Treasury agrees to loan postal service $ 10 billion for rivals’ shipping contracts
The Postal Service contracts with private sector shippers for “last mile” delivery between distribution centers and consumers’ homes, and offers these businesses small discounts for the volume of parcels they deliver. .
(Amazon founder and CEO Jeff Bezos owns The Post.)
President Trump has made fun of the agency about these deals, which industry experts say only represent about 5% in savings. He owns called Amazon’s “delivery guy” of the Postal Service and falsely claims that the deals are the reason the agency got into financial trouble.
In April, Trump declared he wouldn’t approve any emergency funding Unless the USPS quadruples package delivery prices, a move analysts said would quickly bankrupt the agency by driving customers to private sector competitors.
Treasury Secretary Steven Mnuchin had previously sought to leverage the consolidation loans, tied to an initial round of coronavirus relief spending, in return for sweeping operational control of the Postal Service, including arrangements that would allow the administration Trump to approve decisions of senior postal staff, service contracts. with third-party shippers, collective bargaining strategies and high flat-rate prices.
The demands have turned what is typically an independent agency into political football, especially in an election year in which a large part of the population is expected to vote by mail.
The Treasury, even before the agreement, had achieved most of its objectives. In June, the board of directors of the postal service installed a new general postmaster, Louis DeJoy, who was a major promoter of Trump and GOP fundraising. The agency too looking for an outside company evaluate its largest service contracts, in order, experts say, to justify higher parcel delivery rates.
Post’s advocates on Wednesday said they feared loan terms forcing the USPS to disclose the contents of service agreements could open the door to high parcel rates.
“I’m a little surprised that this condition is even necessary,” said John McHugh, chairman of the Package Coalition advocacy group and former secretary of the military. “The USPS itself has already hired outside consultants to review these issues to determine if they are cost effective and reasonably priced. If nothing else, it gives Treasury input to what until now has been absolutely exclusive information between only the USPS and its client. You could say that this is just another step in making the Treasury Secretary the de facto Postmaster General.
The loan agreement requires the USPS to provide the Treasury with monthly and quarterly financial and volume reports. He also has to spend the money he gets from the loan within 30 days and cannot access any of the funds if he has a cash balance of more than $ 8 billion. Funding expires in March 2022.
“While the USPS is able to fund its operating expenses without additional borrowing at this time, we are pleased to have reached an agreement on the material terms of a loan, should the need arise,” Mnuchin said. in one declaration. “I look forward to continuing to work with Postmaster General DeJoy to achieve the President’s goal of establishing a sustainable business model where USPS can continue to provide the postal service needed by all Americans, without shifting costs. to taxpayers. ”
Democrats had publicly urged postal leaders to hold on and not accept funding from the Treasury if it meant relinquishing control of the agency. In the Senate, a bipartisan deal was struck in a first round of coronavirus relief spending to provide a $ 13 billion grant to the USPS, but Trump threatened to veto the entire bill – worth $ 2 trillion, and brimming with funding for the unemployed, small businesses and other industries ravaged by the recession linked to the novel coronavirus pandemic – if postal credit were included.
Rather, Mnuchin told lawmakers that the Postal Service could receive a loan with conditions or get nothing at all. Desperate to save the then cash-strapped agency by October, lawmakers accepted the loan provision.
House Democrats have included unconditional borrowing provisions in their phase four coronavirus relief bill. Senator Susan Collins (R-Maine) pushed for a proposal in the GOP-controlled Senate that would require the Treasury to provide the $ 10 billion unconditional loan and provide additional emergency credit of $ 25 billion that would expire in September 2022. Postal officials would be required to certify that funds were needed to cover expenses related to the pandemic.
The proposal has the backing of Senate Democrats and garnered some Republican support, but not enough to pass a 60-vote threshold to avoid a filibuster.
Democrats were backed after the Postal Service reported better-than-expected financial results in May. Supported by increased parcel volume – Postal workers say parcels entering their distribution centers eclipse Christmas levels – the USPS now has nearly $ 14 billion in cash.
That’s enough money, experts said, to push the agency forward until May 2021 as a worst-case scenario, or October 2021, if package volumes remain high. The Treasury loan will buy the Postal Service at least five more months of cash, but perhaps up to a year more if parcel revenues continue to offset the decline in first-class mail, the most profitable product in the world. ‘agency.