Posted at noon, Friday, January 4, 2002

First-class stamp to cost 37 cents

By Bill Murray
Bloomberg News Service

WASHINGTON — In addition to raising the price of first-class stamps to 37 cents from 34 cents, the U.S. Postal Service will likely increase magazine-mailing rates by 10 percent on June 30.

The post office also agreed during negotiations with magazine publishers, newspapers, parcel shippers and greeting card associations to increase magazine-mailing rates. The change will add $200 million a year in total costs to publishers such as Hearst Corp. and AOL Time Warner Inc.

Publishers said they agreed with the increases because they understand the difficulty the Post Office faces in the aftermath of the terrorist attacks and the scare over anthrax- contaminated mail.

"The major representatives of all the classes of mail are on board," said Jim Cregan, executive vice president of the Magazine Publishers of America. "Everybody recognizes it's a fair deal given the circumstances."

The agency reported a $1.68 billion loss for the 2001 fiscal year as the recession, terrorist attacks and public concern over anthrax-tainted letters sent mail volume falling for the first time in a decade.

The increases must still be approved by the Postal Rate Commission, an independent body. Since the commission's chairman urged the Postal Service and its customers to negotiate a settlement, it's likely the body will approve the rate rise, said Allan Adler, the Association of American Publishers' vice president for legal and government affairs.

Priority mail rates will rise 13.5 percent. Standard advertising mail and package prices will increase between 8 percent and 9 percent, and express mail will increase 9.7 percent.

The mailing industry agreed to have rates increased at the end of June rather than September, in part to allow the post office to gain about $500 million in revenue a month under the new rate plan.

Mail volume dropped 8 percent in October and November from the same period in 2000, and the total revenue losses from events last fall may be between $3 billion and $6 billion.

The rise in stamp prices will take effect 18 months after the last increase and is the largest since 1995 when the rate went to 32 cents from 29 cents. The post office also agreed not to seek another rate rise until at least the fall of 2003.

An increase in first-class stamp prices last took effect in January 2001, when the post office increased the rate by 1 cent.

The Postal Service has increased first-class postage rates every three to four years since May 1971 when the price increased to 8 cents from 6 cents. Three rate increases between November 1981 and April 1988 boosted the price of a single stamp to 25 cents from 20 cents.

The Postal Service, which pays operating expenses without federal support, has struggled to control costs during the last 18 months by freezing all construction plans and reducing work hours that equate to more than 22,000 jobs.

Congress gave the agency $500 million last month to upgrade security and rebuild Manhattan post offices damaged by the terrorist attacks.

Congress last directly appropriated funds to the Postal Service in 1982. Between 1885 and 1917 the price of a first-class stamp was 2 cents. It increased 1 cent between 1917 and 1919 to help pay for U.S. involvement in the First World War then dropped down to 2 cents until July 1932.