USPS scraps plans to close 3,700 post offices

The US Postal Service has abandoned plans to close up to 3,700 mostly rural post offices, in favour of a new strategy of reducing their operating hours.
Executives said today that the consolidation process launched last summer, and suspended until May 15, will now end.

But, Postmaster General Patrick Donahoe told Post&Parcel today that plans to close hundreds of mail processing plants look set to continue, with USPS not intending to comply with a US Senate request to hold off on closures beyond the end of the current moratorium on closures on May 15.

An update on network consolidation plans is expected to be announced next Thursday.

Protecting rural access to post offices became an important issue last month as the US Senate passed postal reform legislation that included a measure banning closures for 12 months.

Today Donahoe said the new rural post office strategy came in response to talks with rural communities involved with the 3,700 post offices slated for possible closure last August.

“We think we have ended up with a win-win solution for rural post offices,” he said. “We have been listening to our customers and are going to keep listening.”

However, he conceded that he hoped the new plan would “take the issue off the table” for Congress as it looks to get postal reforms through the House as well as the Senate, allowing lawmakers to debate bigger financial problems for USPS like pension and healthcare reform.

The plan to reduce operating hours at a broader number of post offices is expected to save USPS $500m a year – more than double the $200m projected to be saved from closing 3,700 post offices outright.

Post office plan

“Very few post offices will be closed in rural America”

Americans have made 350m fewer visits to their local post office since 2005, and since the year 2000 the proportion of retail products sold through alternative outlets like the website, rather than post offices, has increased from 8% to 39%.

While post office usage is decreasing, operational costs are increasing, and while rural post offices currently cost on average $114,000 a year to operate, the weakest 4,500 earn an average of just $15,000 a year.

The new USPS rural post office plan has already been through an initial review of more than 17,000 outlets, 4,500 of which will definitely keep their eight-hour window service.

This autumn, subject to a 90-day advisory opinion from regulators, the Postal Service will launch a fresh series of community meetings to review 13,000 rural post offices, looking mainly into what the appropriate opening hours will be for each one, from two to six hours a day.

It is expected that around 9,000 rural post offices will have their operating hours significantly curtailed, with the process taking until the autumn of 2014 to complete.

Rural postmasters are set to be offered $20,000 voluntary retirement incentives, and currently about 61% or 13,000 are already of eligible age to retire. Donahoe said today that the postmaster associations are on board with the plan.

Some 400 post offices already slated to be closed will now remain open, while more than 100 non-operating post offices will close. Executives also said post offices that have already been closed will not be re-opening.

“We are discontinuing the process we applied to the 3,700 post offices and we will begin a review process that allows each community to retain their post office with reduced hours,” explained Megan Brennan, the USPS chief operating officer.

“We believe that very few post offices will be closed in rural America.”

Communities will have options other than simply reducing operating hours in their post offices, and could, for example, favour consolidating one post office into a nearby post office so that the surviving post office could keep its eight-hour window service.

Work to provide alternative postal access will continue, meanwhile, including an expansion of the current 19 “village post offices” in which postal services are provided at local gas stations and grocery stores, to support communities where post offices are open only a few hours a day.

Donahoe said rural communities will then “vote with their feet” regarding the future of their post offices, with an annual review set to modify opening hours based on customer traffic in each outlet.

Processing plants

“We need to move forward with reductions in capacity like any responsible business would”

Meanwhile, the Postal Service looks set to continue its previous announced process to close at least 223 of its 461 mail processing plants to reduce the excess capacity in the network now that First Class Mail volumes have dropped more than a quarter in six years.

Some confusion over exactly when plants are to be closed has emerged with the continuing advisory opinion process within the Postal Regulatory Commission set to take until at least July, while Congress is also yet to complete its reform legislation, which could affect closure plans.

Next week the Postal Service will announce an update on what is happening with the network consolidation initiative.

Asked specifically about the US Senate’s request to hold off on closures until reform legislation is completed, Donahoe said today that closures had to go ahead.

“Our volume is down so we have buildings that are empty, and we need to move forward with completing reductions in capacity like any responsible business would,” he said, adding that even postal workers were now calling for resolution to the excess capacity in the network, noticing the considerably drop in the Postal Service’s main money-maker, First Class Mail.

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