PRC cases

The Postal Service shares some lists: Closures, Suspensions, VPOs, CPUs, and Retail Channels

January 18, 2013

Yesterday the Postal Service provided the Postal Regulatory Commission with some lists and other material for the annual compliance report.  They include the post offices that were closed and suspended during fiscal year 2012 (October 1, 2011 to September 30, 2012), as well as information about retail revenue sources and Contract Postal Units (CPUs) and Village Post Offices (VPOs).

You can download the lists from the PRC website here.  To make access simpler, we’ve posted the lists on Google Docs, where you can see them in the original spreadsheet form but also as tables and maps.

Post Offices Closed in FY 2012
Post Offices Suspended during FY 2012
VPOs in operation as of 9/30/2012
CPUs and CPOs at end of FY 2012


Retail Revenue Channels

The Postal Service has provided a table that shows the sources for retail revenues.  Because the big mailers are not considered “retail," the retail revenues account for only a portion of the agency’s total revenues — about $17 billion out of $65 billion.  The big mailers take their mail to pre-sort companies or directly to USPS Bulk Mail Entry Units.  “Retail” therefore applies to the average customer — individuals, small businesses, etc.

The following table indicates the “channels” through which the Postal Service takes in its retail revenues.

FY2012 Revenue (in $ millions)
Share of Total Retail Revenue
Change from FY2011
Post Offices (WIR)
PC Postage
Stamps Only Sales by Retail Partners
Automated Postal Centers (kiosks)
Stamps by Mail/Phone/Fax
Contract Postal Units
Total Retail Revenue

The Postal Service likes to say that people aren’t using the traditional brick-and-mortar post office like they used to, but the traditional post office continues to be the main source of retail revenue.  As the table shows, while post office retail is down 3.6% since last year, post offices still account for over 60% of retail revenues

The only significant source of retail revenues aside from the post office is PC Postage, which refers to vendors and authorized providers who print their own shipping and postage labels, such as Click-N-Ship, PayPal Ship Now, eBay's Shipping Label, and Dymo Stamps.  Retail revenues from PC Postage have naturally increased along with the rise of e-commerce — and thanks to promotional efforts by the Postal Service.

Stamp sales by retail partners account for a mere 7 percent of retail revenues.  That’s despite the fact that there are about 32,000 post offices (not including contract units) and over 63,000 retail partners.  Plus, revenues from those partners are virtually flat since last year, with an insignificant increase of 0.2 percent — despite all the effort the Postal Service has put into its USPS Everywhere campaign. 

In fact, now when you go to the USPS “find locations” page, the default for “location types” is not post offices, but “post offices and approved postal providers.”  The Postal Service is doing everything it can to encourage customers to look for alternatives to its network of post offices.

It will be interesting to see how post offices revenues fare over the next couple of years as hours are reduced at 13,000 small rural post offices and larger urban offices are relocated to inconveniently located annexes.  


What were you thinking, Mr. President? Obama nominates Hammond to the PRC

December 2, 2011

On Friday the White House announced that President Obama was nominating Tony Hammond as the fifth commissioner on the Postal Regulatory Commission (PRC).  No offense to Mr. Hammond, but that’s probably not good news for communities trying to save their post office or processing plant, and it’s not good news for postal workers either. 

The PRC is supposed to have five commissioners, but for months now, there have been only four, and we’ve been waiting to hear who the President would nominate to fill out the term of Commissioner Dan Blair, which runs to November 2012.  According to US Code, "Not more than three of the Commissioners may be adherents of the same political party."  Currently there are two Democrats — Ruth Goldway and Nanci Langley — and two Republicans — Mark Acton and Robert Taub.  Obama could have appointed a Democrat, but instead he chose Hammond, a Republican. 

It’s not that Hammond is ill equipped to be a Commissioner.  He was on the PRC from 2002 to 2010, and he served twice as its Vice-Chairman.  He obviously knows the ropes.

Still, with all those years on the PRC, you wouldn’t say Hammond brings a fresh perspective to the Commission, and he is definitely hard-core Republican.  For much of his career, he was a Republican political operative.  From 1989 to 1994, he was the director of the Missouri Republican Party, and in 1998 he was Director of Campaign Operations for the Republican National Committee.  Hammond was involved with postal matters during the ten years he served on Capitol Hill on the staff of Southwest Missouri Congressman Gene Taylor, the Ranking Member of the Post Office and Civil Service Committee.

Hammond also learned about the Postal Service when he worked as the VP of a direct marketing business.  That experience has probably given him a particularly sympathetic understanding of issues facing direct marketers, who play a big role in influencing postal policies, rates, and so on. 

Politics shouldn’t matter in PRC decisions, but they do.  Since Commissioners perform in a manner similar to judges, they are supposed to make rational decisions based solely on the evidence, independently of their politics.  But as we’ve seen with the Supreme Court, justices are human and inevitably influenced by their political persuasion. 

Nothing’s more political than postal business.  Efforts to downsize the Postal Service are greeted with applause by anti-government, anti-union Republicans, while Democrats have shown more interest in protecting postal jobs.  Since Republicans don’t like government regulation of business, they’re less inclined to favor a strong role for the PRC than Democrats might be.

But the Postal Service is not a private business, and postal politics often make strange bedfellows.  In the case of the exigent rate increase, for example, the mail industry actually found itself — at least for a moment — siding with the PRC when it turned down the Postal Service’s request for a rate hike last year. 

Preserving post offices is another unique case.  Elected representatives on both sides of the aisle have been hearing it from their constituents about post office closings.  That’s why proposed legislation coming out of a bipartisan committee in the Senate has an amendment that would make it harder to close rural post offices.  

The consolidation of processing plants is yet another case where geography often matters more than politics.  Many Republicans, who generally favor cost-cutting measures like closing plants, have been fighting to save the plants in their districts.  

Generally speaking, though, Republicans are pushing harder than Democrats to make the Postal Service act “like a business” rather than a public service.  The bill that comes out of the Republican-dominated House will give the Postal Service much more power to close post offices and slash jobs than the Senate version.  It’s Republicans who want to see the the union workforce drastically reduced in size and power, and there aren't many Democrats talking about privatizing the Postal Service.  

With a Republican-dominated PRC, it’s hard to imagine many appeals on post office closures winning a “remand” decision.  It’s been hard enough getting a victory with two Democrats and two Republicans.  Of the last twenty decisions, just two were remanded, and only Chairman Goldway has issued dissents from decisions to affirm the closing. 

You can get an idea of how Hammond feels about remanding decisions by looking at the dissenting opinion he co-authored on the case of the post office in Rentiesville, Oklahoma.  That office was closed for an emergency suspension in 2004, six years after the discontinuance process had been initiated.  In 2010, the Postal Service moved to formally close the post office based on data and public comments that were by that time twelve years old.  For that reason, the PRC remanded the decision for further consideration. 

In his dissent Hammond wrote, “Remanding this determination requires the Postal Service to engage in a process which will most likely yield the same result as the one it came to in this current case.”  As unusual as the Rentiesville case was, that kind of thinking could be applied to any closing decision the Postal Service makes, and it doesn’t bode well for future appeals.

What does it take to save a post office? Looking at appeals on closings

November 17, 2011

Yesterday, the Postal Regulatory Commission rejected three more appeals to save post offices — in Minneapolis, NC; Chillicothe, IA; and Pilot Grove, IA.  But the PRC finally ruled in favor of a community seeking to save its post office.  The ruling on Innis, Louisiana, “remands” the “Final Determination” to close the post office back to the Postal Service for further consideration.  That may or may not save the Innis post office, but it could be a sign that momentum is shifting at the PRC.  Aside from PRC Chairman Ruth Goldway, who has dissented on a few cases*, the Commissioners had shown few signs that they were prepared to reject a Postal Service decision to close a post office.

When the Postal Service issues a Final Determination to close an office, the community can appeal to the PRC.  The PRC can’t overturn the decision, but it can “remand” the decision and tell the Postal Service to take another look and provide more evidence if it wants to proceed with the closing.  Recently, the PRC has been very reluctant to exercise even this limited power.  

While orders to remand were not uncommon back in the 1980s and 1990s, they've become rare over the past decade or so.  In 2000, there was the Roanoke, West Virginia decision; in 2006, the Observatory Finance Station (Pittsburgh, PA); in 2009, the decisions on Hacker Valley, WV and Cranberry, PA, both of which involved using improper "emergency suspension" procedures; and in 2010 there was the case of the suspended Rentiesville, Oklahoma post office, which actually closed in 1998.  That's about it for successful appeals since 2000.  

Over the past few months, the PRC had ruled on some ten appeals, and in every case it either affirmed the decision, effectively closing the post office, or dismissed the case.  The causes for dismissals have varied.  In a couple of cases, it was because the Postal Service hadn’t definitively closed the post office yet, as in Still Pond MD, where the post office has been closed under an emergency suspension but not formally discontinued.  In a couple of cases, the Postal Service actually changed its mind and withdrew the Final Determination notice — more on that a little later.

For a while, it looked as if the PRC was going to affirm every closing decision, and one had to wonder, what would it take for the Commissioners to rule in favor of a community trying to save its post office? Chairman Goldway has dissented several times, arguing that the Postal Service’s case was flawed, but her fellow commissioners, aside from expressing reservations in a few concurring opinions, have shown few signs that they were ready to rule against the Postal Service.  

Then yesterday the Postal Regulatory Commission remanded the decision to close the post office in Innis, Louisiana, back to the Postal Service.  The Innis decision may be a major breakthrough.  It’s worth taking a closer look at the case, since the ruling may help other communities craft their appeals cases.  It may also be a sign that the PRC is looking more critically at the Postal Service’s decision-making process, which bears not only on appeals cases but the Retail Access Optimization Initiative (RAOI).  The Advisory Opinion on the RAOI plan to close up to 3,650 post offices should be coming out in mid-December, hopefully before Christmas, as we learned yesterday in a public hearing held by the PRC.  (The podcast is here.)

The petitioners appealing the Innis decision argued that the Postal Service did not sufficiently consider the effects of closing the post office on the community, and they pointed to erroneous estimates provided by the Postal Service on the potential for population and economic growth in Innis.  They also argued that the Postal Service had not given sufficient consideration to the closing’s impact on postal services.  For example, there are 89 post office boxes in Innis, but room for only 56 at the post office where Innis customers are being directed.  The neighboring post offices are also described as “located at cross roads in the middle of nowhere,” whereas Innis is a bona fide community.  The PRC ruling found merit in these arguments, observing in its analysis that “the Commission cannot conclude that the Postal Service has given adequate consideration to the closing of the Innis post office on the community.” 

The appeal also claimed the Postal Service’s estimate of cost savings was flawed.  Innis had been without a postmaster since 2008, and revenues were pretty low and declining over the past three years.  But the petitioners argued that the revenue declines were due at least partly to the fact that customers were taking their business elsewhere because of the “subpar performance” of the Office-in-Charge, who was eventually removed from the position. 

According to the financial analysis, the Postal Service will save the employee salaries and benefits ($33,404) and annual rent ($2,400).  The Postal Service did not figure in additional costs for the carriers because they already cover the territory, nor did it consider the loss in revenue from post office boxes that don’t move to another post office.  The PRC observed that “the economic study should have included a more accurate analysis of the additional costs for rural delivery to the customers affected.”

Finally, the community proposed an alternate plan that involved closing two adjacent post offices in other communities, and the Postal Service seemed to like that idea, but then it was dropped with no explanation.  The PRC felt that “having recognized possible merit in the alternative,” the Postal Serviced should have offered “an explanation for rejecting that alternative.”

Overall, it’s not quite clear why the Innis appeal was much stronger than many others that the PRC has rejected, like the appeal for the post office in Gwynedd, Pennsylvania, and Akron, Ohion.    But it’s a welcome sign that the tide may be turning at the PRC, at least a little.

It wasn’t all good news at the PRC yesterday.  The Commissioners affirmed the Postal Service’s decision to close the post offices in Minneapolis, North Carolina; Chillicothe, Iowa; and Pilot Grove, Iowa.  Those post offices will now close, although it’s not clear if they will benefit by the suspension on closings that goes into effect on Friday of this week, which would at least keep them open through the holidays.

The vast majority of appeals are still open cases, and their number just keeps increasing in a totally unprecedented fashion.  Here are some materials on the history of appeals:

The Valpak Brief

November 6, 2011

James Cox Kennedy is the chairman of Cox Enterprises, a media conglomerate founded by his grandfather.  Mr. Kennedy is part of the 1% the Occupy movement is protesting against.  Actually, according to the Forbes 400 list, Mr. Kennedy’s $6 billion stake in the family’s company makes him the 53rd richest person in the United States, and that puts him in the top 0.00002%.  Mr. Kennedy doesn’t own the country’s post offices, but his company has hired a law firm to advocate closing them. 

Cox Enterprises is a highly diversified company based in Sandy Springs, Georgia.  It owns 15 television stations, 86 radio stations, several newspapers, and a broadband communications and entertainment company.  It also owns Cox Target Media, North America’s direct mail leader and provider of the Valpak® savings envelope.

You’re probably familiar with Valpak’s “Blue Envelopes®.”  They show up in your mailbox now and then, filled with coupons for discounts on a variety of products and services — automotive, beauty, entertainment, health, home improvement.  Maybe you look forward to saving a few bucks next time you need an oil change or a pizza.  Maybe you toss the thing in the trash without a second thought. 

Valpak depends on the Postal Service to deliver those Blue Envelopes, but the company isn’t very interested in post offices and postal workers.  Its primary concern is keeping postal rates down and profits up.  Cox mails the Blue Envelope to 40 million households each month, 500 million a year.  With that kind of volume, even the smallest increase in rates quickly adds up and cuts into profits.  That’s why the big mail industry stakeholders like Valpak and the Direct Marketing Association favor cuts to the postal workforce, processing plants, and retail network. 

On Friday, Valpak submitted its “Initial Brief” to the Postal Regulatory Commission (PRC) on the case of the Retail Access Optimization Initiative (RAOI), the Postal Service’s plan to close 3,650 post offices.  The brief was prepared by William J. Olson, PC, a Virginia law firm that deals with various kinds of law — constitutional, nonprofit organization, election, health, and firearms — as well as postal law.  Olson himself has written several papers about the postal system, such as “Enhancing Competition By Unbundling the Postal Administration,” which is about “bifurcating” the postal system so that a government-owned agency would take care of delivering the mail (thereby maintaining the universal service obligation), while the receiving and processing component of the system would be privatized.

The Valpak brief argues that the PRC should approve the RAOI because it will help “the Postal Service’s near-desperate need to achieve increased efficiencies and cost savings” and thereby avoid “some form of bailout from Congress, possibly from taxpayers, in order to continue operating.”  The brief addresses legal principles, the financial setting, the Village Post Office, the “non-postal” benefits of a post office, and so on, but the heart of the matter for Valpak is that post offices are simply a very "inefficient" way to “collect revenue” so it only makes sense to close post offices that are losing money and  “unnecessary.”  Otherwise, we’re headed for a “bailout.”

In its own “Initial Brief” to the PRC, the Postal Service studiously avoids any suggestion that post offices might be closed for running at a deficit.  “The RAO Initiative is structured so as not to violate the 39 U.S.C.
§ 101(b) prohibition against closing small Post Offices solely for operating at a deficit,” says the USPS brief.  James Boldt, the man running the RAOI, explicitly testified that whether any facilities were "operating at a deficit" was “not a criterion for their inclusion as candidates for discontinuance review under the RAO Initiative.”  The Postal Service has said repeatedly the RAOI is not only about “cost savings” but also about “optimizing the retail network” and other goals.  The Final Determination notices to close post offices always make it clear that there were several reasons for the discontinuance, not just that the post office was running at a deficit.

The Valpak brief, however, does not mince words, and it probably has the USPS lawyers cringing.  Valpak goes straight for the deficit issue and lays bare the real reason — the only reason — for closing post offices.  The brief states, “Uneconomic retail services, including but not limited to those post offices with a two-hour earned workload, constitute what long has been the most expensive and inefficient way of providing citizens with access to retail postal services.”

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