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The case for post office closures

Posted: April 27, 2012 - 12:03am

It’s no secret that the U.S. Postal Service is in financial trouble. Its business is shrinking, with first-class mail revenue dropping 25 percent since 2006. It has lost $25 billion in the last five years.

To stem the tide, USPS is pursuing a wide range of cost-cutting measures. Among them: closing underused post offices. It has so far identified about 3,700 for possible closure, ranging from Pony Express Station in Fallon, Nev., to the U.S. Capitol Station in Washington. The plan has caused an uproar, leading the Senate to vote on legislation that, among other things, imposes new limits on the Postal Service’s ability to close its retail outlets.

Closing a post office has never been a politically popular move. There is a kind of reverse NIMBY (not-in-my-backyard) effect at work: no one wants to lose the perceived benefits of a local post office.

And for members of Congress, post offices are perhaps the oldest form of pork. Many members have been re-elected based on bringing in a post office — which often ends up bearing their name. Few have won an election for closing one.

But despite this political popularity, Americans are using their local post office less than ever before. Electronic alternatives such as stamps.com, as well as sales at supermarkets and other retails stores, have meant fewer trips to the post office. As a result, traffic at America’s post offices dropped 21 percent from 2009 to 2010. Fully 80 percent of post offices lose money

The Postal Service’s ability to make sense of this system is limited. It is, for instance, barred from closing any small post office because it is losing money (as if that were an irrelevant consideration). Closure decisions are also subject to a lengthy and cumbersome review process, including a 60-day public comment period, and appeal before the Postal Regulatory Commission.

Typical of the closures sought by the Postal Service is the post office in Hope, Minn. During an average business day, it sees eight customers, who require a total of seven minutes of service. Last year, the Postal Service announced plans to close the facility, and instead serve the 90 residents of Hope from the adjacent town of Ellendale, 10 minutes away.

Still, the closure was actively opposed, ending with an appeal to the Postal Regulatory Commission before the move was recently cleared.

Similarly, the post office in Coyote, N.M., also will be closing. Open 42 hours per week, the two postal employees in Coyote see, on average, seven customers a day.

There is another post office in Youngsville, N.M., just four miles away. This closure, while eventually approved, was also disputed and appealed to the Postal Regulatory Commission.

Given the bureaucratic and political barriers to restructuring, it’s no wonder that past reform efforts have failed. Despite the precipitous decline in business, the number of postal retail facilities has dropped only 1.5 percent since 2007.

The latest effort to trim the network includes many rural facilities, but also many in urban centers. New York City, for instance, has 34 post offices on the list. Washington has 19. Over three-quarters of the offices are miniscule, garnering less than $27,500 in customer transactions each year. The remainder are facilities which have at least five alternative postal facilities nearby available to customers.

The stated savings from these closures — $200 million — are small compared to the Postal Services massive losses, which are expected to top $20 billion per year if left unchecked. But, as any businessman can tell you, small savings can add up to big savings. Moreover, the facilities identified so far are only the low hanging fruit. The Postal Service will be looking at 15,000 other locations for possible closure by 2015.

The additional closures would doubtless involve larger and busier facilities.

But few services offered by USPS require an owned-and-operated facility; there are a host of other alternatives, ranging from automated postal “kiosks” stamp sales at supermarkets and other stores, to “village post offices,” by which postal services are offered by existing small businesses in partnership with the Postal Service.

The status quo for the USPS is not an option. Without change, the government-run enterprise will soon fail, with taxpayers stuck with the bill for cleaning up the mess. Better to let the Postal Service restructure now — even if that does mean fewer chances for politicians to get a building named after themselves.

• Gattuso is senior research fellow in regulatory policy at The Heritage Foundation. Readers may write to the author in care of The Heritage Foundation, 214 Massachusetts Avenue NE, Washington, D.C. 20002; Web site: www.heritage.org.

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