- The Washington Times - Saturday, January 5, 2002

The price of stamps will rise to 37 cents on June 30 and other mail rates will increase about 10 percent, boosting revenue for the debt-ridden U.S. Postal Service in the final quarter of its fiscal year.

The agency reached a settlement with large mailers this week, and other ratepayers have until Jan. 18 to oppose the agreement. Under its terms, periodical and magazine rates will rise an average of 10 percent, which will cost large mailers an additional $200 million a year in total postage costs.

"It's the best outcome we could expect under the circumstances," said Rita Cohen, senior vice president for legislative and regulatory policy at the Magazine Publishers of America, a New York group representing more than 300 publishers worldwide.

The Postal Service filed for the increase September 11 before officials realized hijacked planes had hit the Pentagon and World Trade Center.

"We knew if they went forward now, they would ask for larger increases," Miss Cohen said. "So we're viewing this as having the increase a couple of months earlier is better than having a larger increase later."

Typically, the government holds 10 months of public hearings before the commission locks in rate increases. But the process was speeded up to help ease the Postal Service's losses from the attacks and the anthrax scare.

As part of the settlement, the postal agency agreed that it will not raise rates again before fall 2003.

Stamps last increased in January 2001, up from 32 cents the year before.

If the settlement does not face opposition, the rate increase will be approved by the postal commission later this month and will kick in at the end of June to allow the post office to gain an extra $500 million in monthly revenue before the end of the fiscal year Sept. 30.

The agency lost $1.65 billion last year.

"I don't think it's a surprise to anybody that in this environment the post office needs money for a host of reasons, not the least of which is the impact of anthrax in the mail and September 11 and some of the economy," said Louis Mastria, director of public and international affairs at the Direct Marketing Association, which represents some 5,000 direct mailers around the world.

"Even if you discount those things, which are huge, you still have enormous structural problems at the post office that this rate case won't fix, and no rate case will fix."

The Postal Service was operating close to its loan limit of $15 billion a year before the attacks.

Following September 11, mail volume fell about 8 percent and the losses in revenue resulting from the attacks and anthrax scares may be between $3 billion and $6 billion, said Postal Service spokesman Gerry Kreinkamp.

The attacks cost the Postal Service directly some $63 million, much of it from destruction of the post office near the World Trade Center in New York.

In October, anthrax in the mail killed two local postal workers and sickened at least 13 others. The scare led to further expenses, mostly related to sanitizing the mail.

The Postal Service signed a $40 million contract to buy eight devices that will irradiate mail with beams of electrons. The machines are expected to be installed at regional facilities in upcoming months.

The Postal Service, which does not get taxpayer subsidies, has been operating in the red for years. E-mail, faxes and private delivery companies have caused the agency's share of the nation's mail to drop, leading to revenue loss.

This, in turn, has caused the agency to raise rates. Under the "death spiral" theory, the post office will keep raising prices until it loses so many customers that it becomes too expensive to continue operating.

The White House gave the Postal Service $175 million immediately after the attacks. Congress passed legislation in December to give the agency $500 million to upgrade security and rebuild the lost New York facility. The bill is awaiting signature by President Bush.

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