July 13, 2012
Tomorrow will be the last day for the Southboro Station post office in West Palm Beach, Florida. The Postal Service is closing the office as an “emergency suspension” due to a “lease expiration.”
USPS Handbook PO-101 says the Postal Service has 90 days to find another location or to proceed with a formal discontinuance study, but according to the Palm Beach Post, all indications are that the post office is “closing for good.” It was hugs and farewells today at the post office, and a lot of unanswered questions.
Emergency suspensions were a topic of discussion earlier this week at a hearing of the Postal Regulatory Commission, where the Postal Service’s witness for POStPlan was being cross-examined. The plan to cut hours at 13,000 post offices doesn’t really have much to do with suspensions — it’s supposed to be about keeping post offices open, not finding a way to close them — so it was rather strange hearing suspensions come up so often during the hearing.
But suspensions were apparently on the mind of PRC Chairman Ruth Goldway because she had just had a meeting with representatives of the Association of United States Postal Lessors (AUSPL). The lessors wanted to express their displeasure with the contract the Postal Service signed last year with CB Richard Ellis to handle sales and leases (more on CBRE here).
Chairman Goldway said the lessors association told her that CBRE has been demanding a 20 to 30 percent rent reduction when a lease is renewed, plus an early termination clause that allows the Postal Service to cancel the lease with 30-days notice. The lessors are particularly disturbed by demands that they pay a commission to CBRE upon renewing the lease, even though commissions are typically paid only when a real estate agent finds a new tenant (webcast here, discussion at 3:20).
The AUSPL believes that in many cases, CBRE is not overly concerned if a lessor decides not to renew the lease under the conditions it insists on. That provides an opportunity for the Postal Service to declare an emergency suspension. It’s an easy way to close the post office — no need to worry about community surveys, town meetings, appeals to the PRC, and so on.
At the PRC hearing, Chairman Goldway asked the Postal Service to address the issue of lease negotiations and suspensions in the context of POStPlan. The Presiding Officer’s Information Request asks the Postal Service to describe its policies regarding lease negotiations and to explain what it plans to do to avoid suspensions when there are problems renegotiating leases at POStPlan post offices (POIR 5).
Emergency suspensions just keep on coming
The practice of using breakdowns in lease negotiations as the occasion for an emergency suspension has a long history. In 1997, Congress became concerned about the suspension issue and asked the GAO to look into it. The GAO report notes that from 1992 to 1997, there were 651 suspensions, almost half due to the termination of the post offices’ lease or rental agreement. Only 31 of the 651 ever re-opened.
July 11, 2012
Yesterday was the deadline for submitting initial briefs to the Postal Regulatory Commission on the Postal Service’s Mail Processing Network Rationalization (MPNR) plan to consolidate processing plants and relax service standards for First Class mail and periodicals.
The briefs summarize key points in the testimony and construct arguments for and against the plan. They give a good preview of where the Advisory Opinion is headed. Here’s an overview of these new and important additions to the PRC docket.
The Postal Service
The Postal Service’s brief is over one hundred pages, and nearly all of it is devoted to reviewing the case presented by its own witnesses. It begins by characterizing the Postal Service’s financial problems as an existential crisis. The very survival of the postal system is at risk:
“In the face of trends largely beyond its control, Postal Service management must implement measures that preserve the long-term viability and relevance of the national postal system. Simply put, this is no time for strategies founded on half measures and hope. Rather, it is a time for expeditious action that strikes a reasonable balance between historical service levels and the need to eliminate the excess mail processing and transportation capacity that is fueling the imbalance between revenues and operating costs.”
The brief proceeds to address the fact that the Postal Service has already implemented the service standard changes that the Advisory Opinion is supposed to review. The Postal Service reminds the Commission that an Advisory Opinion is “non-binding,” and it suggests that section 3661 of Title 39 (which establishes Advisory Opinions) should not be seen as “an invitation for the Commission to second-guess the judgment of postal management.”
Moreover, says the Postal Service, the Commission shouldn’t be spending months “reducing the cost or savings implications to the PRC’s own best estimate.” According to the Postal Service, it’s up to the Board of Governors to look at the numbers and make a decision. Only in a footnote does the Postal Service acknowledge that if there were fundamental flaws in its financial analysis, it might be appropriate for the Commission to point them out, but in this case, the Postal Service maintains, there are no flaws of such magnitude.
In any case, having already implemented the service standard changes under review by the PRC and having reminded the Commission that its advice is “non-binding,” the Postal Service says that it “greatly appreciates the potential constructive value that may be derived from the Commission’s exercise of its section 3661 responsibilities and will review and consider the Commission’s advisory opinion with great care when it is issued.”
July 9, 2012
The implementation schedule for POStPlan just got a little clearer. In a Q & A fact sheet posted today on the NAPUS website (available here), the Postal Service says the following:
“The PRC advisory opinion is expected August 23rd. Once the opinion comes back, Dean Granholm will lead the POSTPlan phased implementation. The POSTPlan implementation is expected to begin at the rate of approximately five offices per District, per week, starting with the vacant offices. The survey to the community will be done first, the survey results will be received, and then community meetings will be scheduled. The District Manager designee will go on site for the community meeting, they will receive the community’s feedback and recommendations regarding which path they want to take based on the three available paths. If the chosen path is the POSTPlan, Dean will work with the District to establish the level 2, 4, or 6 conversion date for the offices.”
The PRC’s official Procedural Schedule does not indicate when the Advisory Opinion will be completed, but given that the deadline for filing briefs is July 27 (unless the Postal Service decides to provide rebuttal testimony), the end of August is a reasonable expectation. In any case, it looks as though the PRC has notified the Postal Service to expect the opinion on August 23.
According to the summary spreadsheet provided by the Postal Service to the PRC, there are over 3,100 post offices on the POStPlan list with a postmaster vacancy. About 900 are being upgraded to Level 18, while 2,200 will be downgraded to Remotely Managed and have their hours reduced. A list of the 2,200 is here, and a map, here.
There are also about 4,000 postmasters retiring over the next three months. We don’t know yet how many of them work at POStPlan post offices, but let’s say 2,800. That's five thousand post offices without a postmaster. The Postal Service will begin the implementation process by reducing hours at these offices, probably starting with the 2,200 that have a current vacancy, then proceeding to those where the postmaster is retiring at the end of July, August, or September.
Since the 2,200 are already staffed by Postmaster Relief employees, the only savings for these post offices will come from reducing the hours. It probably comes to about $25 million a year — hardly worth the trouble for the Postal Service. A couple of thousand underpaid PMRs will see their hours cut by a third or half. They'll be the first to pay for POStPlan.
The implementation process will begin with a survey, then a community meeting. The community will be asked its preferences among "three available paths." Based on the Postal Service's presentation to the PRC, it's not quite clear how there are exactly three options. In the market research associated with POStPlan, there are five: (1) close your post office and go to another post office for services; (2) close your post office and set up a contract unit with a local business to run a limited service office; (3) close your post office and set up a contract unit with a local business to run a full service office; (4) close your post office and expand rural delivery; (5) keep your post office open with reduced hours.
As you can see, whether there are three paths or five makes no difference. There are really no options at all. It's just reduce the hours or close the post office.
The Postal Service will probably initiate the implementation process almost immediately after the Advisory Opinion is issued. It will go through the motions of a survey and community meeting to determine what everyone already knows — the community would prefer reduced hours to no post office at all — and then it will start reducing hours. It may take a few weeks for the postal bureaucracy to follow all the steps described in the appendix to USPS witness Jeffrey Day's testimony (p. 25), but we can expect to see the first POStPlan post offices with reduced hours in early October.
There are 74 USPS districts, so reducing hours at five a week would mean, on a nation-wide basis, 370 post offices per week. At that rate, it will take about 14 weeks to downgrade the 5,000 post offices without a postmaster.
That means all during October, November, and December, the Postal Service will be busy holding meetings and reducing hours and finding and training part-time workers to staff thousands of post offices. The Postal Service will suspend consolidations of mail processing plants from September through December because of the election and the holiday season, but management apparently thinks downgrading thousands of post offices won't be a problem.
POStPlan has been in production for over a year, yet somehow the Postal Service is going to release it at the worst possible time. Coming soon, POStPlan, the disaster movie.
July 7, 2012
When the Postal Service presented POStPlan to the Postal Regulatory Commission in May, it would not put a number on how much the plan would save, but the USPS press release said $500 million a year. The Commission asked the Postal Service to provide the calculations that led to this estimate, and the Postal Service submitted a spreadsheet showing how much it currently costs to staff 22,000 post offices, and how much it would cost if 13,000 of them were staffed with part-time workers and the hours of operation were reduced to match revenues (USPS-LR- N2012-2/6).
Using the average salary for postmasters at each level of post office (11, 13, 15, etc.), the spreadsheet estimates the total cost for labor under the current system at $1.66 billion a year. Under POStPlan, labor would cost $1.14 billion. That yields a net savings of $517 million. (There’s more about the cost savings calculations in this post.)
A couple of day ago, the Postal Service responded to a question about cost savings posed by the PRC's Presiding Officer, Nanci Langley: “In calculating the cost savings as shown in Library Reference No. 6, how does the Postal Service treat offices with a current Postmaster vacancy and which may be managed by (a) an Officer in Charge (OIC) and (b) a Postmaster Relief (PMR)?”
The Postal Service replied that the average used in the calculations was “an average of the salaries for Postmasters currently assigned to each of the respective levels. The Postal Service used this average salary for offices with an OIC or PMR covering the assignment.” (POIR 4-6)
In other words, the Postal Service based its cost-savings estimate of $500 million on calculations that average the salaries of postmasters, without taking into consideration the fact that in over 3,000 POStPlan post offices, there is no postmaster. Instead, there’s a non-career employee who earns a half or third as much. The savings from using these PMRs have therefore already been realized, and they are not part of the savings for POStPlan. By not counting PMRs, the Postal Service has significantly overstated the cost of labor under the current system. The $500 million figure thus overestimates the savings by a considerable amount.
The PRC, or one of the participants in the Advisory Opinion process, may ask the Postal Service to provide a revised cost savings estimate using the actual salaries of employees at the POStPlan post offices. While we wait for the results, here’s a rough estimate of how including PMRs will affect the cost savings analysis.