Double trouble Another rate hike possible in 2002 Two postal rate hikes in two years: That could well be the fate of catalogers and other users of the U.S. Postal Service.

Sources expect the U.S. Postal Service Board of Governors to implement new postal rates on Jan. 7, following a November recommendation from the Postal Rate Commission on the current rate case. And at the Mailers Technical Advisory Committee meetings held in October, acting USPS chief financial officer Richard Strasser said it’s a “reasonable possibility” that the USPS will start another rate case in the summer, with new rates likely to hit by spring or summer of 2002.

Why another rate increase? Postal consultant Alan Robinson, president of Silver Spring, MD-based Direct Communications Group, notes that postal cost-of-living salary increases are 29 cents an hour greater than what the USPS had anticipated when it filed the current rate case. Also, Robinson anticipates that the January rate hike for catalogers will be less than the up-to-14% increase originally proposed and closer to an average of 6% across the board.

Robinson predicts that the 2002 postal rate increase will also average another 6% across all rate categories. That would cover more than $1 billion in unanticipated cost increases and revenue shortfalls.

While agreeing with Robinson that the USPS will probably file another rate case next year, Gene Del Polito, president of industry trade group the Association for Postal Commerce, believes that the USPS is “overblowing the acuteness of its financial need.” For instance, Del Polito says that the USPS typically knows what to expect from its labor negotiations, so it shouldn’t be surprised about salary increases. Last year, the largest postal letter carriers union, National Association of Letter Carriers, won a step pay increase – an automatic raise based on workers’ job titles rather than merit – in its negotiation with the USPS. In the next year, the American Postal Workers Union (APWU), which represents postal clerks, will be negotiating a contract. Both unions “have always been paid on a parity basis,” Del Polito says. “So the probability is high that an arbitrator will give the APWU a step increase too.”

A second rate increase will come as a shock to many, since a survey released in October by mail equipment supplier Pitney Bowes showed that fewer than 30% of mail center managers even knew of the expected January postal rate hike. And fewer than 33% of those who were aware of the upcoming rate hike had budgeted for it.

In October, sources say, they saw mail handlers from the Shawnee Mission, KS-based Indian Creek Post Office setting aside 30-foot-high stacks of catalogs. The sources say these catalogs sat for weeks while postal workers caught up with first class mail delivery. The post office’s supervisor, Larry Byers, admits that some catalogs have been stacked up in the post office on occasion to allow for the delivery of first class mail, which takes priority over standard A mail. But he insists that the catalogs have remained stacked for only a day or two – not weeks.

At least one customer of that post office has experienced substantial catalog delivery delays, however. Lois Boyle, partner/chief creative officer for the Shawnee Mission-based catalog agency J. Schmid & Associates, says she received one of her clients’ catalogs three weeks before another person at her firm received his. The client, food gifts cataloger Wolferman’s, “wanted to blame the lettershop for not getting its books out on time,” Boyle says. But after speaking with two people who had been inside the Indian Creek Post Office – neither of whom would speak on the record – and hearing about stacks of undelivered catalogs, Boyle believes there was a problem in that particular post office.

“Yes, some bulk mailings are rotated daily,” Byers explains. “That means that if I have Tuesday, Wednesday, and Thursday mail still on hand on Friday, we may not get the Friday [bulk mail] out that day – we may not get the Wednesday [bulk] mail out that day either. But anybody who tells you that we’re weeks behind is a liar.”

While the Shawnee Mission problem isn’t necessarily widespread, catalog delivery, nevertheless, is “inconsistent around the country,” says Gene Del Polito, president of the Association for Postal Commerce, a trade group based in Arlington, VA. “It hasn’t been good, but it’s not horrible,” he says. “If a problem crops up in one area of the country, the Postal Service moves to fix it, but then problems arise in other parts of the country, and they don’t always get corrected.”


USPS MAY POST A LOSS Could set stage for additional rate hikes A month before the end of the USPS’s fiscal year 2001, Postmaster General William Henderson told the Associated Press that the agency might post its first annual loss in six years. What’s more, the loss could be as high as $300 million. Some observers say that for mailers, already facing the likelihood of a postal rate hike early next year, the red ink could translate to yet another increase in 2003.

“I’m not optimistic right now,” Henderson told the Associated Press on Aug. 29. “Our cash flow is down.” But first class mail volume for the first 12 of the year’s 13 accounting periods was up 1.3%. And Standard A mail volume (which includes catalogs) was up 4.9% for the same period – an increase that postal economist and catalog consultant Walter Bernheimer II, president of Wellesley, MA-based Bernheimer Associates, describes as “tremendous.” In addition, Priority Mail was up 3.1% for the 12 accounting periods.

Final revenue figures for the USPS’s fiscal year are expected to reach $65 billion. But Bernheimer notes the agency showed a $226 million profit through its first 12 accounting periods. “That would mean the Postal Service would have to lose more than $500 million for the final one-month period” to post a $300 million loss for the year. But Henderson cites additional costs as the key problem, including $150 million in worker’s compensation and $350 million for higher gas prices.

Some sources wonder if Henderson’s warning was meant to encourage the Postal Rate Commission to approve aspects of the pending rate hike. The agency’s last increase, in 1999, averaged only 4.5% for most catalogers. But if approved, next year’s increase could run as high as 14.8% for some catalogers. Trade groups have attacked the USPS during the hearings for the $1.7 billion contingency it included in its rate increase proposal, an amount they say is nearly twice the sum necessary.

“Unless the Postal Service has screwed around with the numbers,” concludes Bernheimer, “it’s probably going to break even – maybe lose just a few bucks.”