January 1, 2014
BY MARK JAMISON
Here’s a resolution for the New Year: Support the people’s post office.
That means working to preserve an essential national infrastructure and rejecting initiatives to dismantle it, like closing post offices and cutting window hours, delivering the mail fewer days of the week, and converting customers to cluster boxes.
It means working to ensure that the post office continues to be a good place to work — with job security, decent wages, and good benefits — and remembering that the post office provides jobs to thousands of veterans, minorities, the disabled, and women.
It means doing your postal business at your local post office, not some Village Post Office or the postal counter in Staples, and it means challenging workshare discounts, outsourcing, and all the other forms of piecemeal privatization.
It means demanding more transparency in how the Postal Service conducts its business, questioning secret negotiated service agreements, and taking the universal service obligation seriously.
Supporting the people’s post office means fighting back against those who want to plunder and corporatize the Postal Service for their own self-interest and use it as a tool for enhancing their wealth at the public expense. And it means calling out those who care more about the postage rates they pay than the health of the postal system and the good of the country.
The rate increase
Later this month postal rates are going up by 6 percent. That may make things hard on some mailers, like community newspapers, news magazines, and non-profits. But the Great Recession has taken a huge toll on the Postal Service, and the rate system is set up to permit such increases when "exceptional circumstances" require it. The Postal Regulatory Commission therefore determined in 2011 that an exigent rate increase was justified. It was just a matter of how big or small it would be. It turned out to be very small indeed.
The Postal Service presented convincing evidence showing that from 2008 through 2014 the recession had cost it nearly $40 billion in profits, which easily justified the 4.3 percent increase it was seeking. (Another 1.7 percent increase was already permitted under the price cap.) That increase would have generated about $1.8 billion a year, money that could have been used to maintain and improve the postal infrastructure.
The mailers argued that the recession had cost the Postal Service more like $1 billion, not $40 billion, and they thought a one percent increase for just two years would be sufficient. That would have generated only about $700 million and done almost nothing to help the Postal Service’s financial situation.
In the end, the Commission granted a 4.3 percent increase for about 18 months, or until the increase has generated $2.8 billion. That may help address the liquidity problem, but it won’t do much to help maintain the postal system.
The ruling was obviously much closer to what the mailers were willing to give than what the Postal Service was asking for, so the mailers came out fine. They weren’t satisfied, though, and they immediately started complaining.
December 29, 2013
There were a couple of interesting developments this week in the story about how the Postal Service and its real estate broker CBRE are handling post office lease deals and the sales of postal properties.
On Christmas Day, the USPS Office of Inspector General posted a solicitation notice looking for a supplier to do an analysis of the fair market value of postal properties that have been sold and of properties currently leased by the Postal Service. The OIG appears to be launching an investigation (or expanding one already underway) into the central question raised by Peter Byrne’s new book on the sale of postal properties: Are the properties being sold for less than market value, often to businesses with friendly relationships with CBRE?
On another front, news media in Princeton, New Jersey, are reporting that a buyer has been found for the historic Palmer Square post office. While the sale price has not been revealed, the buyer is LCOR Ventures, which appears to be a spinoff of LCOR Inc., a large real estate company that has done several big deals with CBRE in the past. That coincidence may raise some eyebrows at the OIG.
The OIG contracts out
The OIG's solicitation notice was posted on FedBizOpps.gov on December 25. It says that the OIG is looking for “a supplier who possesses specific subject matter expertise in the area of fair market value of properties.” The notice indicates that the OIG is looking at both properties that the Postal Service leases for its post offices and the owned properties it has been disposing of. As the solicitation states, the supplier will “assess the fair market value of recently disposed U.S. Postal Service owned properties and conduct an analysis of fair market rent for markets nationwide.”
The notice explains that CBRE is the Postal Service’s exclusive real estate broker and responsible for negotiating leases and selling properties. “We would like the Supplier to perform reviews of the appraisals in order to ensure they were representative of the fair market value.”
Proposals from suppliers are due on January 10. The OIG will issue decide who to hire on or before February 10, 2014. The OIG wants the report within thirty days of the tasking date, so the OIG would have the results sometime in March.
The OIG’s website currently contains nothing about an audit into the fair-market-value question like this, so it’s not clear what the context of the solicitation notice is. It’s possible that the OIG is expanding the scope of an audit currently underway that’s looking into the preservation and disposal of historic post offices. Or it may be that the OIG is starting a new audit on the market value issue and has simply not posted anything about it on the website yet.
In all likelihood, the OIG solicitation notice came as a result of allegations made in Peter Byrne’s new book, Going Postal: U.S. Senator Dianne Feinstein’s husband sells post offices to his friends, cheap. Byrne documents numerous instances in which CBRE sold postal properties at below market value. In some cases the buyers were CBRE’s clients and business partners. The fact that the chairman of CBRE Group Inc. is Richard C. Blum, husband of Senator Dianne Feinstein, has given Byrne’s story a lot of attention, including this article in the L.A. Times. (There's a list of the properties Byrne researched here, along with a few more.)
Standard Mail slows down: The Postal Service requests an advisory opinion on load leveling DSCF mail
December 27, 2013
The delivery of a large portion of Standard Mail is about to slow down. Today the Postal Service submitted a request for an advisory opinion to the Postal Regulatory Commission concerning a change in service standards for DSCF Standard Mail.
DSCF discounted mail is mail that’s been presorted and prepared according to postal regulations and then entered at one of the 350 Destination Sectional Center Facilities in the country for delivery within the service area for that particular DSCF.
Under current standards, this mail is delivered within three days. Monday is the expected delivery date for DSCF mail entered on Thursday and Friday, which are two of the three busiest days for such mail. The Postal Service wants to level the load and more evenly distribute the DSCF mail throughout the week. Standard mail entered on Friday would be delivered on Tuesday instead of Monday, and mail entered on Saturday would be delivered on Wednesday instead of Tuesday.
DSCF Standard Mail represents approximately 62 percent of all Standard Mail and about 32 percent of overall mail volume. Judging by a chart provided by the Postal Service, it appears that about forty percent of DSCF Standard Mail would be impacted by the proposed changes. That means delivery for about 25 percent of Standard mail would slow down by a day.
The Postal Service plans to implement the changes on March 27, 2014, which is 90 days after the filing of the request, the soonest date possible according to federal regulations. The changes won't come as much of a surprise to many mailers, since postal management consulted with the Mailers Technical Advisory Committee (MTAC) about the plan back in April 2013.
The request an advisory opinion is here. The docket also contains testimony from a manager of processing operations about the details of the plan and from a district manager about how tests of the load leveling have worked out so far.
(Photo credit: SCF in Kearny, New Jersey)
December 24, 2013
The Postal Regulatory Commission has approved the Postal Service’s request for an exigent rate increase of 4.3 percent, but only for about 18 months to two years, however long it takes to recoup $2.8 billion in lost profits. In the short term, the increase will help deal with the low liquidity problem, but it will not fully address the long-term effects of the Great Recession. (The ruling is here; the press release is here.)
The decision will come as something of mixed bag for both sides. The Postal Service will be happy that it got the full 4.3 percent increase, and the mailers will be happy that it’s for less than two years. Whether dissatisfaction with the results will lead either side to go to the U.S. Court of Appeals remains to be seen, but here's a New Year's prediction. The mailers will take the decision as a victory, and the Postal Service will take it to court.
The ruling was not unanimous. There are currently only three Commissioners (the other two positions are awaiting Senate confirmation), and the vote went two-to-one, with Commissioner Robert Taub dissenting. His opinion argues that the Commission has itself “failed to reasonably measure both the volume loss due to the Great Recession and the continuing financial harm to the Postal Service caused by that volume loss.” Commissioner Taub thus disagrees with his colleagues’ decision to make the increase just temporary. He would have made it permanent.
The Commission found several flaws with the Postal Service’s econometric analysis about how much volume and revenue were lost due to the recession as opposed to other causes like electronic diversion, so it came up with its own analysis. The Commission estimates that 25.3 billion pieces were lost between 2008 and 2011 as a result of the Great Recession, which equates to $2.8 billion in 2014 contribution (profit).
The Postal Service, on the other hand, had estimated a total volume loss of 190 pieces for the five-year period, with a total contribution loss of $22 billion. It sought a permanent rate increase that would have brought in $1.8 billion in annual contribution. Looking ahead, say, ten years then, the Postal Service was asking for roughly $18 billion, and it got less than $3 billion.
The Commission’s estimates of lost volume were far, far less than what the Postal Service came up with, but they were still substantial enough to justify at least a temporary rate increase, particularly considering the agency’s dangerously low liquidity level.