Capital spending is making a comeback at the Postal Service from dangerously low levels. The Postal Service plans on tripling its capital spending commitments in Fiscal Year 2015. Under its recently issued Integrated Financial Plan for FY 2015, the Postal Service projects $2.2 billion in new capital commitments. This contrasts sharply with capital spending over the last five years, which was annually below $1 billion.
Capital spending commitments will be concentrated on previously deferred investment needed for aged and end-of-life equipment. Planned spending includes $800 million for mail processing equipment; $500 million for vehicles; $500 million for customer service and support equipment; and $400 million for facilities.
Total capital spending in FY 2014 was just $700 million, an anemic level for an entity that had $66 billion in total annual expenses. Postal Service capital spending has been limited to cash on hand as the agency long ago reached its statutory $15 billion debt limit. The agency also owes the U.S. Treasury $22 billion for unpaid retiree health care pre-funding mandates.
But the outlook for revenues in FY 2015 allows room from increased capital spending. Based on a projected 13 percent increase in package volume, and a moderate rise in Standard Mail volume, the Postal Service projects a $1.8 billion revenue increase from last year, with annual total revenue of $69.6 billion.
The Postal Service also expects to spend slightly more on transportation, supplies and services, and rents and utilities. Spending in these areas will increase from $13.3 billion to $14.9 billion. Transportation is projected to increase by $200 million to $6.6 billion as savings from transportation cost-reduction initiatives are offset by costs associated with network consolidations and increased volume.