Nonprofit Mailers Looking At 20% Price Hike

September 27, 2013       Patrick Sullivan      

Nonprofit mailers would have to pay as much as 20.7 percent more but could receive a reduction in an enhanced carrier route rate if the United States Postal Service (USPS) gets its way.

USPS board of governors yesterday submitted proposals to the Postal Regulatory Commission (PRC). If the PRC approves the increases, mailers can expect an average 5.9 percent increase.

USPS spokeswoman Katina Fields confirmed that nonprofit rates would go up. “We’ve done what we can on our end to close the gap,” said Fields, noting layoffs, plant closures, route reductions and 16 consecutive quarters of increased productivity.

The PRC has 90 days to review the USPS’s proposals and make a ruling. If approved, the new rates hit on January 26, 2014. PRC spokeswoman Gail Adams said her office is reviewing the proposals but is currently unable to comment. A USPS press release sent on Wednesday said the rate hike is expected to generate about $2 billion “in incremental annual revenue.”

Normally the USPS is limited to a rate increase equal to the rate of inflation, also known as the Consumer Price Increase (CPI). The regular rate increase proposal seeks an average 1.6 percent hike, in accordance with the August 2013 CPI. The other average 4.3 percent is an exigent increase, due to extraordinary and exceptional circumstances. The exigent rate increase proposal filed with the PRC on Thursday blames sluggish mail and plummeting revenue on the recession.

The USPS last attempted an exigent rate increase in 2010, but was stopped due to, in part to the Affordable Mail Alliance (AMA), a coalition of for-profit and nonprofit mailers. Tony Conway, executive director of the Alliance of Nonprofit Mailers (ANM), which is an AMA member, said the AMA is ready to fight this new increase as well. He called the postal service’s revenue problems structural, as opposed to exigent.

Conway analyzed a number of the proposed changes for nonprofit standard mail: automated, nonautomated and enhanced carrier routes. He found that increases ranged widely, from 2.3 percent at the low end up to 20.7 percent for 5-digit automated flat pieces ($0.082 to $0.099). But the largest change is a price that declined, the only one on Conway’s list. High-density plus pieces, enhanced carrier route, will drop from $0.058 to $0.045, a change of 22.4 percent.

Conway couldn’t identify the rates most commonly used by nonprofits. “It’s a function of all types of variables,” he said. “How much volume, how many different destinations, how fine the sortation levels, drop-ship or not and if so, how deeply in the system, etc. Overall the big question is, flats or letters. If it’s letters, the increase is usually in the 5.9 percent range. If it’s flats, the range will be 7 to 8 percent.”

The four biggest increases behind 5-digit automated flats per piece, according to Conway, are:

  • Automated mixed ADC flat piece: $0.228 to $0.266, a 16.7 percent increase;
  • Enhanced high density flat piece: $0.062 to $0.070, a 12.9 percent increase;
  • Nonautomated 5-digit flat piece: $0.124 to $0.140, a 12.9 percent increase; and,
  • Nonautomated 5-digit nonmachinable letter piece: $0.296 to $0.334, a 12.8 percent increase.

Conway also analyzed periodical rates outside the county of origin, per pound, piece, bundle, sack and pallet, for nonprofit mailers. Those increases, he found, were much more uniform: between 5.1 percent and 8.3 percent.

Postmaster General Patrick Donahoe went before the Senate Committee on Homeland Security and Governmental Affairs yesterday to express support for the Postal Reform Act of 2013. Fields said the Postal Reform Act would grant the USPS the authority to exert more control over its pension prefunding and health care coverage.

“The Postal Reform Bill of 2013, S. 1486, goes a long way toward putting us on the path to financial stability,” said Donahoe. “By taking this approach, the Postal Service can reduce its annual costs by up to $8 billion annually through 2016.”

Donahoe said in July that the USPS will default on a $5.6 billion pension prefunding payment at the end of September. According to the exigent rate increase proposal, last year saw a reduction of about 56 billion pieces of mail. The USPS lost some $15.9 billion in revenue in fiscal year 2012.

“The Alliance strongly supports legislative relief for these problems, and it is unfortunate that none has emerged from Congress,” said a statement from Conway’s ANM. “But it would be equally unfortunate to penalize mailers for the excess costs that other interest groups have forced the USPS to continue incurring.”