FREEPORT, Kan (Reuters) - Six days a week, the small American flag flutters in the shade of a cottonwood tree outside the post office in Freeport, Kansas, population 5.

The flag, which means the post office is open, may come down for good later this year because Freeport is among about 2,000 postal outlets eyed for closure by the United States Postal Service. The vast majority are in small towns, officials said.

"When you lose a post office, you lose a little history," said Carol Peterson, city treasurer and resident historian in Freeport. "We've been blessed with this post office for 126 years."

But the march of time is catching up with post offices in rural areas, where population declines have cut demand. Only eight people have a postal box in Freeport, another 23 have mail delivered, said Terry Ball, officer in charge.

ADVERTISEMENT

Seven miles up the road, 24 people have a box in Danville, Kan., where the post office is also on the closure list. Richard Olivier runs the Danville post office, located in a former gas station where he used to hang out as a boy in the 1950s. People seem resigned to the office closing, he said.

"They really kind of understand the postal service wanting to get into black ink again," Olivier said.

The postal service is losing $23 million a day and is $15 billion in debt, its allowed limit, said Rich Watkins, spokesman for its Mid-America District. The service has cut about 100,000 positions through attrition in the past three years and consolidated sorting and other operations, he said.

The postal service is in such bad financial condition that it may not be able to make a $5.5 billion prepayment for future retiree health benefits due September 30, Postmaster General Patrick Donahoe told a Senate subcommittee last week.

The U.S. agency has lost business to electronic mail and to private sector competitors like FedEx and the United Parcel Service.

In rural communities, post offices can be social centers where people run into neighbors and share news. They help give a town some life, Peterson said.

"Change is tough, we understand that," Watkins said. "Some of these offices have been part of the retail postal system since the 1850s when they were on the rail lines."

But the postal service cannot justify keeping offices that only serve a handful of customers, Watkins said. Beside, he added, people will still get mail, package and stamp-buying services through rural delivery.

Freeport turned back an effort to close its post office in 1997. It is a town that dies hard. Freeport was the smallest incorporated place in the U.S. with a bank until 2009, when it moved. All that's left in Freeport are its five residents, a grain elevator and a church.

ADVERTISEMENT

"It gets to the point where you get so small you can't bring it back again," said Bill Peterson, the Freeport mayor and the husband of Carol.

But towns don't necessarily live and die by their post offices. Plevna, Kan., population 98, lost its post office in 2009 but people have adjusted, said Monte Bowen, the city clerk.

"It made everybody mad for a while, but it didn't wipe us out," Bowen said. "We're still here."

(Writing and reporting by Mary Wisniewski; Editing by Greg McCune)