LEGISLATIVE ANALYST MEMORANDUM

To: Members of the Board of Supervisors

From: Andrew Murray, Office of the Legislative Analyst

Date: June 1, 2005

Re: Employee Suggestion - Sell Surplus Signage and Other Items (OLA#: 038-05I)

Employee Suggestion

As part of the 2005 Board of Supervisors Employee Suggestion Program, an employee suggested that City departments (including MUNI and Parking and Traffic) sell surplus materials, such as signs, decals, and equipment, to the public rather than store them or recycle them.

Executive Summary

Most of the City’s obsolete street and traffic signs are refurbished and reused. Those that are damaged beyond refurbishment are declared surplus and recycled with the City’s scrap metal recycling contractor, a process that is overseen by the Department of Administrative Services Office of Contract Administration (OCA). It is unclear if there are significant outstanding opportunities to sell surplus items such as street signs or other materials that are currently being disposed of or recycled. In the past, OCA suspended the sale of most signs due to concerns over their inappropriate use by members of the public. Therefore, the Office of the Legislative Analyst (OLA) recommends that the Board of Supervisors encourage MUNI and the Department of Parking and Traffic (DPT) to review their practices to verify that they are maximizing their revenue from the sale of surplus materials, including selling items to members of the public.

Analysis

Surplus Material Management

Departments are required to declare materials that they can not make use of, but that have reuse or resale value, surplus and turn them over to the Department of Administrative Services Office of Contract Administration (OCA). OCA disposes of them through a variety of mechanisms, including through recyclers and an auctioning contractor. From the mid 1980s to the early 1990s, OCA stored surplus materials in a warehouse where members of the public could purchase them. Subsequent to that, the City had a City Store through which it sold some surplus materials. However, the store primarily sold memorabilia, not surplus items, and was closed in 2004 due to a lack of profitability.

Signage

The Department of Parking and Traffic (DPT) manages the majority of the City’s transportation-related signage. Peter Rubin, DPT Director of Operations, stated that the City either refurbishes or recycles all of its damaged or obsolete signs, which number approximately 5,000 per year. The cost of purchasing new signs varies by design. For example, one plate of a street name sign costs approximately $10, a doubled faced residential permit parking sign costs $12, a double faced street cleaning sign costs $8, and one stop sign costs $80. Refurbishing a sign costs approximately 80% of purchasing a new one. The recycling of approximately 2,500 signs per year generates a small amount of revenue, approximately $3,500 total in FY 04-05, or $1.40 per sign.

Because the City saves money by refurbishing over purchasing new signs, it is unclear whether obsolete or damaged signs slated for refurbishment could be sold at a price high enough to recover the foregone savings and the overhead of administering the sales. A cursory review of street and traffic signs offered on eBay indicate that they often sell for between $5 and $20 depending on the design, historical or cultural significance, and other attributes.

Recycled signs only generate approximately $1.40 each. Therefore, it would be worthwhile to sell them to the public if greater revenue could be generated, net administrative costs. Signs slated for recycling are often in very bad condition (which determines that they will be recycled rather than refurbished). Therefore, their appeal to consumers might be limited. Mr. Rubin recalls that when the City Store was in operation most people did not want to purchase actual signs, but rather wanted to purchase smaller scale replicas, which they did in limited numbers. eBay would offer the signs to a much wider audience than the City Store did. Nonetheless, even with a wider audience of consumers, given the condition of the signs slated for recycling, there is no evidence suggesting that they could be sold to the public, in volume, profitably.

Both Mr. Rubin and Henny Lee, the point person at OCA, noted that the sale of traffic signs at the warehouse and City Store was suspended due to concerns that members of the public were using the signs in illegal or hazardous manners. For example, members of the public were believed to have been suggestively posting "No Parking" signs to discourage parking by others.

Other Surplus or Damaged Items

MUNI generates a significant amount of surplus materials, including motor coaches and associated parts and equipment. Mr. Lee of OCA indicated that he did not think that there were significant opportunities to increase revenues from the sale of these items. Per Mr. Lee, often departments retain materials to see if they can make future use of them. By the time they want to divest of them, the materials are often obsolete or must be moved soon, both of which reduce OCA’s ability to generate significant revenue as the result of a sale. The obsolescence of the salvaged coaches and associated equipment is in part due to the long service life of MUNI equipment. When it divests of equipment, it is often in a condition and of a technology vintage that is unappealing to most other transit systems. Contacts at the Alameda-Contra Costa Transit District (AC Transit), a comparable transportation system in the region, corroborated Mr. Lee’s assessment.

Recommendation

Based on information provided by DPT and OCA, it is unclear whether there are significant opportunities to generate revenue from the sale of surplus signs or other materials from DPT or MUNI. In the past, OCA suspended the sale of most signs due to concerns over their inappropriate use by members of the public. The Office of the Legislative Analyst recommends that the Board of Supervisors encourage MUNI and DPT to review their practices to verify that they are maximizing their revenue from the sale of surplus materials, including selling items to members of the public