Posted 07-28-2004 at 16:35:57
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Postal Service shouldn't dabble in sports sponsorship
By Sam Ryan
The U.S. Postal Service has just announced that it will not renew its sponsorship of five-time Tour de France winner Lance Armstrong. With a package price of more than $9 million a year, that should get the American taxpayers' stamp of approval.
Armstrong's departure at the end of this year may sadden his fans, but the decidedly less-competitive Postal Service should never have been in the business of sports sponsorship to begin with.
Today, USPS is $7 billion in debt. According to Treasury Secretary John Snow, "the Postal Service has suffered real economic losses in excess of $101 billion" since 1972. What's more, declining mail volume and soaring costs point to ever increasing taxpayer bailouts for the $67 billion behemoth. Faced with decreasing revenues, the Postal Service should be cutting costs, not lavishing millions on sports teams.
From any management perspective, the Postal Service's sports sponsorships have been an unnecessary drain, if not a disaster - at least for stamp buyers. Besides cycling, USPS has magnanimously bestowed your postage dollars on other professional teams as well, including the impoverished New York Yankees and New York Giants.
In an audit covering 1996-2002, the USPS Office of Inspector General noted that "the Postal Service was unable to track or verify revenue associated with sponsorships." In other words, Postal Service executives may get pricey passes to sports events and locker room privileges, but otherwise they haven't a clue.
Even worse, these cushy deals are riddled with outrageous waste. According to the Office of Inspector General's audit, one postal official ran up a $16,685 tab - including a $259 dinner cruise and first-class airfare - on a trip to watch the Tour de France.
And even as it's doling out these plushy contracts, USPS is currently begging Congress for a $779 million taxpayer-funded handout. So we ask - if sports sponsorships don't do anything revenue-wise, why has USPS pursued them so aggressively in recent years?
The USPS line is that these sponsorships raise its "brand image." With its core, government-monopoly business model foundering, the Postal Service decided to enter the free market and compete against companies like FedEx and UPS in everything from package delivery to telephone calling cards to T-shirts.
Postal Service accounting is murky at best (it doesn't have to report to stockholders and the SEC like a private company), so no one can say for certain whether the Postal Service is losing money in its private-sector adventures. The evidence, however, strongly suggests that stamp buyers and taxpayers are getting fleeced.
Consider labor costs. According to the Presidential Postal Commission, postal employees receive a 28.4 percent pay increase, on average, upon hire.
That's the main reason labor accounts for nearly 80 percent of Postal Service costs, compared with roughly 50 percent at private delivery firms.
With this massive premium on labor - and no real profit incentive - the Postal Service almost certainly loses money when it competes in the private sector.
Moreover, as a government agency with a federally-enforced monopoly on letter mail delivery, does the Postal Service have any business competing against private companies in the first place? The Postal Service doesn't pay taxes or parking tickets. It's immune from anti-trust law and SEC transparency requirements. In fact, it's even immune from the Federal Trade Commission's truth-in-advertising rules, so it can assert anything it wants in its costly commercials. Few people know that USPS can craft legally binding regulations designed to hinder competitors - and then use its own police force to enforce them.
As a government agency with little accountability or oversight, what on earth is the USPS doing reaching into private markets and competing against legitimate tax-paying private businesses? What is it doing sponsoring sports teams and claiming it's just another company in the market?
This behemoth should get back to its core mission of just delivering America's regular mail. Terminating Lance's contract is a step in the right direction.
As the greatest cyclist in the world, Lance should have little difficulty finding a new sponsor. The Postal Service, on the other hand, seems to have lost its bearings.
Sam Ryan is a senior fellow of the Lexington Institute in Arlington, Va. Contact him at firstname.lastname@example.org.