3-cent rate hike on letters planned for summer start

WASHINGTON -- From birthday cards to bank statements, charitable appeals to newspapers and magazines, it'll cost more to send mail starting in midsummer.

The increase -- including a 3-cent boost to 37 cents for first-class mail -- could come as soon as June 30, giving the cash-strapped postal service a boost as it tries to cope with declining business and hundreds of millions of dollars in costs from the terror attacks last fall.

All that remains is for the Postal Service's governing board to set the date.

Postal Rate Commission Chairman George A. Omas announced approval of the rate agreement, which was worked out by the post office and nearly 60 organizations and businesses. That agreement allowed the commission to avoid the months of legal wrangling that usually accompany rate cases.

"I cannot overemphasize how extraordinary today's decision is," Omas said.

He said the increases would give the post office "breathing room" to deal with its financial problems, "an immediate influx of revenue while holding rate increases to a reasonable percentage for postal customers."

Commission member Danny Covington said the board realizes no one likes rate increases but also recognizes that the terrorist attacks last fall have had a profound impact on the nation and the Postal Service.

Robert F. Rider, chairman of the postal board of governors, said the board will take up the increases at its April meeting.

The post office announced Sept. 11 -- just before the airliner attacks -- that it was seeking new rates to take effect in the fall of this year because of falling business in the slow economy. The agency had a loss of $1.68 billion last year and anticipated one of $1.35 billion this year, despite freezing new construction and cutting 12,000 jobs.

Then came the attacks in New York and Washington, followed by the anthrax-by-mail contamination, slapping the agency with hundreds of millions of dollars in costs for repairs, decontamination and health care.

Knowing that would plunge the post office into even worse financial problems, Omas suggested the agency and mailers sit down and work out an agreement for speedy consideration of the rate case -- an action that would cost mailers as much as $1.5 billion because the increases would take effect months before originally planned.

"I believe mailers cooperated in this effort because they felt that their short-term financial sacrifice would help keep the nation's Postal Service strong. This selfless attitude is a credit to the entire mailing industry." Omas said.

Many that normally oppose rate increases accepted this one, though not always cheerfully.

One group of businesses commented that if the case had been fully argued, its members would have fought for different rates.

"The settlement agreement represents, we believe, the best result that is possible to achieve under current circumstances," said the group, which included the Alliance of Nonprofit Mailers, AOL Time Warner, Coalition of Religious Associations, Magazine Publishers of America and the National Newspaper Association.

"However," the group added, "the circumstances themselves -- the need for so much additional revenue so soon after the last two rate increases, based on estimates developed prior to Sept. 11, 2001 -- reflect poorly on the Postal Service."

The only opposition came from the American Postal Workers Union, which represents workers who sort mail. The union argued that the rate increases offered giant mailers discounts for presorting mail that exceed the amount the Postal Service would save by not doing that work itself.

The post office denied that argument, saying it was "based on speculation regarding postal revenues, finances and capital investment plans."

And organizations that would benefit from the discounts defended them. "The settlement rates are well within lawful limits," argued a group including the Association for Postal Commerce, the Mailing and Fulfillment Service Association and the Recording Industry Association of America.