Legislature(2005 - 2006)CAPITOL 106
04/19/2006 05:15 PM House ECONOMIC DEV., TRADE, AND TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Economic Implications of Proposed Usps Bypass Mail System Between Fairbanks and North Slope Borough | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
April 19, 2006
5:21 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Jay Ramras, Co-Chair
Representative John Coghill
Representative Bob Lynn
Representative Nancy Dahlstrom
MEMBERS ABSENT
Representative Harry Crawford
Representative Beth Kerttula
OTHER LEGISLATOR PRESENT
Representative Michael "Mike" Kelly
Representative Mary Kapsner
Representative Reggie Joule
Senator Donny Olson
COMMITTEE CALENDAR
PRESENTATION: ECONOMIC IMPLICATIONS OF PROPOSED USPS BYPASS
MAIL SYSTEM BETWEEN FAIRBANKS AND NORTH SLOPE BOROUGH
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
STEVE DEATON, Western Area Distribution Networks Office
United States Postal Service
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation regarding the
proposed USPS bypass mail system between Fairbanks and the North
Slope Borough.
DENNIS ROPER, Special Assistant to the Mayor
Office of the Mayor
Government and External Affairs
North Slope Borough
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
JAMES DODSON
Fairbanks Economic Development Corporation
Mayor's Office
Fairbanks North Star Borough
Fairbanks, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
TRENT BLANKENSHIP, Superintendent
North Slope Borough School District
Barrow, Alaska
POSITION STATEMENT: Shana Blankenship read Superintendent
Blakenship's testimony regarding concerns with the proposed USPS
bypass mail system.
BILL MACKAY, Senior Vice President, Alaska
Alaska Airlines
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to the USPS plan to
truck the Fairbanks-Barrow nonpriority bypass and in-house
nonpriority mail from Fairbanks to Deadhorse where it would then
be flown to Barrow.
NATE OLEMAUN, JR., Mayor
City of Barrow
Barrow, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
REX WILHELM, President/Chief Operating Officer
Alaska Commercial Company
Barrow, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
LINDA WENNING, Finance Director
City of Barrow
Barrow, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
SUSAN HOPE
Barrow, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
JOHN GLEASON, Manager
Wells Fargo Bank - Barrow
Barrow, Alaska
POSITION STATEMENT: Expressed concerns with the proposed USPS
bypass mail system between Fairbanks and the North Slope
Borough.
ACTION NARRATIVE
CO-CHAIR JAY RAMRAS called the House Special Committee on
Economic Development, International Trade and Tourism meeting to
order at 5:21:47 PM. Representatives Neuman, Ramras, Coghill,
and Lynn were present at the call to order. Representative
Dahlstrom arrived as the meeting was in progress.
Representatives Joule, Kapsner, and Kelly and Senator Olson were
also in attendance.
^PRESENTATION: ECONOMIC IMPLICATIONS OF PROPOSED USPS BYPASS
MAIL SYSTEM BETWEEN FAIRBANKS AND NORTH SLOPE BOROUGH
5:22:46 PM
CO-CHAIR RAMRAS announced that the only order of business would
be the presentation regarding the economic implications of the
proposed U.S. Postal Service (USPS) bypass mail system between
Fairbanks and the North Slope Borough.
5:24:38 PM
STEVE DEATON, Western Area Distribution Networks Office, United
States Postal Service, turned the committee's attention to the
PowerPoint presentation entitled, "Fairbanks to Barrow Mode
Conversion Overview." He explained that the current business
plan indicates that the certified air carriers of Everts Air
Cargo, Northern Air Cargo, and Alaska Airlines transport bypass
mail and in-house nonpriority mail between Fairbanks and Barrow
and Barrow's Bush points. The [bypass mail and in-house
nonpriority mail] form a single rate class that is referred to
as standard mail. The business plan identifies a proposal to
create a surface leg of this route such that the mail is trucked
from Fairbanks to Deadhorse at which point it would be flown to
Barrow on any of the mainline carriers interested in
participating in the mail movement.
CO-CHAIR RAMRAS inquired as to the general weather patterns in
Deadhorse.
MR. DEATON related that there has been established road service
into Deadhorse and established air service out of Deadhorse for
over 20 years. However, he acknowledged that there are
certainly days when the weather restricts/eliminates the use of
air traffic. He then turned the committee's attention to a
slide with a map of the proposed service via land and air. As
mentioned earlier, there is already a contract in place to move
mail via the road on a three-day a week schedule and then
transfer it to air carriers to fly to its final destination.
This contractor has existing facilities located in Deadhorse
that are sufficient to handle mail storage, transfer, and ground
handling activities. One of the concerns of the USPS and the
customers is the actual handling of the mail as it moves up the
road to Deadhorse. The trailer specifications in the contract
include technology for a specific type of temperature control
van, Thermo King vans, which allow for dry, freeze, and chill
capacity within the same van. In the winter, these vans can
utilize a heater so that dry and chill products don't freeze.
The facilities in Deadhorse for the ground handler and the
participating air carriers will also be heated and meet storage
requirements.
5:31:54 PM
MR. DEATON continued by reviewing the projected mail volume. He
explained that the in-house nonpriority (IHNP) mail consists of
the nonpriority mail and boxes that consumers bring into the
post office. Bypass mail is mail that authorized shippers
provide in 1,000 pound minimum units to the USPS for transport
to restaurants, stores, businesses, and people. Based on fiscal
year (FY) 05, the projected IHNP is about 1.7 million pounds per
year.
5:33:46 PM
MR. DEATON, in response to Co-Chair Ramras, specified that
bypass mail can, at the shipper's risk, accept perishable,
freeze, and chill items. In further response to Co-Chair
Ramras, Mr. Deaton said that the bypass mail program recognizes
that there are subsistence-type commodities that are more
difficult and costly to obtain in a freight manner. The USPS
doesn't guarantee bypass mail freeze and chill perishable items
because by the domestic mail manual it isn't mail-able.
However, in recognizing the need of those in the Alaska
Interior, shippers and customers are allowed to enter such a
product so long as it's frozen solid upon entry and clearly
marked freeze and chill. Carriers, whether surface or air, are
asked to make every effort to care for the product in freeze and
chill facilities if they have such and to expedite the movement
of such mail so that it doesn't degrade. Therefore, shipper's
risk acknowledges that the items aren't technically allowed in
the bypass mail system, but all will be done to transport such
mail and have it arrive in a reasonable condition.
5:35:24 PM
CO-CHAIR RAMRAS asked if such mail is likely to take longer on
the proposed bypass than the current mechanism for delivery.
MR. DEATON said that it's possible, but noted that later in the
presentation he will discuss the service standard of such mail.
He then returned to the projected mail volume and related that
bypass mail amounts to about 8.5 million pounds of mail that
would be added to the surface contract. He pointed out that
volumes specified on slide 10 would be divided equitably, per
the statute requirements, between the participating carriers.
5:36:23 PM
MR. DEATON moved on to slide 11, which relates that the current
cost of transporting [bypass] mail from Fairbanks to Barrow is
$6.7 million to USPS. He emphasized that the surface mail rate
is being paid for this mail, although it is be transported by
air in Alaska due to the lack of roads. The aforementioned
causes a serious shortfall in the amount of about $60 million a
year for the USPS budget. Therefore, this proposal attempts to
decrease the revenue losses the USPS experiences in Alaska.
5:38:13 PM
MR. DEATON continued with slide 12, which relates the projected
cost of surface transportation. He informed the committee that
the USPS has negotiated a rate, about $.11 per pound, with the
incumbent surface provider. Therefore, the surface movement of
the 10.2 million pounds of nonpriority rate mail yearly will
cost approximately $1.2 million a year to move to Deadhorse.
Slide 13 relates that the existing rate of $.41 per pound for
transportation of the 10.2 million pounds of mail [via air]
between Deadhorse and Barrow would cost the USPS about $4.1
million. Therefore, this proposal results in $1.35 million in
savings annually, which is fairly substantial savings.
5:39:28 PM
CO-CHAIR RAMRAS asked if the USPS takes into account the impact
the service has on the communities or is this all about profit
and loss and seeking efficiency.
MR. DEATON emphasized that with this and all modal changes, the
impact to the communities is considered, which is why the USPS
has had several meetings with the communities, the mayoral
offices, and borough offices. In fact, slide 15 specifies some
of the community meetings that have been held. Generally, when
the USPS makes transportation decisions, they are based
specifically on the service standard.
5:42:32 PM
CO-CHAIR NEUMAN inquired as to the general consensus of the
meetings in Barrow and Fairbanks. He also inquired as to
whether the USPS had discussions with some of the smaller
communities such as Fort Wainwright.
MR. DEATON explained that prior to the presentation in Barrow,
the meeting announcement was posted in the Point Lay and Fort
Wainwright post offices and community offices. A number of
people flew in or called in from those outlying areas to have
their comments heard. He related that at the time, people were
negative about the proposal. However, they hadn't heard the
proposal or the facts but rather had heard rumors and fears.
Some people from Barrow and the outlying communities were also
in attendance in Fairbanks and the concerns remained. In fact,
there are still many people who are concerned with regard to the
proposal and its potential impacts.
5:44:50 PM
MR. DEATON, in further response to Co-Chair Neuman, related his
belief that the majority of the impacted residents are hesitant
to embrace this proposal. He opined that some of the hesitancy
has to do with the perception that the proposal will impact the
residents negatively. However, Mr. Deaton said that this
proposal will have absolutely no impact on the Bush service or
the mail service standard for the mail from Barrow to any of the
[outlying communities]. He opined that the USPS believes this
change will be transparent, but he acknowledged that many people
are concerned because of their uncertainty with regard to how
the proposal will happen.
5:46:25 PM
MR. DEATON continued with slide 16, which relates the service
standards for non-priority standard mail that includes IHNP and
bypass mail. The service standards are universal across the
country. The service standard for bypass mail is 5-7 days. He
explained that carriers are required to move the mail from
Fairbanks to Barrow by the end of the second day following the
day of tender. If the mail hasn't been transported by the
first-leg air carrier by the end of the second day following the
day of tender, it's subject to transfer to a second carrier.
The Bush carrier has until the end of the day following the day
of receipt to deliver the mail to its final destination. This
5-7 service standard for bypass mail doesn't change. The truck
surface contract has until the end of the day following the day
of tender to move the mail to Deadhorse. Furthermore, the two
air legs don't change and continue to have the end of the second
day following the day of receipt to transport the mail via
mainline to Barrow. The same is true for the Bush carrier for
mail going past Barrow. For instance, for Barrow mail if mail
was tendered to the surface contract on Monday, that mail would
be in Deadhorse by Tuesday and the air carrier would have until
the end of Thursday to move that mail to Barrow for delivery.
This still falls within the five to seven days. If the mail's
destination is past Barrow, one day would be added, which still
falls well within the five to seven days. Mr. Deaton opined
that now and under the proposal, the USPS anticipates the mail
will move faster than the service standard and transit windows.
5:51:03 PM
MR. DEATON then pointed out that the Fairbanks to Barrow modal
change isn't unique in the postal service nor within Alaska.
The USPS has done many modal changes and surface diversions in
Alaska over the last 20 years. For example, all bypass mail was
diverted to Dutch Harbor from air to once a week service on
container ships [in 1992]. He noted that the USPS offers other
products if people want to move mail within one to three days.
In terms of impacts to the community, one of the concerns was in
regard to passenger service regarding space and cost under this
proposal. Alaska Airlines has attended all of the USPS meetings
at which it has consistently said that it doesn't know the
impacts to the passenger services. Mr. Deaton specified that
although the USPS doesn't set carrier schedules or pricing, it
does realize that mail piggybacks on those flights. Alaska
Airlines does have an essential air service minimum requirement
to provide service to Barrow at the level of 14 flights a week
in the summer and 7 flights a week in the winter.
5:54:22 PM
MR. DEATON recalled that similar concerns to those expressed
regarding Barrow were heard when USPS diverted Dutch Harbor to
surface once a week. As slide 19 relates, when the surface
diversion to Dutch Harbor took place Alaska Airlines provided
one flight daily and one flight six days a week with the cost of
a "Y" fare one-way ticket of $537.00 and the cost of a seven-day
advance one-way ticket of $447.00. However, after the
diversion, PenAir began providing five flights daily on a 30-
passenger aircraft. The cost of a "Y" fare one-way ticket
decreased by $10 while the cost of a seven-day advance one-way
ticket increased by $10. Although the aforementioned doesn't
predict the future, it does provide a like circumstance and the
results.
5:55:52 PM
MR. DEATON reiterated that this proposal is not unique. The
USPS is scheduled to lose over $1 billion this year nationwide.
Nationwide the USPS is seeking cost deferments and reduction
efforts. In Alaska, the aforementioned is being accomplished
and past surface diversions in Alaska have happened statewide,
in the communities specified on slide 20. Although the changes
weren't readily accepted by the communities, the change was
transparent to the customer.
5:57:14 PM
CO-CHAIR RAMRAS interjected that a recent Fairbanks Daily News-
Miner article reported that Fairbanks mail is going to Anchorage
for processing and then to Fairbanks for distribution.
Therefore, no one in Fairbanks is enjoying a three-day service
standard.
MR. DEATON indicated that may be a misunderstanding because a
small portion of one class of mail [is being delivered to
Anchorage] in order to temporarily use Anchorage's automated
system to delivery point sequence the mail. He related his
understanding that the goal is for Fairbanks to obtain that type
of automation equipment in the future. In further response to
Co-Chair Ramras, Mr. Deaton opined that all mail coming into
Anchorage that is utilizing the delivery point sequence is still
moving that evening via surface up to Fairbanks.
5:58:37 PM
MR. DEATON highlighted slide 20, which relates the locations of
other successful past surface diversions in Alaska. In
conclusion, Mr. Deaton specified that the USPS is not changing
anything in the bypass mail program, rather it's simply
implementing a modal change within that bypass mail flow. He
reiterated the USPS's belief that the change in mail flow will
be transparent to the customer, the mail will continue to arrive
at its destination well within the service standard.
Furthermore, he opined that the freeze and chill should enjoy
better conditions due to the technology of the transport vans,
which is not the case with mail being transported by aircraft.
Mr. Deaton specified that this proposal doesn't effect the Bush
communities because once mail arrives in Barrow, the same
carriers will take it out to its destination in the Bush within
the service standard. With regard to passenger air fares and
service, the essential air service program is designed and has
established the required minimum number of flights of a carrier.
All of the aforementioned will contribute to decrease the
revenue shortfall in Alaska for the USPS, which allows the USPS
to continue to operate using certificated air carriers and
assist in providing a stable air transportation system within
the state.
6:02:35 PM
DENNIS ROPER, Special Assistant to the Mayor, Office of the
Mayor, Government and External Affairs, North Slope Borough,
began by stating that this issue has been tracked by the North
Slope Borough since it was first introduced last year.
Therefore, the borough has stayed in contact with the
congressional delegation. In fact, he said that he has
personally made three trips to Washington, D.C., when the matter
was on the agenda. Mr. Roper informed the committee that over
100 people attended the public hearing in Barrow. Mr. Roper
pointed out that the cost issues are up for debate. Although
the USPS says it can save $1.3 million by using the truck haul
approach, the air carriers view the USPS's numbers as
unrealistic. The air carriers, he said, believe the savings
will be small or nonexistent. The North Slope Borough's big
concern is the local and social impacts this change will have on
the communities. The potential lack of air service and/or
increase in fares is of concern because it will make it more
difficult for people to do business. Mr. Roper characterized
the proposal as a step backward, the impacts of which will be
greatly magnified in the outlying communities. For example,
weather is a factor that results in products sitting in Barrow
waiting for weather that will allow small aircraft to
depart/arrive.
MR. ROPER said that the loss of the current bypass system will
result in a range of effects in the community, including
lowering the quantity and quality of perishable goods.
Recalling raising his children in Barrow, Mr. Roper opined that
no one wants to return to the days of black bananas, soft
tomatoes, and powdered milk. Furthermore, the lack of service
or increase in air fare could impact tourism in the area;
increase difficulties in recruiting teachers, doctors, and other
professionals; impact those with medical needs; and the travel
required for academic activities as well as sports.
MR. ROPER opined that this is a difficult issue, for which Mayor
Itta is preparing to monitor if the change occurs. In fact,
Mayor Itta has requested that one of the economists in the
Government and External Affairs agency to track the new system
if it's implemented. If the system is implemented and the USPS
is saving nickels and dimes as compared to the damage to the
local economies, [the borough] plans on contacting the state's
congressional delegation.
6:08:20 PM
MR. ROPER concluded his testimony by reading a quote from Mayor
Itta's article in the Arctic Sounder, as follows:
I am very concerned about the long-term effects of the
proposed changes in the service. Bypass mail was
created to make local economies stronger. If it is
eliminated, the economies of Barrow, Wainwright,
Atqasuk, Point Lay will suffer. The question is not
whether the savings to the Postal Service justifies
the economic damage to the communities, I do not
believe that they do. For $1.3 million this is just
plain a bad idea.
6:09:09 PM
REPRESENTATIVE NEUMAN inquired as whether the concern is the
financial aspect of the proposal or the tradeoff in social
terms.
MR. ROPER said that he doesn't have any numbers, but could
specify the areas of concern. For instance, the USPS just
related that there has to be at least seven flights [a week] in
the winter, but the community of Barrow is accustomed to
fourteen. He suggested the committee think of the impact to the
community from that alone. Within the community of Barrow there
are about 4,300 people and it doesn't take long to disrupt the
community.
6:11:18 PM
JAMES DODSON, Fairbanks Economic Development Corporation,
Mayor's Office, Fairbanks North Star Borough, began by
highlighting that Alaska has few transportation road systems.
Furthermore, Congress gerrymandered Alaska when it divided the
state and disallowed roads in many areas. Therefore, the Rural
Service Development Act was intended to provide transportation
for quality of life, goods and services, and passenger seats
into rural Alaska. The USPS says it costs $118 million to
supply rural Alaska with such service. He pointed out that
Alaska doesn't have the federal highway dollars that other
states enjoy and thus rural Alaska needs the aforementioned
transportation system. If this system is dismantled, the state
will have to step in and [make up the difference]. The Rural
Service Development Act supports the entire U.S. while the Rural
Service Act supports Alaska. Currently, there is a proposal in
Congress to cut the Rural Service Development Act by $77
million. Mr. Dodson said, "We are trying to save $1.3 million
out of $118 million to dismantle a system that has been
effective for years." Today, there are three carriers flying
airplanes out of Fairbanks to provide goods, services, and
seats. This proposal would have those three carriers fly the
same aircraft out of Deadhorse and thus Barrow would be
connected with Deadhorse rather than Fairbanks. Therefore, the
residents of Barrow would be serviced by Deadhorse and would
have to park their cars in Deadhorse and drive the 502 miles to
Fairbanks. The aforementioned defies logic, he opined.
Moreover, it defies logic that the USPS would suggest that there
is no impact to rural Alaska.
6:15:05 PM
MR. DODSON, in response to Co-Chair Ramras, specified that there
are no mainline carriers based in Deadhorse. If the USPS is
allowed to implement its business plan, the airplanes would have
to be flown to Deadhorse for nothing. At that point, the USPS
could then charge the $.41 from Deadhorse to Barrow. Mr. Dodson
said that in doing the calculations, he couldn't find the
savings projected to occur under this proposal and the USPS
claims there is proprietary information. He questioned how
there could be proprietary information when the USPS is the only
entity doing the job in Alaska as it has been granted a monopoly
to move the mail in Alaska.
6:16:15 PM
REPRESENTATIVE MICHAEL "MIKE" KELLY, Alaska State Legislature,
inquired as to how many air carriers have gone out of business
because of the bypass mail changes that have already occurred.
6:16:44 PM
MR. DODSON recalled that the law has changed twice since the law
was implemented. He estimated that at least 25 percent of the
smaller carriers have went out of business.
REPRESENTATIVE KELLY posed a situation in which a route that was
profitable going from Fairbanks to Deadhorse to Barrow is
changed to only go from Deadhorse to Barrow. He asked if in
such a situation, the cost of air fare will increase
considerably once re-bid because the plan has to travel empty to
accomplish this proposal.
MR. DODSON related that the Department of Transportation &
Public Facilities (DOT&PF) is charged with gathering the costs
of the mainline carriers and recalculating it annually. He
opined that the cost to the carriers will increase and
consequently the cost of moving mail will increase.
REPRESENTATIVE KELLY mentioned that he used to fly bypass mail
service and worked for one of the small carriers that closed due
to the change in bypass rules. While one may applaud the USPS
in its attempts to cut costs, the result in Alaska could be
devastating for these communities. He inquired as to how many
passenger seats this proposal might eliminate from Fairbanks to
Deadhorse.
MR. DODSON answered that he didn't know. However, he related
his understanding that Alaska Airlines is about to file its new
schedule, which will provide that information.
6:18:40 PM
REPRESENTATIVE KELLY asked if the result might be very different
than that of the situation of Dutch Harbor and PenAir, as
presented by the USPS.
MR. DODSON replied yes, and opined that there will be a drastic
reduction of seats between Fairbanks and Barrow.
TRENT BLANKENSHIP, Superintendent, North Slope Borough School
District, had his testimony read by Shana Blankenship as follows
[original punctuation provided]:
In the Postal Reorganization Act of 1970, the US
Postal Service is granted special protection for the
right of post boxes and delivery of first class mail
to the US Government because of its commitment to
provide a standard of service to all box holders,
rural and urban.
In a 1976 amendment to the act, the US Postal Service
was required to provide a maximum degree of effective
and regular postal services to rural areas,
communities, and small towns where post offices are
not self-sustaining; it being the specific intent of
Congress that effective postal services be insured to
residents of both urban and rural communities.
In assisting the Senate to craft reform legislation,
the Governmental Accounting Office [GAO] crafted GAO-
04-803 USPS Report on Delivery and Retail Services.
In it was the recommendation that the Postmaster
General provide improved transparency and
communication to inform Congress and other stake
holders of the actions it plans to take regarding its
retail optimization strategy, including:
(1) The criteria USPS will use to make decisions
related to changing its retail network; we have
requested the cost analysis and specific data used to
propose this decision, and it has not been provided.
(2) The process it will use to communicate with postal
stake holders throughout the decision-making process;
The Rural Post Office and Community Preservation Act
of 2003 and H.R. 3432, Post Office Community
Partnership Act of 2003, requires USPS decision makers
in our region to involve us in decisions that will
impact the quality of service we receive. The Alaska
postmaster has not given us the information we
requested, we have not been given the opportunity to
propose and examine alternatives to this plan.
Clearly this decision hasn't been responsive to the
Rural Post Office and Community Partnership Acts.
(3) The impact on customers, including those in rural
areas; Where is the impact data on Barrow and the
North Slope for this decision? You are required to
share it.
(4) The time frames for implementing all phases of its
retail optimization initiative; We have requested the
cost analysis, impact data, timelines and specific
data used to propose this decision, and it has not
been provided. We have asked you to involve us, to
generate alternatives, you have not responded. The
GAO noted that the US Congress has made it clear on
several occasions to the USPS that the Universal
service standard is not to be compromised in rural
areas in any contemplated reform, we have requested
information that assures us that the Universal
Standard will be preserved here; that the mail on the
North Slope will be delivered in as timely and
reliable fashion under this proposal as it has been
delivered previously, but our concerns to this end
were not addressed either.
But there is hope for us. In February, S662 on Postal
Reform passed, despite being opposed by the USPS. We
support their reform of the USPS; we are encouraged to
see Congress exert control over our postal system to
protect us. We know all too well, it cannot come soon
enough for us.
If this decision moves forward, without having
provided us a timeline, fiscal impact, cost-benefit
analysis, or opportunity for participation, we must be
prepared to act as a community.
We need to let this bill's sponsors: Senator Collins
of Maine and Senator Carper of Delaware, know that, in
the eyes of the Alaska USPS, the people of the North
Slope are somehow less deserving than the rest of
Alaska.
That while the Senators are championing transparency
at a national level, this transaction is being rushed
to completion behind closed doors, with no cooperation
with our elected representatives in the Borough, the
Tribes or the cities.
That while the Senators are championing universal
service to all rural areas - in Alaska, the USPS
believes it is only those rural areas surrounding
Anchorage and Fairbanks that should enjoy comparable
services, while the service to native peoples in the
bush is held to a different, more cost effective
standard.
That while those Senators believe that providing
universal postal service is the cornerstone of USPS's
mission, the Alaska USPS will discriminate among its
customers in order to provide a trucking contract and
a processing center to businessmen in Fairbanks.
We need to write to Senators Collins and Carpers,
Senators Murkowski and Stephens and support their
belief, embodied in S662, that, and I quote,
"universal service is essential to the nation's
communications network and economy; that it is vital
to the American people, many of whom rely upon the
consistency of mail delivery and convenient access to
the retail postal network."
We can prove that, without roads, consistent access to
mail is more important here than almost anywhere in
America. It is the cornerstone of not only our
economy, but our quality of life.
In summary, if this proposal moves forward without
transparency, opportunity for participation or regard
for universal service, we must come together as a
community and provide universal opposition however and
wherever possible.
6:27:07 PM
BILL MACKAY, Senior Vice President, Alaska, Alaska Airlines,
paraphrased from the following written testimony [original
punctuation provided]:
Co-chairs Ramras, Neuman and members of the Committee,
my name is Bill MacKay and I serve as Senior Vice
President, Alaska for Alaska Airlines. I am joined
today by Jeff Carlson, the Manager of Contract
Stations for Alaska Airlines. We are grateful for the
opportunity to discuss the Barrow bypass mail issue
with you today and appreciate the Committee's
leadership in addressing this important matter. In my
Anchorage-based position, I am involved in leading
many aspects of our operations here in the state of
Alaska and have been coordinating Alaska Airlines'
response to the Barrow mail issue for over a year.
Alaska Airlines is opposed to the U.S. Postal Service
plan to truck the Fairbanks-Barrow nonpriority bypass
and in-house nonpriority mail from Fairbanks to
Deadhorse where it would then be flown to Barrow.
Having spent over two decades in statewide leadership
positions for Alaska Airlines here in Alaska, I have
come to understand very well the critical role the
bypass mail program serves in getting essential goods
shipped into rural Alaska communities. What's more,
this program helps to ensure the economic viability of
scheduled passenger airline service to these towns and
villages - air service that is critical given the lack
of any road connections to these locations.
Alaska Airlines currently operates at least 11 non-
stop flights each week between Fairbanks and Barrow.
We operate an additional daily roundtrip flight from
Anchorage to Deadhorse. This level of service assures
that Barrow residents receive all of the necessities
moving under the bypass mail program on a daily basis.
The Postal Service, however, is now proposing to
transfer the approximately 10 million pounds of annual
bypass and in-house nonpriority mail for surface
carriage from Fairbanks to Deadhorse to connect with
an as yet undetermined number of flights between
Deadhorse and Barrow. While we are committed to
minimizing the negative impact for residents of the
North Slope and the interior, the Postal Service plan
will force us to significantly alter our schedule and
pattern of service to Fairbanks, Barrow and Deadhorse.
Alaska Airlines understands and appreciates that the
plan is driven by the Postal Service's desire to
reduce its costs. However, we sympathize with those
living in the North Slope Borough who are very
concerned with how this altered flow of shipped goods
will impact the timeliness and quality of mail
delivery to their communities. Their very
understandable anxiety over delays in receipt of mail
and increases in damaged goods caused by the new
overland segment and additional handling of the mail
should be carefully considered.
Alaska Airlines, therefore, hopes that the Legislature
will encourage the Postal Service to indefinitely
postpone implementation of its proposed Fairbanks-
Barrow program until there has been additional review,
with full participation by the residents of Barrow and
the other affected communities, of the entire range of
social and economic costs the program would impose in
addition to whatever savings the USPS might accrue.
I thank the co-chairs and the committee for your time
and interest in this very important matter.
6:30:51 PM
CO-CHAIR RAMRAS asked if there will be a reduction in seats for
passenger service between Fairbanks and Barrow.
MR. MACKAY responded that it remains to be seen because it's
difficult to determine the necessary reaction until there is an
implementation date. He highlighted that Alaska Airlines'
operation is a bit complex as there is aircraft scheduling
challenges, flight and ground crew rotations, and advanced
loading of computer schedules. Furthermore, the $1.3 million in
savings predicted by the USPS will be a loss in revenue to some
entity. How much of that loss will be incurred by Alaska
Airlines remains to be seen, he remarked.
6:32:17 PM
REPRESENTATIVE DAHLSTROM asked if the USPS was established as a
service to the people of this country or as a money-making
organization.
MR. DEATON related his understanding that the USPS was
established as a governmental entity to provide mail service.
REPRESENTATIVE DAHLSTROM asked then whether the USPS has
received a federal mandate to now be charged with making money
rather than an organization that provides a service.
MR. DEATON pointed out that one of the tenets of the Postal
Reorganization Act of 1970 removed the USPS from the Federal
Treasury and mandated that USPS act as a business entity.
Therefore, the USPS no longer receives tax dollars. Although
USPS still has postal rate commissions and oversights that
regulate its fees, USPS is required to operate as a business and
generate its own revenue. Since the early 1970s the only funds
from the Federal Treasury have been the $5,000-$10,000 a year
for free mailing for the blind.
6:35:37 PM
MR. DEATON, in response to Representative Dahlstrom, said that
the USPS losses money some years and makes money some years. He
related his understanding that the USPS is looking at a loss of
about $1 billion. In further response to Representative
Dahlstrom, he said that he didn't know whether, during years in
which the USPS makes money, it's invested.
REPRESENTATIVE DAHLSTROM asked if all federal agencies mandated
to act as a business entity are required to make money.
MR. DEATON related that he doesn't know of any other federal
agency that does not receive government tax dollars other than
the USPS.
6:37:05 PM
REPRESENTATIVE DAHLSTROM surmised that it appears as though the
original goal of the USPS has been changed and now the effects
of that are being seen.
MR. DEATON informed the committee that universal service doesn't
mean that everyone receives mail service to their town or house
because there are density requirements. Therefore, in some
places people must go to a distribution sight to receive mail.
The case being addressed today is a situation in which the
communities qualify for mail service of a specific type and
service standard. The intention is for nothing to change in
Barrow as the community will continue to receive the same
service standard for the products purchased as they did in the
past.
REPRESENTATIVE DAHLSTROM inquired as to whom Mr. Deaton reports.
She opined that the legislature is interested in continuing
negotiations so that the best deal for everyone involved
results. Therefore, she asked if Mr. Deaton has the
understanding that this proposal is a done deal.
MR. DEATON responded that the most current decision was to move
to the last step of the proposal, which was to request that
interested carriers submit schedules to the USPS. He reminded
the committee that the USPS doesn't dictate the schedules,
flight patterns, or fares of carriers. If the carriers as a
group aren't interested in participating in the Fairbanks to
Barrow leg, then the proposal cannot move forward and the status
quo would continue.
MR. DEATON, in response to Representative Dahlstrom's earlier
question, explained that he works for the Western Area
Distribution Networks, which is based out of Seattle and Denver.
Mr. Deaton further explained that he is in a two-person office
in Anchorage that the USPS established because of the uniqueness
of Alaska. He specified that he reports to the manager of the
Western Area Distribution Networks Office in Denver. This
project is being jointly proposed and shepherded by the Western
Area Distribution Office and Commercial Air in USPS
headquarters.
6:41:56 PM
NATE OLEMAUN, JR., Mayor, City of Barrow, began by relating to
the committee that his family has a long history with mail
service. In fact, his grandfather Perry Inavenna was a dog team
mail carrier from Barrow to Nome in the 1900s. Furthermore,
Mayor Olemaun's dad was a telegram and Morse code operator with
the Army Signal Corp. before there was regular delivery of mail
to Barrow. Mayor Olemaun then recalled the August 24, 2005,
public meeting in Barrow that was attended by approximately 150
residents and was broadcast over the local radio station. He
then provided the committee with some of the statements that
arose at that meeting. Mayor Olemaun opined that no one has
taken the time to investigate the nature or management of these
impacts. This proposal, he further opined, will return
residents back to the 1960s in terms of air transportation.
Without bypass mail [traveling by air], the current passenger
air service will be severely reduced. He predicted that the
current 15 flights per week would be reduced to 4 flights per
week. Moreover, either passenger fees will skyrocket or air
carriers will serve the market with much smaller planes. This
while a new airport runway is being built to accommodate more
air service to Barrow.
MAYOR OLEMAUN expressed concern with regard to the reduction of
USPS service because it will significantly delay the delivery of
perishable goods and thus cause more spoilage. Therefore,
retail costs in the communities will increase. Moreover, even
with bypass mail, [Barrow] is running out of stock for whaling
crews preparing for the hunt. Without enough supplies, the
whaling crews will return to the 1950s when whalers lived on
what they caught while camping on the ice. In conclusion, Mayor
Olemaun related his support for the committee's letter to the
Postmaster General regarding the Rural Service Improvement Act.
6:47:18 PM
REX WILHELM, President/Chief Operating Officer, Alaska
Commercial Company (AC), paraphrased from the following written
statement [original punctuation provided]:
Mr. Chairman and Committee Members my name is Rex
Wilhelm and I am the President and CEO of Alaska
Commercial Company. ACC is the largest retailer of
food, apparel, and general merchandise in rural
Alaskan communities. We have 28 stores in 26 rural
Alaskan communities and as of May 1 through an
acquisition on Prince of Wales Island, we will have 32
stores in 29 rural Alaskan communities. I am a 25
year Alaskan and from 1986 through 1990 I had the
pleasure of managing the AC store in Barrow so; I have
first hand knowledge of the community.
As a retailer looking to ship more than 5.5 million
pounds of bypass to Barrow this year, I am very
concerned that this change will negatively impact our
store, Barrow, and the surrounding communities.
The Haul Road from north of Fairbanks to Deadhorse is
very rough and will inevitably lead to more damaged
mail, which for AC is mostly food. The mail trucks
will encounter extreme temperatures and winds, road
problems including closures, all of which will cause
delays and possibly more damaged freight. Also, the
unloading and loading in Deadhorse will result in the
mail being handled two more times with the added
potential for even more damage.
Since there are no claims allowed with bypass mail,
our store would have to absorb the lost product and
shipping costs, which in turn would be reflected in
higher local retails.
Another issue of concern is the added transit time.
Under the present situation, our bypass generally
arrives in Barrow within 3 days of mailing. Under the
proposed change, it would take a minimum of 4-5 days
for the mail to reach Barrow. Those extra days would
decrease the life expectancy and quality of produce
and dated products such as dairy.
Additionally, the post office does not require hubs,
such as Deadhorse, to have coolers and freezers.
Under the new scenario, once the mail reaches
Deadhorse and is transferred to the air carrier, the
post office will allow the air carrier two days to
move the mail from Deadhorse to Barrow. I am
concerned that our freeze and chill products could be
potentially stored in unrefrigerated storage space
during those two days.
Lastly, another concern is the inevitable reduction of
scheduled service to Barrow by large aircraft for both
passengers and cargo. I assume a reduction of 10.2
million pounds to the three carriers has to decrease
their ability to keep their current service schedule
and both passengers and cargo will then move less
frequently into and out of Barrow.
Alaska Commercial Company is the largest retailer in
Rural Alaska and we work hard to keep our prices
down. I am seriously concerned this proposed change
would result in lower product quality and increased
damage and loss of products all of which will be
reflected in higher retails to our customers. I feel
this change would be a disservice to the people of
Barrow and the surrounding communities.
6:50:22 PM
CO-CHAIR RAMRAS inquired as to who wins under this proposal.
MR. WILHELM said that he didn't believe anyone wins.
Ultimately, the large losers are the consumers in Barrow and the
surrounding villages. These individuals have the right to
expect the same lifestyle that other Americans enjoy, which was
why the bypass mail service was created. He echoed Mayor
Olemaun's testimony regarding the concern that Barrow will slip
significantly backwards. Although Mr. Wilhelm said he wasn't
sure of the results of such a change, in his experience a change
of this magnitude is of great concern.
6:51:45 PM
REPRESENTATIVE REGGIE JOULE, Alaska State Legislature, surmised
that while this may be the first step in the loss of service to
one part of rural Alaska, is the main store concerned that it
could become a trend.
MR. WILHELM, recalling his experience as a grocery manager in
Barrow in the early 1980s, said the bypass mail system was more
effective than today. He expressed concern that if this change
happens in Barrow, there will be changes in other areas that
rely heavily on the bypass mail system to keep the cost of
living [reasonable].
6:55:14 PM
LINDA WENNING, Finance Director, City of Barrow, said that she
attended the August 24, 2005, meeting at which only 4,100 people
were allowed only two hours to present. The presenters claimed
that the meeting had to end [by a certain time] because they had
to fly out that night. However, the presenters didn't leave
until the next morning. Ms. Wenning characterized it as an
adversarial situation. Furthermore, the USPS doesn't seem to
understand the current level of service that Barrow enjoys. The
proposed changes along with the increase in fuel prices will
negatively impact Barrow's air passenger service, which will
impact tourism. Moreover, medical care access is also of
concern [under the new proposal]. Ms. Wenning pointed out that
the weather will need to be good in three locations: Fairbanks,
Deadhorse, and Barrow, in order to fly. She predicted that
there will be more canceled flights, which will result in worse
mail service. She then questioned why there is only one
trucking firm and three airlines involved in this.
6:56:40 PM
SUSAN HOPE provided her understanding of how bypass mail would
move out of Seattle to Anchorage, then to Fairbanks and be
driven up the Haul Road to Prudhoe Bay where it's placed on an
air carrier destined for Barrow and then on to one of the
outlying villages. With the ability for each location to have
about two days to move the mail, she questioned how the mail
could arrive in just seven days. She said that it doesn't
include the 19 hours of driving time between Fairbanks and
Barrow. Ms. Wenning then turned to the storage facilities and
the concern that already there have been situations in which
food hasn't been stored properly and has been lost. For
example, when only one carrier was going to Kaktovik, the
carrier couldn't store all of a meat order and thus the school
district lost $10,000-$14,000 worth of meat. Therefore, she
inquired as to how [USPS] will regulate what moves or how it is
prioritized. For instance, if Barrow has all of its [food being
sent] bypass on an air carrier, she questioned what happens to
the food for Fort Wainwright. It seems that there would be the
possibility for inconsistency. She expressed concern that
Barrow will inundate the carriers with so much freight that the
smaller carriers won't be able to serve the villages. She
informed the committee that it's even difficult to charter
planes not to mention the weather delays, which she indicated
impact the smaller carriers more so than the larger air lines.
Ms. Wenning related that her biggest concern is that if things
do return to the old ways, not everyone will be able to afford
to follow the old ways.
7:02:36 PM
CO-CHAIR RAMRAS explained how the follow up to this issue is
going to be handled.
7:03:40 PM
REPRESENTATIVE LYNN asked if the legislature has contacted the
Alaska congressional delegation regarding this matter.
CO-CHAIR RAMRAS replied yes. He said that the congressional
delegation is aware of the concerns and the USPS is awaiting a
response from them. By and large, the congressional delegation
seems to maintain neutrality on the matter.
7:04:36 PM
REPRESENTATIVE LYNN commented that he would hope Alaska's
congressional delegation wouldn't remain neutral as it and the
USPS are federal entities.
CO-CHAIR RAMRAS reminded members that US Senator Ted Stevens
authored the Rural Service Act and that his stance is in regard
to the legislature addressing the bypass mail issue.
7:05:07 PM
CO-CHAIR NEUMAN noted that the social impacts have been well
stated, but the fiscal impacts have not been addressed as
thoroughly. However, in reviewing the backup material the City
of Barrow estimates that the USPS will lose a minimum of
$400,000 a year. While in Fairbanks there will be an estimated
loss of $240,000 in landing fees. Alaska Airlines will have a
loss of approximately $2 million, of which he queried how much
would be shifted to passenger traffic. Furthermore, the
Fairbanks North Star Borough estimates a loss of visitors to the
Top of the World day trips in the amount of $260,000 in pure and
direct spending and an additional $80,000 in indirect spending
for a total of $340,000 in lost revenue. Co-Chair Neuman
commented that the USPS does a good job, but he expressed
concern that the actual costs are being transferred to these
communities.
7:07:16 PM
REPRESENTATIVE JOULE inquired as to the vehicle infrastructure
required to move 5.5 million pounds of freight a year.
Furthermore, he inquired as to what type of schedule would have
to be kept to meet such demand. Highlighting the increased
traffic, he inquired as to who pays for the road maintenance and
improvements and questioned whether those costs would outweigh
the proposed savings.
7:10:09 PM
JOHN GLEASON, Manager, Wells Fargo Bank - Barrow, informed the
committee that currently Wells Fargo Bank has the luxury of
working on the same day banking system and thus the proof work
is processed and delivered to Anchorage to the processing center
the same day via Alaska Airlines Gold Streak. Any change in the
airlines schedule could drastically impact customers in Barrow
and how quickly their funds are credited to their account. [The
teleconference link was lost.]
The committee took an at-ease from 7:10:44 PM to 7:11:52 PM.
7:11:55 PM
CO-CHAIR RAMRAS related that it seems there are technical
difficulties in Barrow. He then informed the committee that the
information obtained today will be processed and a letter will
be authored and sent to USPS for response.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, International Trade
and Tourism meeting was adjourned at 7:12 p.m.
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