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202 IRET Congressional Advisory 1 (2006)

handle is hein.taxfoundation/iretcgadv0199 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. April 18, 2006 Advisory No. 202 THE POSTAL SERVICE'S HOTEL WANTS YOUR BUSINESS Executive Summary The Postal Service has a national conference and management training center on an 83 acre site in the leafy Washington suburb of Potomac, Maryland. Several years ago, the Service opened the facility to the general public for a number of hospitality-industry related activities including hotel stays, business meetings, special events like weddings and banquets, food, and drink. Although the facility has a postal theme with large pictures of stamps on walls, a permanent exhibit from the Smithsonian's National Postal Museum, and specialty cocktails named after Pony Express riders and mail drops, its hospitality industry services really have nothing to do with the government-owned enterprise's core purpose of delivering non-urgent mail throughout the country. The William F. Bolger Center's double life raises the issue of whether a government agency should engage in commercial activities unconnected to its government-assigned mission. The expansion of government-owned enterprises into commercial markets is a concern because they are often less productive, less cost effective, and less attuned to customers' wants than private-sector businesses. The Service could argue that it is merely putting the Bolger Center's excess capacity to use instead of letting it go to waste, and generating extra money to help support the agency's other operations. The Postal Service's hotel and related services probably make money. The Service reports that non-Postal-Service guests furnished nearly $6.7 million of revenue in 2004. However, profits will be smaller than revenues. Profits equal revenues minus costs, not revenues alone. The Service should provide data on the extra costs the Bolger Center incurs due to its non-postal customers. A more fundament question is whether the Postal Service is putting to best use its nationwide real estate portfolio. The Bolger Center's excess capacity underlines the desirability of having an independent assessment of the Service's massive real estate holdings, with the results made public to increase transparency and accountability. The Postal Service carries into the hospitality industry its many government-based powers and privileges, including numerous tax and regulatory exemptions. These indirect government subsidies lack transparency, narrow the tax base, are unfair to competing hotels and restaurants, and hurt overall economic efficiency. There is little justification for the Postal Service to continue to receive preferential tax and regulatory treatment on its hospitality industry services. More generally, the Postal Service's government-based benefits should be reexamined on other activities that are outside its core, government-assigned mission.

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