Without rhyme or reason: The PRC turns down the Akron appeal

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Earlier this week the Postal Regulatory Commission (PRC) turned down an appeal that would have required the Postal Service to reconsider its decision to close the Goodyear Heights post office in East Akron, Ohio.  It was a decision without rhyme or reason, and it does not bode well for future appeals.

The PRC seems just as determined to affirm closing decisions as the Postal Service is to make them, and it doesn’t look like evidence matters.  The decision comes first, and gathering and considering information comes later.  Just over the past few weeks, the PRC has rejected appeals for Freehold NJ, Fort Smith AR, and Gwynedd PA.  Many communities have said they feel like the Postal Service’s public hearings are just a sham because the decision has already been made.  If the PRC keeps rejecting appeals like this, it’s going to start looking like the whole process is a charade.

The Chairman of the PRC, Ruth Goldway, did not go along with the East Akron ruling, and just as she did with the decisions on Freehold and Fort Smith, she issued a dissenting opinion.  Her dissent explains why the Postal Service was wrong to close the Goodyear Heights post office and why her fellow commissioners should have voted to remand the decision back to the Postal Service for further consideration.  Goldway’s conclusion is worth quoting in full:

“In my view, the final determination does not offer a rational explanation of why the Postal Service would make a determination to close this facility despite the closing’s negative impact on the Postal Service’s finances. The record also documents lapses in the Postal Service’s provision of adequate notice and meaningful community input to the citizens of East Akron. I find its decision to be arbitrary and capricious as well as unsupported by substantial evidence in the record. Accordingly, I would set aside the Postal Service’s Final Determination and remand the matter back to the Postal Service for further consideration.

“This unsupported decision has the effect of worsening the Postal Service’s immediate financial problems rather than remedying them. I recognize that this facility has already been closed and that restoring service now at that location would add costs to the Postal Service. However, I believe that the Commission’s legal responsibility requires it to make the Postal Service accountable for its actions.”

In order to understand Goldway’s criticism of the Postal Service and her colleagues on the PRC, it’s necessary to go back to the beginning.

The Postal Service decided to study the East Akron post office for closure back in 2009 as part of its Stations and Branches Optimization and Consolidation (SBOC) initiative, an ill-fated effort to close up to 3,100 post offices that ended up with a list of about 140 before being discontinued in the spring of 2010.  Patrons of the East Akron post office learned their post office might be closing in July 2009, when they received questionnaires about their postal habits and concerns.

The closing of the East Akron station was opposed not just by the neighborhood patrons but also by the City of Akron itself.  In May of 2011, the Postal Service issued a final determination to close the post office, and an appeal was quickly filed with the PRC.  In June the city filed a restraining order in federal court to keep the post office open during the appeals process, but the court would not intervene, and the post office closed on June 24.

The appeal notes many problems with the Postal Service’s case: the Postal Service failed to give sufficient consideration to the effects of the closing on seniors, especially those with disabilities; it failed to listen seriously enough to concerns about the inconvenience and safety issues at the post office to which the East Akron station was being consolidated; it failed to post its Final Determination at the East Akron station; it failed to inform customers of their right to appeal; it failed to make the Administrative Record available for inspection (it was later compelled to do so by the PRC); and so on.

For its part, the Postal Service repeated its usual line about the PRC not even having jurisdiction over the case because the East Akron post office is a station, not a main post office, and thus not entitled to an appeal in the first place.  The Postal Service then went through all the community’s concerns, and essentially dismissed them as having been considered but outweighed by other concerns, like saving money.

Most of the administrative record for the case was well developed by July 2011, and nearly all of the arguments for and against the consolidation were based on the premise that the Postal Service would be moving employees, post office boxes, and postal services to a nearby post office on South Arlington Road, about 3 miles away.

Then on July 26, 2011, the Postal Service announced its Retail Access Optimization Initiative (RAOI), and the South Arlington post office was on the closing list.  This did not escape the attention of the folks in East Akron.  As reported in Ohio.com, “When the U.S. Postal Service recently shuttered the East Akron post office, customers were told they could use the South Arlington location.  Now that post office might be closed.  Akron leaders, who are still appealing the decision to close the East Akron post office, were shocked Tuesday to see South Arlington and two other Akron post offices on a new postal service list of locations being considered for closure.”

A few weeks later, the City of Akron filed a supplemental statement with the PRC pointing out the obvious, namely, that in its Final Determination to consolidate the East Akron station, as well as in numerous supporting documents, the Postal Service had repeatedly identified the South Arlington Road station as the new post office for the patrons of the East Akron station.   Much of the Postal Service’s argument, in fact, rested on its claim that the proximity of the South Arlington Post Office would provide “a maximum degree of effective and regular postal service” to the community.  How could the Postal Service make such a claim and then put the South Arlington station on the RAOI list?

But what’s even more amazing is that the PRC completely ignored this fact when it affirmed the closure decision.  There’s not a word in its “Order Affirming Determination” about the South Arlington Station being on the RAOI list, yet there are ten references to the station in the space of 15 pages, referencing its proximity to the East Akron station, the issue of safety, the potential inconvenience, and so on.

If that’s not crazy enough, consider the issue that does get a lot of attention in the appeal docket — the matter of money, specifically how much money the Postal Service will save by closing the East Akron post office.

In looking at the financial aspect of the case, one is struck first by the fact that the East Akron post office was actually doing a thriving business.  The USPS noted that retail transactions had declined at the station by approximately
 10%  since 2007, suggesting that the decline — due no doubt to the recession — was a reason to close the post office.  But even with this decline, receipts were almost $400,000 in 2009.  In other words, this was not a tiny rural post office doing $50 of business a day.  This was a post office doing a significant amount of business, and it had a very small staff to boot.

Most of the financial information about the post office is not available for public inspection since it’s considered proprietary by the Postal Service, and the record is conspicuously redacted — on many pages, large portions are blacked out.  Still, the record provides the basics for understanding the Postal Service’s cost analysis.

Essentially, by closing the post office, the Postal Service estimated that it would save the cost of the rent and utilities (about $140,000 a year), plus the salaries and fringe benefit costs for two employees, a supervisor and clerk (about $170,000 a year).  However, much of this $310,000 savings would be offset, the Postal Service acknowledged, by what it called “replacement services,” for example, the additional costs for the carrier who would need to drive additional distances in delivering the mail to the East Akron neighborhood from a new home base on South Arlington Road.  The Postal Service did not provide a clear explanation of how it arrived at these replacement costs, but it provided a very specific total, $220,572.  Even with these replacement service costs, the Postal Service estimated that it would save over $90,000 a year by closing the East Akron post office.

In reviewing the numbers, the Public Representative, and later Goldway in her dissent, observed that it didn’t make sense for the Postal Service to say that it was going to save salaries for two employees, when it was also saying that these two employees were not going to be seriously affected by the closure because they were simply being transferred to the South Arlington station.

The Postal Service wanted it both ways.  The two East Akron employees were not losing their jobs, so presumably two other employees (with the exact same salaries) would lose their jobs and the Postal Service just didn’t want to mention it, or no one is losing a job and the cost savings is a fiction.  Take your pick — neither makes the Postal Service look good.

Chairman Goldway focused on a second issue in her dissent — the nearly two years left on the lease, which meant that the Postal Service was responsible for almost $200,000 in a buy-out.  Plus there was the $30,000 in renovations that will be necessary at South Arlington to accommodate the additional carriers.  According to Goldway’s figuring, if salaries and benefits were not considered as cost savings and if the extra costs of the lease buy-out and renovations were factored in, the Postal Service stands not to save money by this closure but to lose money — something on the order of $80,000.

The majority report of the Commission, however, bent over backward trying to make the Postal Service’s case even stronger than the Postal Service had presented.  Remember those “replacement costs” of $220,572?  Well, the Postal Service explained that the minimum additional annual carrier drive time and mileage costs would be about half of that, but it never said where the other half was coming from.  So instead of asking the Postal Service for an explanation, the PRC’s report took another approach.  It suggested that the $110,446 might be “an appropriate estimate” of the replacement costs, so that the Postal Service would actually save $110,000 more than it had indicated in its brief.

Now why would the PRC claim a greater benefit for closing the post office than even the Postal Service was claiming, and why would it do so based on a supposition that the Postal Service had essentially made an error to its own disadvantage?  Isn’t the PRC supposed to be taking a critical look at the Postal Service’s argument for closure rather than putting a spin on things to make the case look stronger than it really was?

There’s also the question of revenue.  The Postal Service claimed the move was basically revenue-neutral: the $400,000 East Akron was taking in would show up on the books at South Arlington or some other postal facility.  But there’s no evidence for this supposition, no studies demonstrating that with previous closures the business lost at one post office was simply picked up at others.

Yet common sense says that some box holders will probably not transfer their boxes, that some people will, at least some of the time, look to UPS or FedEx if it’s more convenient than South Arlington, and that the loss of customer goodwill may have an impact on where a person chooses to do business.  Consider hypothetically that the consolidation causes a loss of revenue of just 10%.  That’s another $40,000 a year that might have been included in the “savings” calculations, and it would have made the actual cost of the closure even greater for the Postal Service than Goldway’s calculations added up to.

One final angle that does not seem to have been considered at all.  The patrons of the Akron post office now have to travel outside of their neighborhood to visit another post office, and that means more miles, driving time, and fuel.  But that’s not part of the Postal Service calculations since these costs are not borne by the Postal Service.  It may be saving some money, but the people who use the post office will have to pay more.  How much is hard to say, of course, since it’s almost impossible to say how many people will make how many extra trips of how many miles, how often, etc.  In any case, the Postal Service certainly made no effort to do that calculation.

Overall, the Postal Service’s decision to close the East Akron post office just didn’t make sense.  The Postal Service could easily have waited until the lease ran out and saved itself the buy-out money.  It could have offered a more reasonable — or more honest — explanation of how it would save the costs of two employees while just transferring them to another office.  And it could have been upfront about the fact that it was planning to close the South Arlington station instead of telling the people in Goodyear Heights that they would not be seriously impacted because there was a post office just three miles away.

In affirming this decision, the PRC also acted without good reason.  Its decision failed to acknowledge the fact that the South Arlington post office may close, and it just repeated what the two sides had said wihout providing any new insights or understanding of the issues, except for helping out the Postal Service by “correcting” its calculation of “replacement services” so that the cost savings were even more inflated than the Postal Service’s numbers.

By the way, if you’re wondering who we’re talking about when we say the PRC did this or that, take a look at the PRC website.  There are currently four commissioners:

Ruth Goldway, Chairman of the Commission, has dissented now on three appeal cases that ruled in favor of the Postal Service.  She is the lone commissioner nominated by a Democrat, President Clinton, back in 1998.  She was reappointed twice by President Bush and named Chairman by President Obama. She has extensive background in postal matters, and she was instrumental in the Postal Service’s adoption of the “Forever Stamp” in 2007.

Mark Acton, Vice Chairman of the Commission, was nominated by President George W. Bush in 2005, and he was recently re-nominated by President Obama.  Before coming to the PRC, he worked for nine years managing legislative and regulatory concerns as Staff Director for the Republican National Committee Counsel’s Office. Acton’s professional background also includes direct mail marketing experience managing Republican Party finance programs.

Tony Hammond joined the Commission via a “recess appointment” by President George W. Bush in 2002 (he was subsequently confirmed by the Senate).  During the 1998 election, he was Director of Campaign Operations for the Republican National Committee.  He served as senior consultant to Forbes 2000 and also as Senior Vice President of the direct marketing firm, FL&S.  From 1989 to 1994, Mr. Hammond was Executive Director, as well as Finance Director, of the Missouri Republican Party.

Nanci E. Langley joined the PRC in June of 2008, appointed by President George W. Bush.  She was involved with the development and enactment of the Postal Accountability and Enhancement Act, and worked with Senator Daniel K. Akaka, the former chairman of the Senate postal subcommittee.  Prior to her appointment, Langley served for 24 years as a senior legislative and policy counselor to two United States Senators (both Democrats) from her home state of Hawaii.

There are supposed to be five commissioners rather than four, so the PRC has been working short-handed since June 30, 2011, when Commissioner Dan G. Blair resigned.  The terms of two commissioners, Acton and Hammond, ended in October 2010, but they have been serving an extra year (as provide by US Code).   Acton has been nominated for re-appointment by President Obama, who has also nominated  Richard G. Taub to replace Hammond.  Both are still awaiting Senate confirmation.  Presumably a fifth commissioner will also be nominated soon.   If at least two new commissioners  are not confirmed by October 14, there will be only two left — Goldway and Langley — which is not even enough to form a quorum.  Forget about the fact that with all the work facing the PRC (the RAOI Advisory Opinion, appeals, rate issues, compliance reports, etc.), there’s probably enough work for a  hundred commissioners.

The section of US Code on the PRC states that “Commissioners shall be chosen solely on the basis of their technical qualifications, professional standing, and demonstrated expertise in economics, accounting, law,or public administration.”  But the law recognizes that politics may enter into their thinking, so it also says, “Not more than 3 of the Commissioners may be adherents of the same political party.”  At this stage, Goldway and Langley are the Democrats (even though Langley was nominated by a Republican president), and Acton and Hammond are the Republicans.  Taub is also a Republican.  The party of the fifth commissioner is yet to be determined.

You can contact these commissioners by going to the PRC website here.  The complete docket is here, the appeal brief is here, and the PRC decision, along with Goldway’s dissent, is here.

(Photo credits: East Akron post office; SOS sign; entrance to post office; the commissioners’ photos are from the PRC website.)

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