As part of a class in Cost-Benefit Analysis, six students at the LaFollette School of Public Affairs at the University of Wisconsin-Madison examined the impact of closing one of the seven Post Offices in Marquette County, Wisconsin.  The study was performed at the suggestion of the Center for the Study of the Postal Market as its first student project focusing on business and policy issues of interest to postal stakeholders.   The six students working with publicly available information provide a useful first attempt to estimate the economic impact on a community of closing a Post Office. A link to the paper is found at the bottom of this post.

For the Study, the Center suggested that students look at Marquette County Wisconsin as it was one of the most rural counties in Wisconsin, and in fact one of the 670 most rural counties in the United States as determined by the U.S. Department of Agriculture.  Marquette County is located roughly 60 miles north of Madison, Wisconsin., which allowed the students conducting the study to  make a site visit.   The county’s population is approximately 15,000 people (as of July 2009) and each of its seven towns has fewer than 2,700 inhabitants. Primary sources of income in the county include construction and agriculture for men, and healthcare and foodservice for women.  Tourism is also a significant economic driver in the county.

The cost benefit analysis considered three alternatives: 1) maintain the status quo, 2) close the Post Office facility in Packwaukee, Wisconsin, and 3) close the Packwaukee location and replace with an Automated Postal Center (APC). The study recommend closing the Packwaukee location and replacing it with an APC.

Selection of the Target Post Office

Marquette County has seven Post Offices within its borders.  The students determined that the Yezer Model, developed for the USPS-OIG would suggest that Marquette County should have facilities employing 2.7 people and have 1.62 windows.  Practically, this would indicate that Marquette County should have two facilities with one having longer operating hours than the other.

Rather than pursuing such a dramatic change in retail access, the students focused on closing just one of the seven Post Offices in the county.   The study selected the Post Office in Packwaukee after conducting a spatial analysis and interviewing Post Office employees.  The Packwaukee Post Office was within ten miles of three other Post Offices all of them being less than a 15 minute drive away.  After closing the one Post Office, Marquette would still have four more Post Offices than the Yetzer model wold indicate.  Interviews with individuals at a number of businesses in Packwaukee indicated that few used the Post Office regularly.  An interview with the Executive Director of the Packwaukee Public Library indicated that the library had both a postage meter and a bulk mail permit which significantly diminished its need for a retail facility services.

Costs and Benefits of Closing the Facility

The study first examined the costs and benefits of closing the Packwaukee location without offering any alternative in town.  The benefits from the closure came from the elimination of one postal employee position and the operational costs of the facility.   The study indicated that the 7-year net present value of the benefit to the Postal Service of closing the facility would be $560,367.   The costs associated with closing the facility included the additional travel costs, including vehicle, driver time, and accident costs, the environmental impact of increased travel and  the cost to the Postal Service of transferring the employee.   The study determined that the costs would be born by the approximately 1,949 customers that lived within a three mile radius of Packwaukee. and were estimated to visit the post offices on average 2,301 times per month.  (Those living further away had other locations that were closer.)   The seven-year net-present-value of the cost of closing Packwaukee was estimated at $1,292,724.  The net present value of the difference in costs and benefits to the community of closing the facility was estimated at $732, 357.

Costs and Benefits of Replacing the Facility with an Automated Kiosk

Then the study examined the cost and benefits when a self service kiosks was placed in Packwaukee.   The self service kiosk was assumed to have similar capabilities to the exiting Automated Postal Center (APC).   The introduction of the self service option reduced the  costs to the 1,949 residents as some of their trips to other Post Offices could be provided by the the kiosk.   In this case, the 7-year net-present-value replacing a full service Post Office generated net benefits of $255,273.

Conclusions

The study concluded that further analysis is needed to determine whether additional Marquette County post offices should be closed to achieve optimal cost effectiveness as specified by the Yezer model.  They noted that the societal impact of a closure of any Post Office depended upon the retail volume at the location, and its proximity to other facilities.    They noted that both the Postal Service’s costs and the costs of patrons are unique to each facility.    Finally, they noted how unique this study was as they found no other study examining the impact of the closure of a Post Office on a facility.

Report

pdf file

Acknolegements

The Center is grateful for the effort of McKinney Austin, Byron Deluke, Isaac Eagan, Dan Kleinmaier, Paige Muegenburg, and Bickey Rimal on this project.   They came to the project with both independence and a fresh perspective to the question of the impact of closing a rural post offices and their analysis shows both that independence and perspective.   The Center will also like to thank Dr. David Weimer, Professor of Public Affairs and Political Science who both agreed to have this project included as one of the problems analyzed as part of his cost-benefit class and assisted the students in turning the project into a solvable problem for graduate students in public policy

Request for Comments and Critiques and Assistance in Developing New Student Research

As the study notes, there is a dearth of analysis of the impact of closure of a Post Office on a community.    This effort shows that such studies are doable and can provide substantive information about the impact on communities as the Postal Service considers modernizing its retail infrastructure..  The Center for Research in Regulatbed Industry urges readers of the study to write critiques of this study and make suggestions as to improvements in methodology that those conducting similar studies in the future might try.

The study also shows that students, and faculty with diverse backgrounds can be an important contribution to the understanding of the postal market.  We at the Center are interested in pursuing other projects for students at both the undergraduate and graduate level .   We would ask all postal stakeholders that are interested in advancing knowledge about the postal market and postal policy to assist to assist the Center in this effort.   This support can come in one of three ways:

• First, the Center could use assistance in developing study topics that can be accomplished within a 12 to 16 week period.   After developing a study topic, the stakeholder suggesting the topic would act as a resource to the students doing the study.
• Second, the Center  needs assistance in identifying faculty members who would join the LaFollette School  at the University of Wisconsin in providing students with an opportunity to study real world business and policy issues.  Such opportunities could come within courses as was the case of this study or they can be part of an independent study research project.   Third, the Center requires financial support to provide students to cover the out of pocket costs students incur as well as the efforts of the Center staff in providing students guidance and assistance in finding public information that can aid their research.
• Financial support would also enable the Center to offer stipends that would allow students to examine an issue full or part-time over a semester or over the summer.

Robert M LaFollette School of Public Affairs at the University of Wisconsin-Madison

The La Follette School is a leading academic institution in improving the design, implementation, and evaluation of public policy and the practice of governance worldwide.  The La Follette School pursues research, education, and public service in a collaborative setting where students, faculty, and practitioners interact closely and draw upon the outstanding scholarly resources of the University of Wisconsin—Madison.   The La Follette School offers domestic and international degrees in public management and policy analysis.  La Follette School faculty, alumni, students, and staff conduct research and outreach on issues that include the design and management of social welfare programs, international currency and trade, analysis of the effects of welfare reform, determinants of health and health care reform, environmental regulation, public management and finance, Social Security, and science and technology.

The Center for the Study of the Postal Market

The Center for the Study of the Postal Market (the Center) will provide an inclusive and nonpartisan source of research and information on the North American Postal market and a forum for public and industry stakeholder discussion and debate. The Center will explore the current structure and future evolution of the North American physical and digital mail and parcel delivery markets as part of the 21st century economic and communication infrastructure.  The goal of the Center is to facilitate an exchange of perspectives by individuals without regard to past or present affiliations, and to do so without any preconceived notions of what should be the end result.  The Center will provide the industry and government with research, information and opinion in order to help deal with rapid change as government policy initiatives and market forces challenge established relationships between service providers and their stakeholders.  We define the mail market loosely as the market (s) for the delivery of information in a document form via print or digital form, and the delivery of parcels and other items to homes and businesses.  For more information about the Center contact Alan Robinson , Executive Director of the Center.