Terms of USPS loan deal raise eyebrows
- By FederalSoup Staff
- Jul 31, 2020
The U.S. Postal Service has reached an agreement with the Treasury Department over terms of a $10 billion loan provided for in the CARES Act, and it includes USPS handing over negotiated agreements with its top customers.
On April 10, then-Postmaster General Megan Brennan estimated that the pandemic would “increase the Postal Service’s net operating loss by more than $22 billion dollars over the next eighteen months, and by over $54 billion dollars over the longer term, threatening our ability to operate.”
The $2 trillion CARES Act originally contained a $13 billion grant to USPS, but that effort “was blocked by Treasury Secretary Steven Mnuchin, who warned such a move would kill the relief bill. A committee aide said Mnuchin told lawmakers during negotiations: ‘You can have a loan, or you can have nothing at all,’ the Washington Post reported in April.
Under the terms of the July 28 loan agreement, USPS can use the funding only for operational expenses with Treasury approval, must report monthly and quarterly on volume and must repay the loan within five years.
One other condition in the loan agreement has raised eyebrows: Prior to receiving the loan, USPS must give Treasury copies of its top 10 market dominant negotiated service agreements, top 10 competitive product NSAs and any updates on those NSAs.
The NSAs refer to the Postal Service’s agreements with high-volume shippers, such as Amazon. FedEx and UPS, in which USPS handles last-mile delivery in return for volume shipments.
Those agreements have been a source of contention between the Trump administration and USPS. The president has frequently accused the Postal Service of not charging shippers, particularly Amazon, enough to deliver their packages.
“I’m a little surprised that condition is even necessary,” John McHugh, chairman of the Package Coalition advocacy group, told the Washington Post. “The USPS itself has already hired outside consultants to look at these matters to determine if they’re profitable and fairly priced. If nothing else, if gives Treasury entree to what up to this point has been absolutely proprietary information between only the USPS and its customer.”
Several lawmakers said in a July 29 statement that the loan terms “would inappropriately insert the Treasury into the internal operations of the Postal Service using onerous loan conditions.” The statement was issued by the House Oversight and Reform Committee Chairwoman Carolyn B. Maloney (D-N.Y.), Senate Homeland Security and Governmental Affairs Committee Ranking Member Gary Peters (D-Mich.), Rep. Gerry Connolly (D-Va.), who chairs the House Oversight Subcommittee on Government Operations, and Sen. Tom Carper (D-Del.).
“These terms would severely limit the Postal Service’s access to capital and could accelerate the demise of the Postal Service that all Americans, especially seniors, small businesses, veterans and those living in rural communities, rely upon every day, especially during the pandemic," the statement continued. "We will not stop fighting to protect this critical service that communities depend on and to ensure that every American can safely participate in the November elections.”
Postmaster General Louis DeJoy said the loan would help USPS “delay the approaching liquidity crisis.” USPS “remains on an unsustainable path,” he said in a July 29 statement on the loan agreement. “[W]e will continue to focus on improving operational efficiency and pursuing other reforms in order to put the Postal Service on a trajectory for long-term financial stability.”
Although USPS currently does not need to tap into the loan, Mnuchin’s July 28 letter to DeJoy said “it is prudent to establish a borrowing facility that USPS may draw upon should the need arise.”