Senators Joe Lieberman (I-CT), Tom Carper (D-DE), Susan Collins (R-ME) and Scott Brown (R-MA) at press conference announcing postal reform plan (Photo: Charles Dharapak/Associated Press)
In a 62–37 vote late last month (April 25), the Senate approved the 21st Century Postal Service Act (S. 1789), a bipartisan bill that promises financial relief for the U.S. Postal Service (USPS) but would bar it from closing thousands of post offices and hundreds of mail processing facilities. The bill, sponsored by Senators Joe Lieberman (I- Conn.), Susan Collins (R-Maine), Tom Carper (D-Del.) and Scott Brown (R-Mass.), would allow the Postal Service to use $11 billion in surplus contributions to the Federal Employees Retirement System to offer buyout and early retirement packages to as many as 100,000 USPS employees by October 2015, and would extend the timeline for the Postal Service to grow a healthcare fund for future retirees, saving the agency billions of dollars over the next few years. It also would guarantee citizens access to retail postal services, impose a one-year delay in closing rural post offices, allow the USPS to end most Saturday deliveries within two years (but only if it can show that it must do so to become financially solvent), and require it to maintain an overnight delivery standard for first-class mail sent and delivered by the same processing facility, which would keep open about half of the 223 plants now scheduled for closure or consolidation.
In a letter to Postmaster General Patrick Donahoe released on May 1, the four sponsoring senators called on the USPS to extend its moratorium on closings beyond May 15, saying, “We believe an attempt to proceed with the planned closures—to “get in under the wire” while legislation to the contrary is being considered—would be counterproductive and would violate the clear intent of the Senate.”
“We therefore urge you to extend the current moratorium to delay the closure or consolidation of post offices and mail processing facilities that would be kept open were S. 1789 to be enacted into law,” they continued, “while we work together with our House colleagues to enact comprehensive postal legislation as quickly as possible.” Whether that will happen before the May 15 deadline is debatable, since the Senate bill faces serious opposition from both the USPS Board of Governors and the House of Representatives.
The Board of Governors believes that the bill “does not provide the Postal Service with the flexibility and speed that it needs to have a sustainable business model,” said Board Chairman Thurgood Marshall Jr. at a board meeting earlier this week (Monday, May 7). Marshall and Donohoe continue to advocate for the five-year business plan the Postal Service proposed in February, which Marshall claims “would better position the Postal Service to pursue vital and promising revenue opportunities and also achieve a cost reduction of $22.5 billion by the year 2016.” Donohoe added that “we would have preferred the Senate allow the Postal Service to move further and faster in addressing its cost reduction goals.”
The Senate-approved measure has gone to the House, where a very different postal overhaul bill co-sponsored by Representatives Darrell Issa (R.-Calif.) and Dennis Ross (R-Fla.) already is pending. Their Postal Reform Act (H.R. 2309) includes a proposal to create a panel similar to the Defense Department’s Base Closure and Realignment Commission to make decisions about closings and finances. It also contains much steeper cuts to postal operations than the Senate bill, setting Congress up for what could become a grueling showdown between the two chambers, when and if the House moves on the measure—something the Senate bill’s sponsors have said they hoped will happen very soon.
**Update** Nearly simultaneous with our post of this article, Postmaster General Patrick Donohoe announced a revised plan to to cut the operating hours of 13,000 locations with little traffic (mostly rural locations) to between two and six hours a day. The Postal Service reports that this new plan will actually save more money than the old one – $500 million versus $200 million. Perhaps more importantly, it will placate the lawmakers who have been critical of the USPS’ various campaigns to close post offices, end Saturday mail delivery and raise postage rates.
Which independent federal agency’s predecessor was created on July 26, 1775, by a decree of the Second Continental Congress? Here’s a hint: it’s also the third-largest civilian employer in the nation (behind only the federal government and Wal-Mart) and maintains the largest fleet of vehicles (more than 218,000) in the world. The correct answer is the United States Postal Service (USPS), which employs some 552,000 career workers—though that number is down from almost 753,000 in 2002 and is expected to shrink even more in coming years, as the service downsizes in response to significant decreases in the volume of first-class mail.
The “Postal Clause” of the U.S. Constitution empowered Congress to “establish post offices and post roads,” transforming the U.S. Post Office into the Post Office Department in 1795 (and making it one of only a few federal agencies explicitly authorized by the Constitution). The department originally was part of the presidential cabinet, until President Richard Nixon signed the Postal Reorganization Act in 1970, creating an independent USPS as of July 1, 1971. The agency is run by an 11-member board of governors that operates much like a corporate board of directors. Nine of the governors are appointed by the president and confirmed by the Senate; they then select the U.S. Postmaster General, who acts as the agency’s CEO, and a Deputy Postmaster General, who serves as its COO. (These two individuals fill the tenth and 11th seats on the board.)
USPS headquarters are located at 475 L’Enfant Plaza, SW, in Washington, D.C. The agency operates a vast retail system of nearly 36,000 post offices and other facilities throughout the nation. Many of these are owned by the USPS; others are leased, either from private sector owners or other government agencies. (Post offices often are housed in buildings owned or leased by other government organizations—for example, in courthouses and other federal buildings; in those cases, the USPS operates as a tenant of the GSA). In addition to post offices, the agency maintains hundreds of mail processing centers, including regional distribution centers, local processing centers, destination processing centers, airport transfer centers—and two remote encoding centers, in Salt Lake City and Wichita, Kansas, where clerks receive images of problem mail pieces, decipher hard-to-read addresses and type the correct addresses using a special encoding procedure.
The USPS is legally obligated to serve every residence and business in the United States, regardless of geographic location, at uniform prices and quality of service. It brought in $66 billion in revenue and processed almost 168 billion pieces of mail last year. While it has not received direct taxpayer dollars since the early 1980s, the USPS does get millions of dollars worth of implicit subsidies annually, in the form of breaks on property tax, vehicle registration and sales taxes, as well as government loans. With rapidly declining revenues, the agency has been exploring other sources of revenue as well as ways to cut costs to reduce its budget deficit. Many, however, argue that this deficit has been largely created by the Postal Accountability and Enhancement Act of 2006, which requires the USPS to pre-fund 75 years worth of future healthcare benefits to retirees with a ten-year timeframe, something that no other government agency is required to do.
In February, the agency announced that it planned to close more than half of its mail processing centers (264 out of 461) as part of a “network optimization” move that would also eliminate 35,000 jobs, end overnight delivery of first-class mail—and save more than $2 billion a year. However, in response to pressure from Congress, it had already (December 2011) agreed to delay closing any processing centers, as well as up to 3,700 local post offices, until May 15—and even that deadline is not a firm one. Speaking last week on the C-Span television show “Newsmakers,” Postmaster General Patrick Donahoe acknowledged that while immediate legislative action is needed to fix USPS financial problems, revenues are currently running slightly ahead of projections, while continuing cost-cutting efforts also are helping the bottom line. Therefore the agency’s cash-flow situation “is OK through the fall and into probably late next year,” he noted, adding that “any changes [i.e., closures] that we make will be incremental over the course of the summer.” No additional closures are expected between August and the end of the year—that is, until after the November 2012 presidential election.
The USPS already has begun replacing some low-volume local post offices with “village post offices”—facilities in local stores that it pays to offer limited postal services, like this one in Kailua-Kona, Hawaii.
Any observer of the federal leasing market will agree that the pace of new leasing has slowed considerably. This is to say that there are few requirements for new space or expansions of existing leases. Landlords hoping to lease space to the federal government must focus instead on what it will take to poach tenants from other buildings and the opportunity to do that poaching usually coincides with the expiration of the government lease.
Since most federal leasing is managed by the GSA, we thought we’d look at those lease expirations on a state-by-state basis to provide an indication of the volume of leasing opportunity. The graph above illustrates that trend, from the present year out to 2032, the date upon which the last of GSA’s current, commenced leases expire.
Our observations on the trend are as follows:
- The highest volume of lease expirations are expected this year and next. This is a signature of the GSA expirations trend whereby, due to the Bow Wave effect, the initial couple of years following the date of analysis are always the ones with the highest volume of lease expirations.
- GSA lease terms are typically some multiple of 5 years and the vast majority of leases are for 10 years or less. You can pretty clearly see that in the chart. The first 5 years offer the highest volume of expirations, the next 5 years offers fewer, the third tranche of 5 years offers a significantly lower volume of expirations and the final tranche even more so. Of course, near term leases will renew or relocate and continue to roll, pushing the expirations volume ever-forward.
- Perhaps the most interesting element of the expirations graph is the period from 2017-2021. In this period lease expirations are fairly stable and the volume remains high. This is due, in large part, to the post-9/11 construction boom that included numerous new FBI field offices, DHS facilities and Border Patrol stations, among others. Most of these were built on 15 to 20 year initial lease terms and the vast majority of these leases are expected to renew in-place.
The chart above is fully interactive. Move your mouse over any bar to see the lease expirations stats for that year, or choose to display the expirations trend for one or more states. The Colliers Government Solutions team tracks a wealth of data on government leasing activity across the country. If you want to explore market trends relating to a specific property or location contact us.
Alexander Hamilton U.S. Custom House
In recognition of the fact that May is National Preservation Month, we’re taking a brief look at GSA’s historic preservation efforts. More than a quarter of the 1,600 buildings owned by GSA, containing more than 60 million square feet of space, are listed in or eligible for the National Register of Historic Places (the nation’s listing of historic properties); most (85 percent) were constructed between 1900 and 1941. GSA’s public building legacy includes border stations, courthouses, custom houses, post offices and federal agency offices throughout the United States and its territories. Nearly half (227) of GSA’s historic buildings are monumental structures designed to serve a symbolic and ceremonial—as well as functional—purpose. These Greek Revival, Second Empire, Romanesque Revival, Beaux Arts, Art Deco and Neoclassical buildings symbolize the permanence and stature of the federal government. GSA also leases space in 85 historic buildings.
The agency’s historic preservation program “provides technical and strategic expertise to promote the viability, reuse, and integrity of historic buildings GSA owns, leases, and has the opportunity to acquire.” Its Center for Historic Buildings “provides national leadership for compliance with the spirit and substance of the National Historic Preservation Act (NHPA) and other stewardship efforts.” The center works to develop innovative prototype design solutions, building investment strategies and other tools to help GSA staff and contractors preserve and upgrade historic properties in a cost-effective manner.
GSA has long been involved in many of the following historic preservation efforts:
- Developing a national database identifying GSA historic properties, including information on material conditions and preservation guidance;
- Creating a strategy for keeping historic buildings viable, including identifying and implementing ways to accommodate tenant needs within a preservation framework;
- Leasing underutilized federally owned historic buildings to the private sector, renting out ceremonial spaces in federal structures for special events and leasing privately owned historic structures for federal use; and
- When appropriate, selling or otherwise transferring ownership of historic buildings no longer needed for federal use to other entities better able to preserve them while maintaining public access.
GSA invested a substantial amount (40 percent) of its American Reinvestment and Recovery Act funding in work on 150 historic buildings, appropriating a total of $1.665 billion for that purpose. For more on GSA’s commitment to historic preservation—including its searchable database of historic buildings and detailed histories of many of these structures. If you’re interested in learning even more about GSA’s recent stewardship efforts, see the agency’s 2011 Extending the Legacy report.
Which federal agency can claim (at least some) credit for more than 190 Nobel Prizes? The National Science Foundation (NSF) is an independent federal agency created by Congress in 1950 “to promote the progress of science; to advance the national health, prosperity, and welfare; and to secure the national defense.” It is the only federal agency whose mission includes support for all fields of fundamental, nonmedical science and engineering research and education. Rather than operating its own laboratories, NSF seeks to fulfill its mission by issuing competitive, limited-term grants to researchers and research facilities throughout the nation. With an FY 2012 appropriated budget of $7.033 billion, it funds about 20 percent of all federally supported basic research conducted by U.S. colleges and universities, making about 11,000 new awards annually in a variety of research areas. It also awards nearly $420 million in professional and service contracts each year. This funding has resulted in major scientific breakthroughs that have led to transformative technologies such as carbon dating, cloud computing, magnetic resonance imaging, nanotechnology and robotics. NSF-funded researchers have won more than 190 Nobel Prizes.
The foundation is led by a director—who oversees NSF staff and management and is responsible for program creation and administration, merit review, planning, budget and day-to-day operations—and by the 24-member National Science Board (NSB), which meets six times a year to establish NSF policies. The director, deputy director, and board members are appointed by the president and confirmed by the Senate. NSF is divided into seven directorates—Biological Sciences; Computer and Information Science and Engineering; Education and Human Resources; Engineering; Geosciences; Mathematics and Physical Sciences; and Social, Behavioral and Economic Sciences—each of which is headed by an assistant director.
The foundation’s 2,100 employees—including approximately 1,400 career employees, 200 scientists from research institutions on temporary duty with NSF, 450 contract workers and the staffs of the National Science Board office and the Office of the Inspector General—are based at its 556,466-square-foot headquarters in Arlington, Virginia’s Ballston area. With its lease expiring next year, it is unclear whether the agency will remain in Ballston although, as we predicted last month, a move seems unlikely.