The U.S. Postal Service yesterday called for a penny increase in the price of a first-class stamp, a rate that postal officials predicted would take effect in 2001.
But business mailers quickly objected to some other proposed rates, contending they are unfair and would impose a costly burden on magazine publishers, catalogue companies and community-based nonprofit groups.
Under the proposal, a first-class stamp would rise from 33 cents to 34 cents. Postcards also would go up a penny, to 21 cents.
The "priority mail" flat rate, for material sent in a Postal Service envelope regardless of weight, would jump from $3.20 to $3.85. To soften that increase, postal officials created a new category of priority mail, priced at $3.45, for items weighing less than a pound.
The proposed rates were developed by the Postal Service and approved by its board of governors shortly after the start of a 35-minute morning meeting at postal headquarters here.
Postmaster General William J. Henderson said the proposal would bring the Postal Service an estimated $3.7 billion in additional annual revenue.
But Henderson said higher rates would not cover anticipated costs and indicated he would seek to reduce overhead and expenses by $1 billion in the coming year. He suggested the agency was operating with a thin financial safety net.
"We've literally coughed up to the edge of the cliff here to raise prices. . . . We're trying to be consumer-sensitive here," Henderson said. First-class stamps, he said, remain a "real bargain," given inflation trends over the last three decades.
Einar V. Dyhrkopp, chairman of the board of governors, said the proposed rates would keep the Postal Service "solvent." The agency's current budget allows for $100 million in profit, a small sum for a $63 billion-a-year operation. "That's cutting it very, very close," he said. "I'm going to be honest--we're going to be lucky if we can do it."
The Postal Service receives no tax dollars for its labor-intensive operations and under law must break even over the long term. An independent agency, the Postal Rate Commission, reviews the proposed rate hikes and has up to 10 months to hold hearings and study the service's justification for postage increases.
The last rate increase came a year ago, on Jan. 10, 1999, when the price of a first-class stamp rose by a penny, to 33 cents.
Rate cases are enormously complex. For the last case, the Postal Service filed more than 100,000 pieces of paper with the rate commission. More than 100 witnesses submitted testimony and 82 parties, including Postal Service competitors, intervened in the case.
The proposed new rates drew some praise yesterday, because it appears automated mail-handling and sorting machines have held down first-class costs, but the request also came in for stiff criticism from business mailers.
Dozens of rates based on weight, location and editorial content make it difficult to estimate the typical postage cost for periodicals and direct mail. But the magazine and catalogue industries said their rates would jump by 15 percent and a spokesman for community-based nonprofits said their rates for charitable fund-raising mail would increase by as much as 16 percent.
Some industry spokesmen suggested the rate hike would drive more retailers, catalogue companies and small publishers toward the Internet and electronic commerce ventures.
"I can't think of a more ill-timed decision and I can't think of a more wrongheaded decision," said Gene A. Del Polito, president of the Association for Postal Commerce, which represents direct-marketing and catalogue companies.
For catalogue companies, he said, the proposed rate increase means "do whatever you have to do to make your Web sites as interactive as possible . . . spend more on the Web."
Other industry spokesmen said they were disappointed that the agency did not wait at least two or three more months to fashion a rate case on 1999 data, rather than the fiscal 1998 figures that will be submitted to the rate commission.
"It boggles the mind," said Neal Denton, executive director of the Alliance for Nonprofit Mailers. He called the 1998 numbers "obsolete."
Community-based nonprofits, such as hospitals and fire departments, cannot pass along the extra cost of mail solicitations, Denton said, and "will have to take the costs out of programs in their community. It just makes no sense."
The proposed rates seem certain to set off a lobbying battle on Capitol Hill and to spur demands that the Postal Rate Commission examine the increases closely. "We will do all in our power to bring this increase down to a reasonable level," said Cathleen Black, president of Hearst Magazines and chairman of the Magazine Publishers of America.
Henderson said a joint postal-industry task force has been formed to look at ways to lower periodical rates and will send any findings to the rate commission.
CAPTION: Calling first-class stamps a "real bargain," Postmaster General William J. Henderson said the Postal Service is "trying to be consumer-sensitive here."