Postal Service halts construction plans, citing financial losses

Friday, March 9th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ Moving to block massive losses as costs rise and business slips, the Postal Service is freezing hundreds of new construction and leasing projects across the country.

And the agency's governing board issued a warning Thursday that unless there are changes in the laws that regulate how the post office operates, universal service to every home, every day, could be in danger.

Postal officials didn't provide a dollar estimate for the savings they expect in the cutbacks, but they said more than 800 planned projects in all states will be affected.

The move comes just two months after the price of first class mail went up a penny to 34 cents.

Many other rates rose also, but several price increases in other types of mail that had been sought by the agency were rejected or trimmed by the independent Postal Rate Commission.

With rising costs, postal officials now say they face a $2 billion to $3 billion loss this fiscal year. After five years in the black, the post office had a $199 million loss last fiscal year.

Postal managers are preparing to apply this summer for another rate increase, to take effect next year.

Among the problems cited by the Postal Service are wage rate increases larger than the rate of inflation, rising fuel costs, changes in the type of mail being processed, increased competition and forecasts calling for the diversion of some first-class mail to electronic alternatives.

The construction and leasing freeze affects facilities that the agency has made commitments to but where construction has not yet begun.

``All new construction, new leasing and expansion planned for 2001 is frozen,'' postal spokeswoman Judy de Torok said.

The projects already under way won't be halted, she added, and a few planned projects will continue if needed for health and safety reasons.

Meanwhile, the universal service that Americans take for granted could be in jeopardy unless laws regulating operations are changed, said the postal governing board.

``Regrettably, our call for an additional rate increase, following so soon after the last one, reflects the fact that the 30-year-old statutory model that governs the Postal Service is in need of change to protect universal service at affordable rates,'' board chairman Robert F. Rider said.

For the past several years postal leaders have sought changes in the law to give them more flexibility in changing rates and services to cope with rising costs and changes in competition. Under current rules it takes nearly a year to change rates.

Long negotiations and hearings produced a bill they felt would solve many of their problems last year, but the measure never came up for a vote and died with the end of the last Congress.

The postal governors this week asked the Rate Commission to reconsider the changes it made in their request. They also sent a letter to President Bush seeking his assistance in getting legislation to provide them more freedom.

Universal service to every address at uniform rates has been a requirement since the nation's founding. For years Congress subsidized the service, but when the current system was created in the 1970s the subsidies were phased out. The post office no longer receives taxpayer money for its operations.