fraud.  More on that another day.)

The Postal Service’s contract with CBRE has become the subject of considerable controversy.  Postal lessors — the people who own the 24,000 properties housing post offices — have complained about various aspects of the new arrangement, including the commission they must pay CBRE when leases are renewed.  CBRE is also the Postal Service’s real estate agent for the sale of postal facilities, so it’s been targeted by critics for its role in the sale of historic post office buildings.  The fact that the Chairman of CBRE’s Board of Directors is Richard Blum, husband of California Senator Dianne Feinstein, has fueled the controversy.

The OIG report is fairly critical of the USPS-CBRE contract, but the Postal Service and CBRE get off easy.  The OIG doesn’t get into the lessors’ complaints, the sale of historic post offices, or the Blum-Feinstein connection.  The report could have been a lot worse.  Here’s a summary of what’s in it — and what’s not.


The wrong incentive

The OIG identifies two aspects to the conflict-of-interest issue.  The first is the fact that CBRE gets a commission when it negotiates a lease renewal on behalf of the Postal Service.  The commission is a percentage of the amount of the lease, so CBRE has an incentive to negotiate a higher rent — good for the lessor, bad for the Postal Service. 

Because of the Postal Service’s financial situation and the changing landscape in the commercial real estate market over the past few years, the Postal Service has been pushing for lower rents.  The OIG notes that the Postal Service established a target for reduced lease rates, but in the first year of the contract CBRE did not meet the target.  The implication is that CBRE had little incentive to meet the target because it benefited by higher rents.

It’s hard to know what to make of this criticism.  The lessors have been complaining that the Postal Service has been pushing too hard for lower rents when negotiating lease renewals.  Sometimes the Postal Service wants a reduction of 20 or 30 percent or even more, and there are often other demands, like an early termination clause or making the lessor responsible for maintenance costs or building improvements that the Postal Service had previously paid for. 

In response to a draft of the OIG report, Mr. Tom Samra, USPS Vice President of Facilities, explains that there’s nothing to this conflict-of-interest criticism.  CBRE provides the market data used to determine the value of the rental property, and Postal Service real estate specialists review the data.

The OIG’s point is still valid, and one wonders why the Postal Service thought it was a good idea to turn lease negotiations over to an outside contractor who benefits from having the Postal Service pay higher rents.  Mr. Samra’s letter does not respond directly to this concern.


Betrayal without remedy: The unwinding of the Postal Service

June 17, 2013


The United States Postal Service is not a corporation in the traditional sense of the word, but that hasn’t stopped its leadership — the folks at L’Enfant Plaza and the men and women who sit on the Board of Governors — from viewing it primarily as a corporate entity.  The post office is in the Constitution, but that hasn’t stopped some members of Congress from trying to undermine the idea of postal services and the postal network as basic fundamental infrastructure.  The Postal Service is supposed to serve the entire country, but that certainly hasn’t stopped the companies and industries that see themselves as the primary stakeholders in the postal system from demanding a more corporatized structure and mission that will serve their narrow interests.

Since the beginning of the country’s postal system, there have been voices chattering for privatization.  The Postal Reorganization Act of 1971 represented a major step toward that goal, and the 2002 Transformation Plan was another leap forward.  It demonstrated that the leadership of the Postal Service clearly prefers something akin to a privatized corporate entity.  In recent months, several think tanks have jumped on board with white papers advocating privatization, including a study reviewed by NAPA and a recent paper by Robert Atkinson, “Postal Reform for the Digital Age.”  At this point, talk of privatization has become mainstream in a way unimaginable just a few years ago.

We are now witnessing a postal passion play brought to us courtesy of the national media.  It features constant reports of staggering financial losses (sometimes including a reference to the retiree healthcare payments mandated by the 2006 PAEA), Pat Donahoe’s “woe is me — disaster is just around the corner” spiel (usually followed by an announcement of some further cuts to the network or services), and recriminations directed at Congress for not getting out of management’s way (as if giving management more freedom would solve anything).  The main storyline has been that the Postal Service is an inefficient (albeit beloved) government entity that is saddled with a bad business plan and impossible future liabilities, but it’s not beyond repair, if only those who know better were given the power to fix it.

That’s not the real story, though, and it never has been.  The real story is just beginning to come into focus: The leadership of the Postal Service, using the laws already in place, is engaged in their version of that most American of economic phenomena — the leveraged buyout. 

While publicly everyone involved has seemed intent on “saving” some semblance of the United States Postal Service, its leadership, egged on by some in Congress and many in the private arena, has managed the situation like a private equity firm that’s focused on extracting value out of an entity and bringing it to bankruptcy as a means of escaping past promises and contracts.  The story is nothing less than a new twist on the piracy of corporate raiders — this time with serious implications with respect to the very fabric of the social contract that developed after the Great Depression.

The unions and employee groups have focused on efforts to staunch the bleeding, the various industries that are dependent on the postal network have lobbied for the maintenance of preferential rates, and politicians have focused on photo ops and tough talk about creating a sustainable business model.  They are all focused on their own interests and seem unable to see that the demise of a great national institution is at hand.

This demise has nothing to do with a failed business model or a changing landscape where digital surpasses outmoded technologies.  The fall of the Postal Service is about the coming triumph of a resurgent ideology, an ideology that has led to countless financial panics, the abuses and inequality of the Gilded Age, and the Great Depression.  What is happening to the Postal Service is one piece of a greater puzzle.

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