Bloomberg News

Postal Service Seeks 50-Cent Stamps to Prevent ‘Taxpayer Burden’

February 23, 2012

Feb. 17 (Bloomberg) -- The U.S. Postal Service wants Congress to help it raise the price of a first-class stamp to 50 cents, an 11 percent increase, as part of its strategy to avoid annual losses as high as $18.2 billion by 2015.

The Washington-based agency included the increase in a five-year business plan released yesterday. In a separate letter to Congress, the service said U.S. taxpayers will have to cover losses if lawmakers don’t help it cut costs.

The letter and business plan reiterated proposals to cut billions of dollars a year in costs by ending Saturday mail delivery, closing facilities and pulling out of a health-care program for federal workers to manage its own benefits. Congress would have to approve some of those changes.

“In the context of the tremendous operating challenges facing the USPS, we believe the plan is comprehensive and balanced,” Lloyd Sprung, senior managing director of Evercore Partners Inc., told reporters on a conference call. The service hired Evercore, a New York-based investment-banking firm, last year to provide restructuring advice,

“We believe the plan allows the USPS to preserve its mission while also becoming economically self-sustaining,” he said.

The service said last week it lost $3.3 billion in the quarter ended Dec. 31. It has forecast a $14.1 billion loss for the year ending Sept. 30.

“These prospective losses would be unsustainable and would cause the Postal Service to become a long-term burden to the American taxpayer,” the service said in its letter to Congress. “Such an outcome is highly undesirable and entirely avoidable.”

Postage Increases

The Postal Service says it would save $2.7 billion annually by cutting mail delivery to five days a week and $7.1 billion a year by managing its own health-care benefits.

Raising the price of a first-class stamp to 50 cents would raise $1 billion a year in new revenue, according to the plan.

Postage-rate increases now can’t exceed the rise in the consumer price index. The service wants to make the 5-cent increase over one or more years in addition to annual inflation- linked boosts, Chief Financial Officer Joseph Corbett said on the call.

“The U.S. today is by far the least expensive of any post in the world,” Corbett said. “Clearly we’re underpriced in that area for single-piece first-class, and we would like the ability to move that price up.”

The price of a first-class stamp was raised to 45 cents last month from 44 cents.

The Postal Service drafted its business plan with analysis from Boston Consulting Group and Accenture Plc.

--Editors: Bernard Kohn, Stephen West

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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