Knife in the back: More tales of emergency suspensions

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Tomorrow will be the last day for the Southboro Station post office in West Palm Beach, Florida.  The Postal Service is closing the office as an “emergency suspension” due to a “lease expiration.”

USPS Handbook PO-101 says the Postal Service has 90 days to find another location or to proceed with a formal discontinuance study, but according to the Palm  Beach Post, all indications are that the post office is “closing for good.”  It was hugs and farewells today at the post office, and a lot of unanswered questions.

Emergency suspensions were a topic of discussion earlier this week at a hearing of the Postal Regulatory Commission, where the Postal Service’s witness for POStPlan was being cross-examined.  The plan to cut hours at 13,000 post offices doesn’t really have much to do with suspensions — it’s supposed to be about keeping post offices open, not finding a way to close them — so it was rather strange hearing suspensions come up so often during the hearing.

But suspensions were apparently on the mind of PRC Chairman Ruth Goldway because she had just had a meeting with representatives of the Association of United States Postal Lessors (AUSPL).  The lessors wanted to express their displeasure with the contract the Postal Service signed last year with CB Richard Ellis to handle sales and leases (more on CBRE here).

Chairman Goldway said the lessors association told her that CBRE has been demanding a 20 to 30 percent rent reduction when a lease is renewed, plus an early termination clause that allows the Postal Service to cancel the lease with 30-days notice.  The lessors are particularly disturbed by demands that they pay a commission to CBRE upon renewing the lease, even though commissions are typically paid only when a real estate agent finds a new tenant  (webcast here, discussion at 3:20).

The AUSPL believes that in many cases, CBRE is not overly concerned if a lessor decides not to renew the lease under the conditions it insists on.  That provides an opportunity for the Postal Service to declare an emergency suspension.  It’s an easy way to close the post office — no need to worry about community surveys, town meetings, appeals to the PRC, and so on. 

At the PRC hearing, Chairman Goldway asked the Postal Service to address the issue of lease negotiations and suspensions in the context of POStPlan.  The Presiding Officer’s Information Request asks the Postal Service to describe its policies regarding lease negotiations and to explain what it plans to do to avoid suspensions when there are problems renegotiating leases at POStPlan post offices (POIR 5).

 

Emergency suspensions just keep on coming

The practice of using breakdowns in lease negotiations as the occasion for an emergency suspension has a long history.   In 1997, Congress became concerned about the suspension issue and asked the GAO to look into it.  The GAO report notes that from 1992 to 1997, there were 651 suspensions, almost half due to the termination of the post offices’ lease or rental agreement.  Only 31 of the 651 ever re-opened. 

More recently, in 2009 the PRC ruled on an appeal of the Hacker Valley, West Virginia post office, suspended over a lease issue.  In that case, the lessor told the Postal Service she didn’t plan to renew the lease two years before the lease expired, but the Postal Service failed to look for another location and just closed the office.  After reviewing a number of suspension cases, the PRC observed, “This history strongly suggests that the Postal Service is using its suspension authority to avoid the explicit Congressional instructions to hear and consider the concerns of patrons before closing post offices” (A2009-1).

The PRC subsequently launched an investigation into emergency suspensions.  It obtained a list from the Postal Service showing that between 2004 and 2009, 300 post offices were suspended for building-related issues, at least half of them due to a lease problem.  No final report was ever issued by the PRC, and the docket is still open (PI2010-1).

In November 2010, the AUSPL gave the PRC a long list of complaints about the lease issue.  It concludes by saying that lessors often feel that when the Postal Service makes it impossible for the lessor to renew the lease, it’s the lessor who gets the blame: “It appears these issues are a strategic attempt to place lessors in the position of being blamed for PO closings.”  The problems have apparently been exacerbated since the CBRE contract was signed last July.

A few months ago, the USPS Office of Inspector General also got interested in the matter, and it put a page on its website inviting comments about the USPS-CBRE contract, but no report has yet been issued, and the page no longer appears on the OIG’s website.

 

The West Palm Beach Story

In the past, emergency suspensions have usually been confined to small rural post offices, but over the past few weeks, the Postal Service has used lease issues to close a couple of large urban post offices.  The situations could hardly be characterized as emergencies.  The Postal Service basically just told the landlords that it wouldn’t be renewing the lease.

The West Palm Beach Southboro Station is one of these post offices.  The Postal Service hasn’t had much to say about what happened.  “USPS Headquarters never made the decision as to whether or not to close the Southboro Post Office,” Debra Fetterly, the USPS spokesperson told the Palm Beach Post.  “Southboro simply involved a lease expiration with no renewal. USPS was told by landlord that there is a new tenant.”   As a USPS customer relations rep explained in this news video, "Apparently the Postal Service did not come out on top in the negotiations."

There’s a little more than that to the story, however. According to the landlord, Michael Markman, president of BET Investments, here’s what happened.  (Thanks to Emily Roach of the Palm Beach Post for her excellent reporting and many of the details that follow.)

In 2010, BET Investments bought the Southdale Shopping Center where the Southboro post office is located.  The lease with the Postal Service was set to end on October 31, 2011, so in January 2011 Mr. Markman started the process of negotiating a new lease.  But the Postal Service said it did not need all the space it was renting and did not plan to sign a new five-year lease.  Mr. Markman continued to negotiate and even offered the Postal Service a smaller space.

Sometime in early autumn, the Postal Service asked for a short-term extension until the end of January 2012.  Then in late October, the Postal Service announced that it would be holding a community meeting to discuss its proposal to consolidate the Southboro Station with another office a couple of miles away. 

The USPS press release for the meeting says that the Postal Service seeks the public’s input about whether to close the office, and it offers the following explanation: “Due to the continuing migration of hard copy messages to electronic alternatives, the downturn in the economy, and some extraordinary requirements in the 2006 Postal Accountability and Enhancement Act, the U.S. Postal Service is compelled to continue its aggressive plan of cost reductions which began nearly a decade ago.”  The press release says nothing about an impending problem with the lease.

The community meeting was held on November 3, 2011, but apparently the Postal Service did not proceed with the discontinuance process, perhaps because of the moratorium that ran from December until mid-May.  The Postal Service instead asked the landlord for a second short-term extension till the end of June, and then another for the month of July. 

In the spring, the Postal Service informed Mr. Markman that it wasn’t interested in renewing the lease, and he went looking for a new tenant.  On June 6, customers were informed that the post office would close on July 14. 

The landlord says during the 18 months of negotiations, he worked with three people at the Postal Service, and he never objected to the terms of a lease.  “We tried to renew them or downsize the branch,” says Markham, “but I was told that it was slated to close as a result of overall cuts that the Postal Service was making.” 

Given how determined the Postal Service was to close the Southboro office, you’d think that it was running at some huge deficit and needed to be closed to stop the bleeding.  According to the Postal Service, however, the Southboro station had revenues of $1.4 million.  While the office has 29 employees, nearly all of them are letter carriers, and the retail services require only a few clerical workers.  With just their salaries and an annual rent of $168,000, the station was clearly showing a significant profit.  Apparently, these days that’s not enough to keep a post office open

 

The Bainbridge story

As unusual as it is to see a large post office like Southboro closed for an emergency suspension, the circumstances are almost identical to what happened in Chagrin Falls, Ohio, where the Bainbridge branch was suspended in June 2012 over a similar situation with the lease.  As with Southboro, the story goes back to early 2011.

In February 2011, the Postal Service announced that it was considering closing the Bainbridge branch.  "We're in financial straits and watching our revenue go down," USPS spokesperson Victor Dubina explained.  "But no decision to review that consolidation option has been made at this time," Dubina said.  The matter of the lease was not mentioned.

Sometime in the spring of 2011, the Postal Service asked for a one-year extension on the lease, which was set to end on June 20.  As news reports subsequently explained, the extension gave the Postal Service time to expand the parking and post office boxes at the Chagrin Falls Post Office so that it could take on the Bainbridge customers.

On June 13, 2011, a meeting was held at Fellowship Bible Church to discuss the potential closure.  “The Bainbridge branch of the Chagrin Falls Post Office is being studied due to reduced workload and customer activity,” USPS Operations Manager Marchelle Rogers said in a letter to customers. “We are tentatively considering relocating retail operations to a nearby office.”  Again, there was no reference to a potential problem with renewing the lease.

At the June meeting, Mr. Dubina again blamed the financial problems of the Postal Service for the need to consolidate the branch, and the only reference to the lease was his comment that the Postal Service had gotten a one-year extension so that it had some time to look at buying land around the Chagrin Falls Post Office so that it could be expanded to handle the Bainbridge customers.

In July 2011, the Bainbridge branch appeared on a list of 727 post offices being studied for closure, but the office remained open for almost another year.  In May of 2012, just when the moratorium ended, the Postal Service announced that “an issue with the building’s lease is forcing the US Postal Service to close its Bainbridge post office branch and move the operation down the street.”  The last day of operation was June 15, 2012.

Postal Service spokesman David Van Allen explained that the post office had been considered for closure for some time, and it was approved for closure last February, but the moratorium was in effect at the time.  While the moratorium was in place, Mr. Van Allen says, the owner of the building leased it to another tenant, and that’s the reason now being given for the suspension.

As with Southboro, the landlord’s comments suggest that the decision was not his but the Postal Service’s.  He told the media, “They are downsizing.  I'm sorry that they have to leave, because they were a very good tenant.  I think they were a great addition to Bainbridge.  But I understand the fact that they need to do major cost-cutting.” 

As for the landlord finding another tenant, that may have been true at some point in May, when the Postal Service declared the emergency suspension, but the building is currently listed as available for lease

 

More emergency suspensions in the news

Using lease issues to justify emergency suspensions also came to the attention of Congressman Mark Critz of Pennsylvania earlier this year.  In March, the Congressman sent a letter to the PRC requesting an immediate review of concerns that the Postal Service appeared to be deliberately labeling post office lease holders as “unreasonable” in an attempt to close postal centers outside of the public review and appeals process.  

Congressman Critz named several small rural post offices — Derry, East Vandergrift, New Florence, and Sipesville — where the landlord had apparently received a termination notice indicating simply that the Postal Service would not be renewing the lease.  The Congressman’s focus on the problem had an immediate effect.  A couple of weeks later, Chairman Goldway infomred Critz that the leases were being renewed for three of the post offices he’d expressed concern about.   Rather than being suspended, they’re just going to have their hours reduced under POStPlan.  (For some reason, though, New Florence is listed as for sale and available for conversion to other uses.)

The post office in Rolling Meadows, Illinois, closed on May 26 because, according to a USPS press release, the Postal Service could not come to an agreement of lease terms with the owner.  The closing was announced in April, and residents tried a letter writing campaign, but to no avail.  The lease was due to run until January 31, 2012, so apparently it was extended for a few months beyond that.  One local resident couldn’t believe his post office was closing.  “This kind of blows my mind,” Tom Coombs told the Rolling Meadows City Council in May.  “How can a new business come to a city that has no post office?”

In June, residents of Glen Easton, West Virginia, were given one week’s notice that their post office would be closing.  According to the town historian, the closure was “due to the lease expiration.”  It’s not likely that the landlord had another tenant who wanted the space.  The building is owned by Consolidation Coal, and locals say it will most likely sit vacant along with about a dozen other homes that Consol owns.  In a letter to customers, the Postal Service said, “A decision to permanently discontinue operations at the Glen Easton Post Office has not been made.  In the near future, we will be contacting you to explain our long term plans and solicit your comments.”  Glen Easton has had a post office since 1854.

The post office in Hillsboro, Maryland, closed June 21 due to what the Postal Service described as safety concerns with the building.  The landlord, however, told the local news that the Postal Service was just looking for an excuse to close the post office.  At the Postal Service’s request, she had made many improvements in the wiring, plumbing and sidewalks, but it was one thing after another, and the latest problem was the slanted floor. 

The landlord thought about spending the money to have the floor repaired, but she figured the Postal Service would just find another problem.  "They'd rather not have the post office there," she said.  A former town commissioner agreed: “The town's populace feels that this was a very under-handed way to circumvent a promise to not close any rural post offices,” said Roger Quicke.  "The whole town is up in arms about this.  They told us the hours would be reduced, but we would keep our post office. It feels like we turned our backs and they slipped the knife in."

(Photo credits: customer entering Southboro Station, West Palm Beach, FL; CBRE HQ in LA; Southdale shopping center (PO is on other side of Publix from CVS); former Hacker Valley, WV post office; Bainbridge Branch, Chagrin Falls, OH; Rolling Meadows, IL, post office; Glen Easton, WV, post office; Hillsboro, MD, post office.)

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