The RAOI Advisory Opinion: A Transformative Moment or a Bump in the Road?


December 30, 2011

It’s been a week since the Postal Regulatory Commission (PRC) issued its Advisory Opinion on the Retail Access Optimization Initiative (RAOI), the Postal Service’s plan to close 3,652 post offices.  The Postal Service has yet to issue a reply.  Maybe the attorneys and strategists in postal headquarters just don’t know what to say.

The Advisory Opinion says the plan to “optimize” the postal retail network won’t optimize it at all, and the PRC identifies several flaws in the plan that need to be addressed if the Postal Service wants to close a significant portion of its retail network.  The decision has to take some of the wind out of the sails of the effort to close post offices, cruising along as it was, with over 500 closings this year and thousands more on the horizon.

The Advisory Opinion was unanimous, which will add even more weight to the decision.  This consensus represents a considerable achievement for the four Commissioners, who have been regularly disagreeing over appeals on post office closings.  Since December 12, the day before the Postal Service declared a five-month moratorium on closings, the PRC has ruled on eighteen appeals.  Four were remanded back to the Postal Service for further consideration — a victory for the appeal — while the remaining fourteen were decided in favor of the Postal Service’s determination to close the office.  The Chairman of the PRC, Ruth Goldway, dissented on all but one of those rulings, and Commissioner Nanci Langley joined her on ten.  Most of the decisions were thus two-to-two votes (a remand requires a majority).  The Commission is clearly divided on the issue of appeals, yet it was able to find consensus on the RAOI. 

The Advisory Opinion could turn out to be a transformative moment.  It will provide support to those in Congress looking to slow down or stop the closings, and it might persuade the Postal Service to re-think its plans to eliminate half the country’s post offices.  Seeing how much public protest the closings have provoked — and how much attachment people feel for their post office — might even lead the Postal Service to embrace the post office.  Rather than jettisoning post offices as unwanted baggage, as nostalgic icons of the postal past, perhaps the Postal Service will begin thinking about how to take advantage of its network of post offices, how to expand the products and services they offer, and how to take the post office into the 21ST century.

More likely, though, the Postal Service will see the RAOI Advisory Opinion as merely a bump in the road, just another “barrier to retail network optimization,” as a June 2011 GAO report put it.  The Postal Service will probably cite a few passages in the Opinion to support the validity of its commitment to closing post offices, and then find fault with the Opinion in other respects.  The Postal Service attorneys complained during the hearings that they weren’t given adequate opportunity to fully explore particular lines of questioning and to challenge some testimony, and they may make hay of those objections.  Just to appear reasonable, if nothing else, the Postal Service will probably accept some if not most of the PRC’s recommendations, with an eye toward implementing them quickly so that it can get on with the plan.

 

The rush to close

The RAOI is actually the second attempt in recent years to close thousands of post offices.  In 2009, the Stations and Branches Optimization and Consolidation initiative (SBOC) proposed closing over 3,000 stations and branches.  While the PRC worked on the SBOC Advisory Opinion, the Postal Service kept revising the list, until it was eventually pared down to only 162 facilities.  The SBOC Advisory Opinion, issued in March 2010, was very critical of the plan and recommended that the Postal Service expand people’s opportunity to offer input, improve the financial analysis used to estimate the cost savings if a facility closes, and provide local managers with better guidance on how to conduct the closing process.

Between the SBOC Advisory Opinion in March 2010 and the Request for an Opinion on the RAOI in July 2011, the Postal Service had well over a year to get its act together.  That should have been plenty of time to compose a persuasive rationale for why so many post offices needed to close, figure out a reasonable way to select those most suited for closing, improve the closure process, and train management on the procedures.

Instead, the Postal Service apparently fell victim to its own “crisis narrative” and rushed the whole business.  It revised the discontinuance procedures to make it faster and easier to close post offices, initiated closure studies on thousands of post offices rather than waiting to hear the Advisory Opinion, violated its own procedural regulations in conducting public hearings, and closed hundreds of post offices apart from the RAOI, thereby provoking a loud public outcry and a couple of hundred of appeals to deal with as well.

Now the Postal Service has painted itself into a corner.  It’s in the middle — actually near the end — of the process of discontinuing over three thousand post offices on the RAOI list.  Were it not for the moratorium, the Postal Service would probably be issuing Final Determinations right now. 

But instead of moving forward, full speed ahead, the Postal Service is facing growing momentum against closing post offices.  An OIG report criticized the RAOI earlier this month, Congress is looking at several bills to limit closures, the public protest is getting stronger, the RAOI Advisory Opinion says the plan is seriously flawed, and the PRC looks like it’s prepared to make trouble if the Postal Service proceeds with the closings.  No wonder the lawyers and VPs in postal headquarters are taking their time figuring out what to say. 

 

The Optimization does not optimize

The main conclusion of the Advisory Opinion is that the “optimization” initiative would not improve the retail infrastructure.  As the introduction to the Opinion states, “The primary Commission finding is that notwithstanding its name, the Retail Access Optimization Initiative is not designed to optimize the retail network.” 

Many of the witnesses and participants had commented that it didn’t make sense to describe closing thousands of post offices as “optimizing” anything, but the PRC’s conclusion means something more specific.  The Commissioners were concerned that the Initiative would not “maximize net retail revenues while fulfilling statutory service obligations.”  In the view of the PRC, the Postal Service failed to take advantage of “modeling tools and techniques” that would have helped it to better realize its goals.

As PRC Chairman Ruth Goldway explained in a press release, “The Commission was unanimous in expressing its concern that the Postal Service’s plan did not and could not, because of lack of data and analysis, determine the facilities most likely to serve the greatest number, reduce the greatest costs, or enhance the potential for growth or stability in the system.  We agree that the Postal Service access network should be the right-sized but found that the RAOI was not the proper approach to meet that goal.”

The PRC’s criticisms echo those made earlier this month by the USPS Office of Inspector General (OIG), which conducted an audit study that found the Postal Service did not have “an integrated retail network optimization strategy.”  The OIG recommended that the Postal Service take advantage of “objective integrated economic modeling,” “improve the reliability of retail facilities data,” and clarify “what specific changes will be made, how long it will take to make them, and anticipated benefits.” 

By law, the Advisory Opinion is only an opinion, and the Postal Service is not required to follow the PRC’s recommendations.  It could conceivably say, “Thank you very much,” and proceed with closing many if not most of the post offices on the RAOI list.  That, however, could put the Postal Service on a collision course with the PRC. 

As Chairman Goldway states in her Concurring Opinion, “The Postal Service, by law, may not be required to follow the recommendations presented in the Commission's decision.  If it chooses not to and rather proceeds with the RAOI as originally submitted to the Commission, it risks, I believe, violating the law I cited earlier and the consequences that could follow.”  In other words, the PRC could find that the closures put the Postal Service “out of compliance” with Title 39 and related statues.  It has the power to issue subpoenas and levy fines, and it can also take its case to Congress.

 

The process that led to the Opinion

The process that led to last week’s Advisory Opinion officially began on July 26, 2011, when the Postal Service made its formal Request for an Advisory Opinion on the RAOI.  The Postal Service is required to ask for such an Opinion when it’s planning to make changes that might have a nation-wide impact, and the Postal Service and PRC agreed that the RAOI would have such an impact. 

In all, there were 13 witnesses, 468 interrogatories posing questions and requests for information to the witnesses and institutions, 48 library references containing data and other information supporting the testimony, several comments and letters from the public, and four days of public hearings to examine and cross-examine witnesses.  There were briefs, rebuttals, reply briefs, motions, orders, and all the trappings of a legal proceeding.

In marked contrast to the abundance of data it provided to begin the current Advisory Opinion process on the plan to consolidate processing plants, the Postal Service initially presented very little data for the RAOI.  But in response to requests and interrogatories, the Postal Service produced numerous spreadsheets and tables on such matters as distances to “nearest-neighbor” post offices and alternate access points and the revenue for post offices. (The library references can be found here, but twenty-two are “non-public” because they contained information the Postal Service deemed proprietary.)

The thirteen witnesses included three from the Postal Service — James Boldt, the man ostensibly running the RAOI; Dean Granholm, VP of Operations; and “institutional.”  The other ten witnesses were essentially opposed to the RAOI.  These included representatives of the National Association of Postmasters of the U.S. (NAPUS) and the League of Postmasters, experts provided by the Public Representative, the Center for Responsive Law, and the National Newspaper Association.  (The witness list is here.)

The docket also contains comments from several members of the public, including the New York Farm Bureau, postmaster Mark Jamison, and Leila Vaughan.  They are here.   There are also several letters included in the docket as well, here.  Among them is a letter from several members of Congress that states, “widespread post office closures are the wrong way to deal with the Postal Service's fiscal problems, and they could harm the Postal Service's competitiveness in the long run.”

There were also a several days of hearings (Sept. 8, Oct. 17-18, Oct. 28) when witnesses offered testimony and were cross-examined.  The complete transcripts of those hearings add up to several hundreds of pages, and they are all available on the PRC website, here.

Briefs were submitted by the postal workers unions (APWU and the AUSPL), the postmasters’ associations (NAPUS and the League), the Public Representative, Ralph Nader’s Center for Responsive Law, the National Newspaper Association, David Popkin, Valpak, and the Postal Service.  The briefs make for the best reading in the docket because they summarize the testimony and make the arguments, for and against the RAOI, in a succinct and forceful way.  The briefs can be seen here

During the course of the proceedings, the Postal Service gradually removed some post offices from the list.  In early December, it released a list of 307, in response to a FOIA request by Evan Kalish.  According to news reports, a few more have been removed from the list since then.  That leaves over 3,300 communities with post offices still under threat of closure, waiting to hear their fate.

 

Criticisms of the RAOI

Like the SBOC Advisory Opinion of 2010, the RAOI Advisory Opinion says that “right-sizing” the retail network is a laudable goal, but there’s considerable room for improvement in how the Postal Service selects post offices for closure, how it calculates cost savings, and how it conducts the closing process.  The Advisory Opinion makes the following criticisms of the plan:

1. Insufficient Financial Data

The PRC found that it could not figure out how much money the RAOI would save.  The Postal Service itself had avoided the question, saying publicly that it would save $200 million, but claiming in testimony before the PRC that there wasn’t a specific financial goal and cost-saving was not the primary motive or aim. 

The Postal Service does not collect the kind of financial data that the PRC believed would be necessary for a rational optimization initiative.  Specifically, there’s no data that separates the retail costs of running a post office from other operational costs, and for some types of post offices, there’s a lack of facility-specific revenue and cost data as well.  That makes it almost impossible for the Postal Service or the PRC “to develop reliable cost savings estimates on either a program-wide or average facility basis.”

2. Problems with the discontinuance procedure

The PRC examined the new Postal Service process to evaluate facilities for closure.  While acknowledging significant improvements since the 2009-2010 SBOC, the Commission continued to believe that the Postal Service is not doing enough to ensure “meaningful public participation.”

Specifically, the Commission recommended training local managers in the laws applicable to retail access, developing more robust processes for obtaining and evaluating relevant community information, and gathering information on how other existing Postal Service initiatives may impact the availability of postal services in the affected area.  The Postal Service could also do more to evaluate what happens after a post office closes.  (There have been studies like this in the UK, where over 7,000 post offices have been closed, but the Postal Service has not commissioned any itself.) 

3. Issues over alternate access

A core concern of the Commission was the question of suitable alternative access.  The main argument for closing post offices is that there are so many other ways for customers to do postal business — online, stamps-on-consignment at a local business, using the mail carrier as a “post office on wheels,” and so on.  The Postal Service rolled out the “Village Post Office” concept at the same time as the RAOI, as if that too were going to be a viable alternative to the traditional post office.

The PRC found, however, that most of the alternatives offer only a limited array of services. The Commission believes that alternative access for sites being closed must be presently available, viable, and an adequate substitute for existing access at the post office. 

4. Disparate impact on vulnerable populations

Much of the testimony was about the fact that nearly 3,000 of the post offices on the list were “rural,” so that the Initiative was essentially discriminatory.  The Commission found that there was “insufficient evidence in the record to conclude that the RAOI, as applied as a screening procedure, unduly or unreasonably discriminates among users of the mail, or grants an undue or unreasonable preference to any user.”  But the PRC did express concern that the methods use to select post offices for the RAOI list “may inadvertently have a disparate impact on vulnerable populations.”

5. Other issues

There were many other grounds on which the PRC might have criticized the RAOI, but the Commissioners chose to stick to these main points.  For example, the PRC disagreed with the Postal Service’s contention that the RAOI screening criteria did not tend to select post offices operating at a deficit.  But the PRC said that considering revenue did not violate Title 39, section 101(b), which states, “No small post office shall be closed solely for operating at a deficit.”  Looking at revenues is fine, then, so long as that’s not the only factor in a closing decision.

There’s one other issue worth mentioning, since it came up frequently in the testimony, and that’s the simple fact that closing post offices, especially rural post offices, means people need to drive further to get to a post office.  Considering how expensive gas is and how important conserving fuel is these days, that’s not a small matter.

One of the witnesses in the case calculated just how much additional driving might be necessary and found that the closure of the RAOI post offices would result in a longer drive to the post office for 16.2 million citizens, resulting in an increase in aggregate fuel costs to those individuals of approximately $232 million.  Yet the Postal Service estimated it would save only $200 million from closing all those post offices.  Thus, the costs that the Postal Service might save would simply be transferred to postal customers.

 

Closing post offices and the law of the land

While the Advisory Opinion found serious flaws with the RAOI, the Commission stopped short of rejecting the Postal Service’s effort to downsize its network of brick-and-mortar post offices.  As noted above, the PRC press release quotes Goldway saying, “We agree that the Postal Service access network should be right-sized but found that the RAOI was not the proper approach to meet that goal.”

At issue here is whether or not the Postal Service has the authority to close thousands of post offices, and whether or not the PRC has the authority to challenge the Postal Service if it chooses to do so.  The Advisory Opinion refers briefly to the legal context for closing post offices, and it cites a 2008 study it had commissioned on the "universal service obligation" that deals with the matter in more detail.  Essentially, the issue is subject to debate: the legislation on the topic is ambiguous, ambivalent, and subject to a range of interpretations. 

On the one hand, the statutes give the Postal Service considerable authority to determine how to deliver postal services.  Title 39, USC 404 (a) says that the Postal Service has the power to “determine the need for post offices, postal and training facilities and equipment, and ... provide such offices, facilities, and equipment as it determines are needed.”  USC 403 (b) says that the Postal Service shall “establish and maintain postal facilities of such character and in such locations, that postal patrons throughout the Nation will, consistent with reasonable economies of postal operations, have ready access to essential postal services.”  The latter passage, it should be noted, says nothing about whether those “postal facilities” need to be traditional post offices — they could presumably be postal counters in a Wal-Mart.

On the other hand, there are other passages that restrict the Postal Service’s power to close post offices.  Title 39, USC 101(b) says, “The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining.  No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities.”

That passage came up numerous times during the Advisory Opinion process, and there was a lot of discussion about what “maximum degree” meant and how it appeared post offices were in fact being targeted for closure because they were operating at a deficit.

In addition to these key statutes, the annual appropriation legislation that Congress has passed each year since the early 1980s contains a couple of passages that relate to post office closures. One declares that “6-day delivery and rural delivery of mail shall continue at not less than the 1983 level,” and another says that “none of the funds provided in this Act shall be used to consolidate or close small rural and other small post offices in fiscal year [insert year].”  This proviso is included in recent legislation and is therefore very much in effect right now.

In her Concurring Opinion (p. 117), Chairman Goldway begins by citing the appropriations provisos, and then proceeds to make the following comment:

“Clearly there continues to be strong, bipartisan agreement that it is necessary for the nation to maintain a visible and vibrant mail delivery network and that small post offices are an important part of the system.

“The Commission might have determined — given this legislative language — that the Postal Service proposal to close 10 percent of the nation's small post offices is contradictory to the law of the land.  The Commission could have found that the Postal Service is required to maintain all of its existing post offices.  But the Commission recognizes that any system must adapt to changing economic, cultural, and technological conditions in order to remain viable.”

In other words, the Commission chose not to challenge the Postal Service on the grounds that it was a violation of Title 39 to close thousands of small post offices.  Rather, the Commission acknowledged that times change, and so must the Postal Service.  If the drift is away from post offices and toward alternative access in supermarkets and big-box stories, so be it.  But whatever the retail system, citizens must have “ready access to essential postal services.”

 

The social value of the post office

The Advisory Opinion thus avoids getting into a defense of the post office as a social and political institution, safeguarded by the law of the land.  The role of the traditional post office in a community and the many values it possesses receive some attention in the Advisory Opinion, but not much.

Mark Strong, President of the National League of Postmasters, and Mayor Donny Hobbs of Lohrville, Iowa, provided eloquent testimony about the importance of a post office in a small town.  Anita B. Morrison, founding principal of Partners for Economic Solutions, testified about the economic and community development impact of postal facilities, and she described how a post office anchors many business districts across the country and serves as an “activity generator” drawing customers from broad areas. 

The Advisory Opinion reviews this testimony, but in its analysis, the Commission has almost nothing to say about the value of the post office to a community or to the country itself.  The role of the Postal Service in “binding the nation together” is mentioned twice, but the role of the post office itself is not cited in this context.  Presumably, the Postal Service could continue to bind the nation together without post offices.

In the PRC’s press release, Chairman Goldway even suggests something along those lines. “More than 160 appeals of decisions to close individual post offices, not related to the RAOI, have come before the Commission recently,” says the Chairman.  “In each case, we have seen how concerned local communities have been with losing access.  With real, practical alternatives available, these communities would be far less likely to feel the loss of a neighborhood post office and would join with the Postal Service in the move to efficient alternatives.” 

Such comments suggest that moving postal retail services into Wal-Marts and supermarkets may be fine, so long as the alternatives provide a more complete range of services than most of them currently do and so long as they are within a reasonable distance.

But a post office is a different kind of place than a Wal-Mart or supermarket, and it stands for something else in the history and psyche of the nation.  The issue is not simply a matter of distances, services, and efficiencies.  The post office is a national institution, and post offices belong to the citizens of the United States.  Replacing the post office with a counter in a private retail business is a form of privatization that steals the post office from the people.  The Advisory Opinion steers clear of such arguments.

 

The momentum shifts

The Postal Service did not wait for the PRC to complete its Advisory Opinion before beginning the process of closing the 3,652 post offices.  It began the studies on virtually the same day it submitted the request for the Opinion, July 26.  The day after, it also released a list of 727 non-RAOI post offices already under study for closure.

Between the two lists, well over three thousand community meetings have already taken place, countless questionnaires have been distributed and returned, petitions have been circulated, letters have been written to Congress, and thousands and thousands of comments have been submitted to the PRC and the Postal Service.  Most of the post offices on the non-RAOI list have closed, and most of those on the RAOI list have gone through all but the final the stages of the discontinuance process.  If the Postmaster General had not been pressured by the postmasters associations and a couple of dozen Democratic Senators to issue a moratorium on closings, post offices would soon be closing by the hundreds, every month.

The momentum was clearly moving toward closing a large portion of the nation’s postal network.  The Postmaster General said recently that they’ve closed 500 post offices this year.  A hundred others have been issued a Final Determination, and they’ll close as soon as the moratorium ends.  The Deputy Postmaster General said in September that a second list of 4,000 would be coming out soon, and the Postal Service has plans to close 15,000 post offices, nearly half the nation’s 32,000 post offices, over the next five or six years. 

But now it looks like the momentum may be shifting.  When Congress returns from its holiday break, legislators will resume their debate over the numerous bills that have been put forward in both houses.  While the Issa-Ross Postal Reform Act would make it easier to close post offices, other bills would make it more difficult.  It’s likely that Chairman Goldway will be asked to discuss the RAOI Advisory Opinion with congressional committees.  Senator Susan Collins has already cited the Opinion as evidence to support her “skepticism about the wisdom of mass postal closures without a more thoughtful, transparent, and data-driven process.”

A few months ago, when Darrell Issa and Dennis Ross were grabbing the headlines with their House hearings on the need to downsize the Postal Service, it did look like the post office was an endangered species.  As 2011 comes to a close, however, things are looking much different.

It’s far too soon to declare victory in the effort to save the post office.  But for now, the Advisory Opinion represents a significant road block in the path of mass closures, and the moratorium will give communities several months to organize resistance, craft appeals, pressure Congress, and do what it takes to ensure that the country’s postal system remains the people’s post office.

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