The conventional wisdom is that the Internet, competition from the innovative private sector and sky-high pension costs of pampered federal employees are killing the U.S. Postal Service (USPS). The only hope is to slash costs, scale back services, sell off unnecessary assets and shift the business of mail delivery to more efficient private owners.
It’s not true. The post office is being savaged for thinly-disguised political reasons, including the enrichment of a few select individuals. Investigative journalist Peter Byrne says California Senator Dianne Feinstein’s husband, Richard Blum, is one of those profiting mightily.
The postal service’s August financial report (pdf) showed a net operating profit of $182 million with one month left in the fiscal year, and improved revenues over the previous year. But, as post office critics would be quick to point, it still had a net operating loss of $4.95 billion. How can that be?
In 2006, the Republican-controlled Congress passed the Postal Accountability and Enhancement Act, which forced the USPS—which pays its own way and does not receive money from the federal budget—to prefund its future health care benefit payments to retirees for the next 75 years. The Postal Service was ordered to pay for the benefits of workers it hasn’t even hired and do it an accelerated time frame, a requirement not demanded of any other federal government agency.
The law instantly put the post office on the verge of bankruptcy and unleashed a movement to villainize and privatize the service. Unions would take a beating, private carriers would get a boost and $85 billion in hard assets could be sold to those who would know how to properly monetize them.
One of those in the know is Blum, chairman of C.B. Richard Ellis (CBRE), which has the exclusive contract to handle sales of post office property, according to Byrne. In his e-book “Going Postal,” Byrne cites an audit by Postal Service Inspector General David C. Williams that questions a “fundamental change” in policy that allowed, for the first, a single outsourced firm to manage all sales and leasing of postal real estate, rather than handling it in-house.
The result, Williams wrote, “are conflict of interest concerns.”
CBRE was hired as exclusive agent for the postal service in June 2011 and proceeded to sell millions of dollars worth of property. By Byrne’s count, CBRE “arguably” sold 52 properties for $66 million less than their assessed value ($79 million if you toss out the nine properties that sold above assessed value). Most of the sales did not involve distressed properties, perhaps ravaged by the economic downturn, and tended to be in economically healthy neighborhoods.
“The sales were mostly of central downtown buildings, with parking, in wealthy or revitalizing neighborhoods that attracted restaurant, boutique, and residential developers, or modern, suburban office buildings and warehouses, also with ample parking that attracted high-tech industrial firms,” Byrne wrote. “In other words, the most saleable postal properties were the ones most likely to command prices that exceeded their assessed values.”
Byrne also found that 20% of the portfolio was sold to business partners or clients of CBRE, while it took up to a 6% commission in 34 of the 52 transactions. CBRE appeared to act as an agent for both the Postal Service and buyers in many of the transactions, contrary to customary property sales, according to Byrne.
On Wednesday, USPS announced that it would ask Congress to let it raise the price of a stamp 3 cents next January 26 because of its “precarious financial condition.”
“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” USPS Board of Governors Chairman Mickey Barnett wrote in a letter to customers.
To Learn More:
Going Postal (East Bay Express excerpt from a book by Peter Byrne)