Threat to shutter N.Y. post offices is pushing the envelope

Sunday, June 7th 2009, 4:00 AM

There’s no reason the United States Postal Service should be going broke – but it could end up that way if its managers, including politically motivated members of Congress, don’t wise up.

Countless stories have reported a $6 billion deficit at the postal service, usually ascribing it to the skyrocketing cost of fuel, the increased use of e-mail and the effects of a weakening economy.

There’s no question that the economy is taking a heavy toll. In a recession, it’s natural that businesses – the main users of the mail – send out fewer sales promotions and ship fewer goods. And the national wave of foreclosures means hundreds of thousands of addresses have become vacant places that don’t send or receive mail.

The growing gap between revenues and expenses is cited to explain 25,000 recent layoffs and a shrinking of the mail network that could include 20 shuttered branches in New York City alone. Even with the recent 2-cent increase in the price of a first-class stamp, postal officials still talk about the need for more layoffs, and keep floating the idea of reducing delivery to five days a week.

The doomsday talk is premature. Even though more people use e-mail, the postal service delivered a record high 213 billion pieces in 2006, well into the digital revolution. Even online shoppers have to get physical goods delivered to them, and that usually means a visit from the postman.

In reality, the $6 billion deficit is a burden dumped on the postal service by Congress. By law, the postal service must use current dollars to pre-fund future employee health and retirement benefits, a financial shackling that turns what ought to be a surplus into a deficit.

Before the pre-funding law was passed in 2006, the postal service had fallen behind on paying benefits. That problem, however, has been fixed. A bill currently before Congress can – and should – be passed to eliminate the deficit by relaxing its benefit payment schedule.

But that may not happen. Congress has been horribly slow at correcting problems like the benefits snafu – yet adamant about imposing tough, expensive mandates on the postal service.

Take universal service, the congressionally imposed mandate that mail get delivered six days a week. Despite polls showing that most Americans are willing to live with weekday-only service, a key congressman – Rep. Jose Serrano of the Bronx, who chairs the powerful Appropriations subcommittee that funds USPS – has declared that universal service is here to stay.

“People depend on regular mail delivery and would be greatly inconvenienced by missing a day’s delivery,” he told the Washington Post. “The Postal Service must manage its operations in ways that will not cause consumers to miss out on mail service.”

If only that tough approach were applied to other parts of USPS, like the outrageous salaries paid to top management.

By law – in yet another congressional mandate – the postmaster general’s pay is capped at 20% more than the salary paid to the vice president of the United States. But Postmaster John Potter got around that by adding performance bonuses and other benefits to his $265,000 salary, so much so that his true 2008 compensation was worth $850,000. Deputy Postmaster Patrick Donahoe did pretty well, too, taking home more than $600,000 on a base salary of $238,654.

The lavish packages were approved by Congress, before public outrage led to vows of an investigation by the very same lawmakers.

Potter defends the high pay as appropriate for executives running a $70 billion corporation. That would hold more water if he and his team weren’t so committed to slashing jobs and service levels.

America needs a reorganized postal service that either operates like a truly independent corporation or returns to its roots as a government agency. Today’s hybrid arrangement might satisfy Congress and the postal top brass, but it isn’t working for anybody else – especially the public.

elouis@nydailynews.com

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Dodger Stadium now has its own ZIP code

According to Major League Baseball, “Dodger Stadium and the associated property now have a new ZIP code to go along with the new “Dodgertown, CA” name it was designated in October 2008. The Los Angeles Dodgers announced Saturday that the United States Postal Service will designate Dodger Stadium and its property with the new 90090 ZIP.” [EdNote: Oh, I get it. Dodgertown gets its own zip code, but towns and villages elsewhere are being told we're running out of five-digit zip codes. No wonder people in Congress are ripped with the Postal Service.]

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To Survive, USPS Must Change Strategy

Burrus Testifies on Capitol Hill:
To Survive, USPS Must Change Strategy

APWU Web News Article #060-09, May 20, 2009

In testimony before a House panel May 20, APWU President William Burrus told lawmakers that if the Postal Service is to survive, it must re-examine its overall strategy.

He emphasized that there is an urgent need to pass H.R. 22, which would allow the USPS to pay its share of contributions for annuitants’ health benefits out of a retirees fund rather than from its operating budget. “But adjusting the payment method of retiree healthcare benefits is just one option the Postal Service is pursuing, and it is only a short-term fix to stave off imminent collapse; it will not address the long-term challenges,” he said.

The union president also condemned many of the USPS’ cost-cutting efforts. “Actions such as plant consolidations, employee reassignments in large numbers, [and] reduced retail hours are having a detrimental effect on service, and in many cases generate little or no savings,” he said during a hearing held by the House Subcommittee on Federal Workforce, Postal Service and the District of Columbia.

The cost-cutting initiatives are undermined by the Postal Service’s flawed rate strategy, Burrus testified, which slashes revenue from major mailers without reducing USPS expenses.

Underscoring the severity of the USPS’ financial crisis, several lawmakers at the hearing, including subcommittee Chairman Stephen Lynch (D-MA), indicated that Congress may have to consider allowing the Postal Service to reduce the number of delivery days from six per week to five.

Burrus rejected the suggestion, calling it “an act of desperation” that would “hasten the demise of the Postal Service.” Private companies would step in to provide service on the sixth day, he said, accelerating the diversion of mail from the Postal Service.

Congress is unlikely to approve such a proposal, Burrus said, but because it is so dramatic, entertaining it “sucks all the oxygen out of the discussion.”

Strenuous Opposition

Speaking specifically about the postal network, Burrus noted that “since the release of its original Transformation Plan in April 2002, the Postal Service has ignored demands by legislators and workers for details about where, when, and how consolidation would take place.”

Many of the consolidation announcements “generated strenuous opposition from workers and affected communities,” he testified, noting that “in 2006 and 2007, 37 of the 50 consolidations were terminated, placed on hold, or reversed.”

The Postal Service also “was the subject of severe criticism by the Government Accountability Office (GAO) for the lack of transparency in its planning efforts, and for failing to allow for sufficient input from workers, citizens, and public officials,” Burrus said.

A GAO report [PDF] concluded that “Inconsistency in data calculations also impacts the ability of USPS to accurately determine the expected cost savings,” and noted that “the USPS Inspector General found discrepancies in the projected cost savings… resulting in savings that may have been significantly overstated,” Burrus pointed out.

Concerns Persist

“Despite USPS assurances to the contrary, citizens, community leaders, small-business owners, and postal workers are concerned that a ‘realigned’ mail processing network will reduce service and delay delivery of the mail,” the union president said.

“The danger is clear: If service to small businesses and individual citizens is permitted to decline, it could lead to the demise of the institution. Regrettably, the Postal Service has consistently failed to share an overview of its network realignment plans.”

A basic flaw in the Postal Service network realignment strategy is that it considers only the facilities under its direct control, Burrus said, and ignores the broader mail-processing and delivery universe that includes private facilities. In doing so, the Postal Service ignores savings that could be achieved by reducing outsourcing and worksharing-discount.

The Postal Service asserts that it is attempting to cut costs, Burrus observed. “Despite the shortcomings I have outlined, I want to emphasize that the APWU does not oppose cost reductions or improved efficiency,” he said. The record shows, for example, that the union has supported the USPS automation program, he noted, “even though it had a profound effect on the number of APWU jobs — because we believed it was necessary for the long-term survival of the Postal Service.”

Rate Strategy Subverts Efforts

The APWU president told lawmakers that the USPS cost-cutting efforts are “subverted by its postage rate strategy, which dramatically reduces revenue from major mailers without a corresponding reduction in service.”

“The USPS business model is based on the erroneous premise that discounts for large mailers increase volume. However, a review of the effects of three decades of rate manipulation reveals that discounts have failed to boost first-class volume.”

During the Capitol Hill hearing, Burrus presented data that demonstrate that “despite disproportionate increases in postage discounts, volume has been unaffected.”

“The misguided rate strategy has undermined the principle of universal service at uniform rates,” Burrus testified, “and tests the limits of the law. Under the guise of transferring postal work to the large mailers and rewarding them with discounts derived from ‘costs avoided,’ the uniform-rate standard has been eroded.”

The only mailers who pay the “published” first-class rates are individual citizens and small businesses, Burrus said. “Passing H.R. 22 will provide the Postal Service immediate relief; but the long-term solution to the crisis is to end the policy of subsidizing large mailers at the expense of American citizens and the USPS.”

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Postal Service has survived past challenges — and it will again

By DAVID BECKER II
Special to the Herald-Journal

Published: Wednesday, May 27, 2009 at 3:15 a.m.
Last Modified: Tuesday, May 26, 2009 at 6:50 p.m.
The Herald-Journal’s recent editorial, “Postal progress,” begged for balance in both logic and facts about the U.S. Postal Service, our employees and customers. Here’s some food for thought for your readers.

While it’s true that the recession and the Internet are contributing to difficult financial circumstances for the Postal Service, the major cause of loss of mail volume and revenue is the economy. Let’s not all throw in the towel and turn to the Internet without considering some important facts:

* The U.S. Postal Service is our nation’s third largest employer; its employees and customers represent a functioning, viable $900 billion economic cornerstone of our economy in a time when jobs are scarce.

* Eight-two percent of Americans still pay their bills by mail.

* Like other American businesses, the Internet has revolutionized customer service for the Postal Service with usps.com providing 80 percent of the services you get at a post office. In 2008, stamp and retail sales at the Postal Store totaled more than $442 million.

* The Postal Service has the largest fleet of alternative fuel vehicles in the nation: 43,000 in all.

* According to the Environmental Protection Agency, advertising mail accounts for less than 2.4 percent of municipal waste in landfills.

* Postal Service Priority and Express packaging is free, eco-friendly and recyclable.

* Thanks to the Postal Inspection Service and the Office of the Inspector General, delivery of your mail is secure.

* Less than 4 percent of identity theft happens through the mail; the remainder comes from illegal computer access of personal information.

* Without the Postal Service providing affordable, universal, surcharge-free prices, private shipping rates would likely skyrocket.

* Is e-mail cheaper than a 44-cent stamp? Consider the cost of the computer, the Internet service provider fee, the power bill and the ongoing equipment upgrades.

* About one-third of our population does not have Internet access.

* Ideas to charge per e-mail already have been considered by Internet service providers. Without a postal alternative, service providers could charge and raise the cost for each e-mail at will.

* Other forms of communication (TV and the Internet) have a considerable negative environmental impact, sending outmoded models to landfills by the millions. According to the National Safety Council, only 11 percent of computers get recycled, and small-time consumers alone add 10 million computers to landfills each year.

From the telegraph to the Internet, new technology has historically caused many predictions of the end of the Postal Service. But because the Postal Service is able to adapt and change to ensure secure, affordable, universal delivery, it has withstood similar threats to serve our country for almost 250 years.

David Becker II is the Spartanburg postmaster.

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Madison Avenue Flirts With 3-D

According to the Wall Street Journal, “Papa John’s International, the U.S. Postal Service and General Electric have begun to incorporate “augmented reality,” or AR — a technology that lets consumers interact with hologram-like images — into their marketing. One well-known example of AR: the yellow first-down lines in TV broadcasts of football games. This week, the Postal Service will start running an ad campaign that touts a flat-rate shipping fee for its Priority Mail service. The online portion of the ad effort includes a “virtual box simulator” on the prioritymail.com site. The simulator allows consumers to hold an object, such as a cup or a book, in front of a Webcam and use the resulting 3-D image to determine the right size box for shipping the object. The push into AR comes as companies have grown dissatisfied with relying solely on static advertising or passive media like TV commercials, which have washed over coach potatoes for years. In pursuit of alternatives, they have pumped money into approaches that encourage consumers to “engage” with their message or product, something ad executives believe helps increase sales.”

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Postal carrier gets probation for hiding mail

By ED WHITE – 20 hours ago

DETROIT (AP) — A Michigan postal worker who hid thousands of pieces of mail in a storage unit has been placed on probation for two years.

Jill Hull appeared in federal court in Detroit Thursday, three months after pleading guilty to deserting the mail, a misdemeanor.

In September, managers of a self-storage business opened Hull’s unit and discovered thousands of pieces of unopened mail, including first-class letters. Some had postmarks from 2005.

The 35-year-old Hull has said she couldn’t keep up with her route in Livingston County, 50 miles northwest of Detroit.

U.S. Magistrate Judge R. Steven Whalen declined to order a fine, saying Hull can’t afford it.

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Live From the ACMA Forum: Catalog Industry Broken

From: MULTICHANNEL MERCHANT May 21, 2009 11:36 AM, By Jim Tierney

Washington – The catalog industry is broken, according to Robert Bernstock, president of shipping and mailing services for the U.S. Postal Service. Huge postage rate increases have crippled many catalogers, he told attendees at the second annual National Catalog Advocacy & Strategy Forum, put on by American Catalog Mailers Association, and as such, “the business model is broken.”

The good news is that the USPS wants to help the catalog industry anyway it can. “We can reconstruct the entire supply chain to lower costs,” he said.

What’s more, Bernstock totally engaged the packed room when he suggested taking a “relook at the whole structure”— from pricing, service, and operational efficiencies. “We want the lowest cost delivery system,” he said. “We need to take a major relook at the whole structure.”

It’s no secret that catalog volumes is down sharply: Hamilton Davison, executive director, of the ACMA, reminded attendees that catalog volumes have sank 35% in the past two years.

But Bernstock stressed that “We’re not in this for anything other than the catalog industry to be healthy. The USPS is a willing partner in this. We have to increase the value of the catalog to the consumer.”

“Finding a solution to the ailing catalog industry is a priority,” said Tom Foti, manager of marketing mail for the USPS. “With cost and response there has to be a balance.”

Right now, there is not a balance there, he said. “We’re going to have to look at the whole supply chain. We have to increase the value of a catalog to the consumer.”

Customized pricing is another possibility, Foti added. Creating a new catalog product would bring “a spotlight on catalogs” and potentially fix an infrastructure with better organization and better business decisions.

“We have to turn the tide on catalogs,” Foti noted. “The value of catalogs often gets lost on the public.”

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The Postman Will Ring More Than Twice, but Maybe Not Six Times

By Joe Davidson
Thursday, May 21, 2009

If we still used the Pony Express to deliver mail, someone would shoot the horse to put it out of its misery.

The U.S. Postal Service is like a once-proud thoroughbred now crippled with a broken leg — or two. It remains a venerable institution, but it has been so severely handicapped by the recession that lawmakers are beginning to seriously consider cutting a day of delivery.

That gradual — and reluctant — shift in attitudes was evident at a congressional hearing yesterday at which the Postal Service again made a plea for legislation that would allow it to cut mail delivery from six days a week to five.

“The only way we’ll embrace it is if we have no other choice, and we’re getting to that point,” said Rep. Stephen F. Lynch (D-Mass.), chairman of the House Oversight and Government Reform subcommittee on federal workforce, Postal Service and the District of Columbia.

Compare that with the words of one subcommittee member, Rep. Elijah E. Cummings, a Baltimore Democrat, at a hearing just two months ago: “I would bet everything I’ve got that’s not going to happen.”

Rep. Jason Chaffetz (R-Utah) said yesterday that while his “immediate reaction is ‘No way,’ ” he might be willing to consider some combination of delivery-day cuts and a taxpayer subsidy — another term for a bailout. Currently, the Postal Service gets zero tax dollars.

“I don’t think we can get rid of any possibilities at this point,” Chaffetz added.

The difference between March and now is the devastating and escalating decline in Postal Service finances.

William P. Galligan, a USPS senior vice president, told the panel that the agency posted its second-quarter financial results after the last hearing. Compared with the same period last year, total mail volume fell almost 15 percent. Revenue is down 10.5 percent. Almost $2 billion was lost in the second quarter.

“We are projecting a loss of more than $6 billion for this fiscal year,” Galligan said.

This year the service expects to move 180 billion pieces of mail. That sounds like a lot, but it’s 32 billion less than in fiscal 2007. The collapse in volume is the largest since the Great Depression.

Postal officials have implemented several cost-cutting measures, including a hiring freeze, closing a few district administrative offices and reducing work hours. Unfortunately, that’s not enough to keep the agency from going broke.

“Even if the Postal Service is successful with all of its cost-control and transformation efforts, it appears likely that without legislative relief the Postal Service will run out of cash this year and face serious financial difficulty in 2010 and beyond,” said John D. Waller, director of accountability and compliance at the Postal Regulatory Commission.

The legislative relief the Postal Service wants is permission to change the way it funds retiree health-care benefits and to cut the sixth delivery day, most likely Saturday. Legislation the subcommittee is considering would allow the agency to pay for the health benefits of current retirees out of its Retiree Health Benefit Fund instead of its operating budget, saving about $2 billion this year.

“Unfortunately, as mail volume continues to plummet, even [the legislation] will be insufficient to close the gap between costs and revenue,” Galligan said. “That is why we must make fundamental changes to our service network — including reduced delivery frequency.”

But just how much reducing delivery will save is the big question, and an important factor in determining congressional support. Last year, the Postal Service projected $3.5 billion in savings annually, if the cutback did not lead to a reduction in volume. The Postal Regulatory Commission assumed mail volume would decline with a cut in delivery days and projected a savings of $1.9 billion.

Del. Eleanor Holmes Norton (D-D.C.) said Congress will want an independent assessment of the savings a five-day schedule would bring. “I would seriously consider it if we had an independent study showing that it would make a structural difference” in postal operations, she said.

Galligan is prepared for strong congressional opposition to the five-day proposal, but he thinks it must be done.

“In the simplest words I can find, we can no longer afford the costs of six-day mail delivery,” he said. “In my mind, it is no longer a question of if, but rather when, will economics require this change,” he said.

“The time, I believe, is now.”

Written statements from the hearing can be found here: http://federalworkforce.oversight.house.gov/story.asp?ID=2444.

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The United States Postal Service & Power Company?

Switching to electric delivery vehicles would enable the U.S. Postal Service to make millions by selling electricity and to reduce delivery costs by millions as well, a postal expert says.

Batteries for the electric vehicles could be charged during off-peak hours and kept connected to the grid, writes Michael Ravnitzky, Special Assistant to Commissioner Ruth Goldway of the Postal Regulatory Commission, in a paper published today on the PRC’s Web site. When not being used in delivery vehicles, stored power in the batteries could be sold back into the grid at times of peak or unexpected surges in demand.

(A presentation Ravnitzky did recently on the concept can be found here. The paper grew out of an op-ed piece Ms. Goldway wrote for The New York Times.)

USPS’s fleet of 142,000 right-hand drive delivery trucks is nearing the end of its useful life. The vast majority could be replaced by electric vehicles using today’s battery technology, Ravnitzky writes.

“Most daily mail delivery routes are short, repetitive and well-defined, and include many stops, making the postal delivery fleet a prime application for electric drive vehicles. The electrification of the postal fleet could significantly reduce gasoline and maintenance expenses while reducing the fleet’s carbon footprint,” he says.

“Historical experience with electric drive vehicles suggests maintenance cost reductions of at least 30 percent to 50 percent,” he writes. That, and an electricity cost that is equivalent to 80-cents-per-gallon gasoline, suggests annual savings for the Postal Service could be in the hundreds of millions of dollars.

On the revenue side, Ravnitzky sees more opportunity from storing electricity and having it available to the grid on a contingency reserve basis than from actually selling electricity. As such unreliable sources as wind and solar power became more of a factor in the grid, he notes, the needs to store electricity and have it available on a rapid-response basis will grow, he says. He estimates $2000 to $2500 annually in revenue per vehicle from various “V2G” (vehicle to grid) services – which would mean several hundred million dollars if most of the fleet went electric.

“The operators of the electrical grid are essentially running a massive just-in-time delivery system and it can be tricky to keep this system balanced.”

Electric vehicles cost more upfront than gasoline-powered ones, and some investment in battery-charging operations would also be needed, according to Ravnitzky. Mass production of the expensive batteries would reduce the cost and presumably give a leg up to manufacturers developing similar products for the consumer market. Further study is needed to provide detailed information on capital costs, operational savings, revenue potential, and environmental impact, Ravnitzky says.

Perhaps his vision could be employed to provide a simultaneous bailout for three needy recipients – American car companies, the U.S. Postal Service, and the environment.

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Postal Service Expects Steeper Declines

The U.S. Postal Service has cut 25,000 jobs this year and mail volume will continue to drop into 2010 as it struggles to break even and return to profitability, Postmaster General John E. Potter warned today. The bleak outlook comes as the agency expects a $6.5 billion loss this year that — with cutbacks and increased borrowing — can be trimmed to $1.5 billion.

“Unfortunately, I wish I could say we’ve hit bottom, but we haven’t yet,” Potter told reporters at the start of this week’s National Postal Forum, a mailing industry convention.

USPS anticipates delivering 180 billion pieces of mail this year, far below the record 213 billion delivered in 2006. Worse, Potter says mail volume will likely bottom out at closer to 170 billion pieces per year.

“Folks are looking at alternatives and there are some that simply will not return,” he said. The agency has commissioned a survey of its largest customers in hopes of anticipating future workloads.

As if the migration to e-mail and e-commerce wasn’t bad enough, the collapse of the housing and financial sectors have made the Postal Service fall faster and farther. Fewer housing starts mean fewer new addresses created each year. Potter said new addresses will drop from an average of 1.9 million per year to 1.1 million. The financial sector, which has long relied on the mail to transact and communicate with its customers, has also cut back on mail significantly. Last week’s 2-cent increase for the price of first-class postage might also make it difficult for some customers, and Potter said the bump will not be enough to offset losses.

“What we really need to be talking about is how to do we find a path back to break even and then beyond break event to profitability,” Potter said. He’s seeking permission from Congress and the Obama administration to delay billions of dollars in payments to an employee retirement fund, money that could help offset current losses. The service has also cut more than 10,000 city carrier routes in the last several years, saving about $100,000 per route and the eliminating the need for some vehicles.

Then there’s the possibility of trimming a day of service, a suggestion Potter threatened earlier this year might be necessary someday soon. Lawmakers have all-but killed the cutback for now, but Potter discussed it as a realistic solution during today’s conversation with reporters.

“With some minor exceptions, people have told me that if they have to adjust their operations, they can,” he said.

Still, “Until people hear from us…they should count on getting the same great service that they’ve always got.”

The Associated Press contributed to this report.

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