Subject: REVISED DONATION POLICY
Approval of a Council Policy regarding the donation or sale of surplus City personal property.
BACKGROUND
Chapter 4.16 of the San Jose Municipal Code governs the disposition of surplus City property. The Director of General Services is responsible for the sale, donation, or other disposition of property that the City no longer needs. Real estate and land dispositions are regulated elsewhere in the Code.
The City receives requests for donations of property, particularly vehicles, on a regular basis. These requests typically come from other governmental agencies, non-profit organizations and volunteer groups. Several requests have been from cities and villages in Mexico. These requests are often addressed to the Mayor, an individual Councilmember, or the City Manager. The requests are in turn referred to the Director of General Services for action.
The City Council has approved the donation or sale of various types of City property in recent years. However, the City does not have a policy outlining guidelines or priorities for responding to requests for donations. It is recommended that the Council adopt a policy to provide guidance to the Administration regarding requests for and the disposition of surplus property.
On December 6, 1994, the City Council amended the San Jose Municipal Code to authorize the Director of General Services to donate surplus property valued at up to $1,500 to other governmental agencies and qualified non-profit organizations that met certain guidelines. Those guidelines are as follows:
1. Priority
2. Eligibility
All non-profits must be a 501(c) (3) organization, and have a “formal relationship”with one or more City departments. The formal relationship could include:
a. The organization is providing a service that complements an existing City program.
b. The donation furthers a special project or geographically focused City effort.
c. Donation or sale to a non-profit organization that has common client base as a City program or service.
d. The proposed use of the equipment requested to be donated benefits a particular group such as the elderly, low income families, the homeless population or some similar community to which the City wishes to provide assistance.
These criteria are consistent with those considered in the approval of funding in the CDBG, Housing funding rounds, and Community Based Organization competitive processes. The guidelines have proven fair and workable with regard to donations valued at less than $1,500.
No specific guidelines or policy exist for reviewing donation requests over $1,500. There are a lot of items that the City sells for which it derives revenue. Council has not approved any policy regarding which categories of property that would normally be sold at auction should be eligible for donation and how that selection process should take place. Rather, requests come to the Department of General Services from various sources. Absent an official policy, reports are then prepared for Council consideration, according to the Director’s best judgement.
Examples of three types of disposition of surplus property will be described below. The most common request for donations is for sedans, pick up trucks and vans. Former police cars are also sought after. The auction revenue currently being generated through sale by an outside auction company with which the City has a contract is approximately $2,100 to $2,300 for these types of vehicles, minus the charges for the service. Examples of three types of disposition of surplus property will be described below.
An example of this type of request occurred in September of 1999 when the City Council approved the sale of twenty (20) former police cars to the Municipio of Los Cabos, Baja California Sur. The unit price was $2,100 based on most current auction house prices at the time. There was no loss of revenue based on the sale price, however there were staff time costs involved in making the arrangements, checking the vehicle condition, and preparing them for shipment. These costs are avoided when the auction company picks up a load of vehicles in as is condition.
This arrangement would entail selling to another agency or organization at a lesser price than would be anticipated through a bid or auction process to achieve a specific benefit desired by Council. There is a request of this type pending Council approval of a policy.
Donation
Fire apparatus is valued higher than sedans or pickups. For example, in April of 2000, eleven (11) pieces of fire apparatus were donated to eleven (11) municipalities in Mexico as part of a single Council action. The estimated values of individual vehicles ranged from $3,000 to $20,000 for a total value of $108,000. This case resulted in a loss of potential revenue, but achieved a humanitarian purpose intended to increase public safety.
Another example of past donations involves the City Council periodically donating vehicles to the San Jose Conservation Corps. The Corps is a non-profit youth training program. These donations have resulted in some loss of potential revenue, but also support an organization that has multiple projects with the City and which benefit local youth.
The following process has been used for making donations of property valued at less than $1,500 to non-profits since Council approval was received in 1994. It has worked well.
Periodically, the Purchasing Division of the Department of General Services makes departments aware of the types of surplus property that may become available for donation to non-profit corporations. City departments can then notify non-profits, with which they have a working relationship, that the City may have items available for donation. Interested non-profit corporations can obtain a request form from the Department with which it is associated and return it to that Department.
The Department receiving the form will: (1) certify that the non-profit is a corporation qualified under Section 501 (c) (3) of the Internal Revenue Code, a volunteer Fire Department, a governmental entity or a school district; (2) confirm that it has a formal relationship with the corporation; and (3) the department representative signs the form and sends it to the Purchasing Division. Purchasing staff enters the information into the database. Periodically, Purchasing staff reviews surplus items and Police Departments unclaimed property for items valued at less than $1,500 that have not been selected by City departments which might be candidates for donation. When several groups of items have been identified, a process of matching the surplus property to non-profit needs occurs.
City departments will continue to have first priority to reuse appropriate items surplused by another department prior to sale, donation or disposal. Only those items unlikely to generate any significant revenue compared to the staff effort involved are made available for donation or sale at a nominal price.
The Administration proposes the following:
1. If the Director of General Services determines that an item is not worth auctioning, (i.e. the costs of processing, transport, etc. will not result in net revenue to the City) then he/she will determine that item to be eligible for donation.
2. Of those items that are worth auctioning but do not have a value of more than $10,000, the following would be eligible for donation:
a. Fire vehicles and equipment
b. Specialty law enforcement equipment (excluding firearms or other weapons)
3. Items that have a value in excess of $10,000 will be sold at auction.
Items meeting the criteria will be placed on a list and submitted to the Rules Committee as a non action item. Interested parties will have thirty (30) days to submit to the Director of General Services, a request for donation containing all the information necessary to show eligibility. The Director will make a recommendation to Council regarding the donation on a regularly scheduled Council agenda.
Under the existing guidelines all donations are subject to the following conditions:
a. condition of property shall be designated “as is”
b. no delivery shall be provided
c. the transferee must assume all liabilities in writing
d. property must be used for the sole use of the agency and not transferred or returned
Requests to sell City surplus property at less than projected auction value will be prioritized using the same criteria. In the case of a request for donation and a request to purchase the same surplus equipment, priority will be given to the sale that generates net revenue to the City.
Ordinary
police sedans are usually easy to auction.
The City has not donated such vehicles in the past. On certain occasions Council has approved a
sale of police cars to municipalities in Mexico. Because these ad hoc
transactions have significant cost in administrative preparation and logistics,
staff is recommending that the interested jurisdictions be encouraged to
purchase the vehicles through the regular auction process to the greatest
extent possible. Direct sale of former
Police cars will be minimized.
There are two requests currently on file. It is recommended that those three requests be processed as submitted. Those requests are:
Reduced price sale of one brush patrol fire vehicle to the Paradise Park Volunteer Fire Department.
Donation of one sedan and one pick up truck to the San Jose Conservation Corps.
The adoption of a Surplus and Donation policy by Council will ensure that staff is using consistent guidelines and criteria in reviewing requests for donations when making recommendations to the City Council.
Potential revenue that would be generated through each auction sale would not be realized when property was donated. These numbers can be tracked on a case by case basis and tallied and reported periodically.
Public outreach is not applicable to the recommended action.
This memorandum has been coordinated with the City Attorney’s Office and the Budget Office.
FRANCIS B. MCVEY
Acting Director, General Services Department