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entitled 'New Dollar Coin: Marketing Campaign Raised Public Awareness 
but Not Widespread Use' which was released on September 13, 2002.



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Report to the Subcommittee on Treasury and General Government, 

Committee on Appropriations, U.S. Senate:



September 2002:



New Dollar Coin:



Marketing Campaign Raised Public Awareness but Not Widespread Use:



GAO-02-896:



Contents:



Letter:



Results in Brief:



Background:



New Dollar Coin Marketing Program Cost $67.1 Million and Generated $968 

Million in Seigniorage, but the Coin Is Not Widely Circulated:



Public Resistance Is the Greatest Barrier to Increased Use of the New 

Dollar Coin:



The Mint’s Marketing Plan Identifies but Does Not Provide Details on 

How It Will Address Barriers to Increased Coin Use:



The 2001 and 2002 Mint Reports to Congress Did Not Fully Describe the 

Marketing Program, Results, or Problems Encountered:



Conclusions:



Recommendations for Executive Actions:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Objectives, Scope, and Methodology:



Appendix II: State and Local Governments: Dollar Coin Use Data in the

Largest Transit Systems and Toll Roads:



Appendix III: Comments from the United States Mint:



Appendix IV: Comments from the Federal Reserve Board of Governors:



Tables:



Table 1: Marketing Program Contractors as of December 2001:



Table 2: Mint Promotions Distributing New Dollar Coins, Ranked by 
Number 

of New Dollar Coins to Be Distributed:



Table 3: Number of Dollar Coins that the Mint Shipped to Federal 
Reserve 

Banks, Fiscal Years 1998-2000:



Table 4: Circulation of Highest Value Coins and Lowest Value Notes in 
G-

7 Countries:



Table 5: New Dollar Coin Distribution Problems Identified in Telephone 

Calls to the Mint from January to August 2001:



Table 6: Summary of Actions in Mint Marketing Plan to Address Barriers:



Table 7: Transit Agencies Accepting the New Dollar coin, as of April 

2002:



Table 8: Dollar Coin Use in Toll Road Operators, as of December 2001:



Figure:



Figure 1: Federal Reserve Net Payout of Susan B. Anthony and New Dollar 

Coins, 1998-2002:



Abbreviations:



HDTV: high-definition television:



NASCAR: National Association for Stock Car Auto Racing:



TSI: The Source International:



Letter:



September 13, 2002:



The Honorable Byron L. Dorgan

Chairman

The Honorable Ben Nighthorse Campbell

Ranking Member 

Subcommittee on Treasury 

 and General Government

Committee on Appropriations

United States Senate:



If the public uses the dollar coin rather than the dollar note, the 

government could potentially save up to $500 million annually, 

depending on the amount of use. This report responds to your request 

that we study the United States Mint’s (the Mint) marketing program for 

the new Sacagawea dollar coin, which was required by the United States 

$1 Coin Act of 1997.[Footnote 1]



As agreed with your offices, our objectives were to (1) describe the 

Mint’s new dollar coin marketing program costs, the contracts and 

promotional programs in which the Mint engaged, and the revenues that 

were generated; (2) assess the barriers the Mint may face in increasing 

the public’s use of the new dollar coin; (3) describe the Mint’s future 

plans to promote the new dollar coin and the extent that these plans 

address the barriers; and (4) assess the extent that the Mint’s 2001 

and 2002 reports to Congress on the marketing of the new dollar coin 

fully and accurately described the marketing programs, the results 

obtained, and the problems encountered.[Footnote 2]



To address our first objective, we obtained and reviewed Mint 

contracts, progress reports, plans, and other related documents to 

develop information on the Mint’s new dollar coin marketing program 

costs; the contracts and promotional programs in which the Mint 

engaged; and the revenues that were generated. To obtain information on 

and assess the barriers the Mint faces in increasing the public’s use 

of the new dollar coin, we analyzed Mint documents; interviewed 

officials from the Mint, its contractors, and trade associations; and 

surveyed the Mint’s promotional partners, asking them about any 

problems they encountered during their promotions. We interviewed 

officials at the Mint, the Federal Reserve Board, and various trade 

associations and reviewed Mint documents and the 2002 new dollar coin 

marketing plan to obtain information on the Mint’s plans to overcome 

barriers to increasing commercial use of the new dollar coin. To assess 

the extent that the Mint’s 2001 and 2002 reports to Congress fully and 

accurately described the marketing of the new dollar coin, results 

obtained, and problems encountered, we analyzed the reports and 

compared the information in them with the information we obtained in 

addressing our other objectives. We also reviewed information on the 

introduction and circulation of the Susan B. Anthony dollar coin, 

including hearing transcripts and our previous reports on new dollar 

coin proposals.[Footnote 3] Appendix I provides further details about 

our objectives, scope, and methodology.



We requested comments on a draft of this report from the Secretary of 

the Treasury, the Director of the Mint, and the Chairman of the Board 

of Governors of the Federal Reserve System. The comments we received 

are discussed near the end of this letter and reproduced in appendixes 

III and IV. We did our work in Washington, D.C., between September 2001 

and September 2002 in accordance with generally accepted government 

auditing standards.



Results in Brief:



The Mint spent at least $67.1 million to promote the new dollar coin 

from 1998 to 2001, including expenditures for a marketing and 

advertising program; public relations and publicity programs; 23 

partnerships with banking, entertainment, retail, grocery, and 

restaurant chains; and promotional events with transit agencies. Most 

of the $67.1 million was used for a $40.5 million national advertising 

campaign featuring an image of George Washington that was designed to 

build public awareness, generate acceptance, and encourage the new 

dollar coin’s use. The Mint also worked with contractors to stimulate 

the new dollar coin’s use in state and local government operations and 

used its own staff for marketing activities in federal government 

facilities, but the Mint did not track the costs for the use of Mint 

staff. According to the Mint, between January 2000 and December 2001, 

the new dollar coin had generated approximately $1.1 billion in revenue 

and $968 million in seigniorage.[Footnote 4]



The Mint faces several barriers in its efforts to increase the public’s 

use of the new dollar coin. The most substantial barrier is the current 

widespread use of the dollar bill in everyday transactions and public 

resistance to begin using the dollar coin. As we have reported in the 

past, until individuals can see that the coin is widely used by others 

and that the government intends to replace the dollar bill with the 

dollar coin, they will be unlikely to use the coin in everyday 

transactions. Increasing use of the coin is especially difficult 

because retailers will not stock the dollar coin until they see the 

public using it, the public is unlikely to use the coin until they see 

retailers stocking it, and banks and armored carriers are reluctant to 

invest in new equipment to handle the coin until there is wide demand 

for it. This interdependency of demand, which economists call the 

“network effect,” will be difficult to overcome. Other barriers that 

hinder wider circulation of the new dollar coin include the following: 

(1) negative perceptions the public may have of the coin after two 

failed introductions, (2) lack of public information about the savings 

to the government from using the new coin, (3) lack of public awareness 

about the comparative advantages of the dollar coin over the dollar 

bill, and (4) some people consider the ease of carrying the bill to be 

more beneficial than the durability of the dollar coin. In addition, 

firms that promoted the new dollar coin in partnership with the Mint 

and other commercial users have reported problems with the way that the 

new dollar coin is distributed, such as (1) the unavailability of the 

coin at all banks, (2) supplies of new dollar coins that were 

commingled with the Susan B. Anthony dollar coin, (3) packaging 

concerns such as coins that are not available in rolls, and (4) higher 

fees for delivery of new dollar coins compared with dollar notes.



The April 2002 Mint marketing plan for the new dollar coin requested 

$0.5 to $1.0 million for the remainder of fiscal year 2002 for 

researching consumer and distribution barriers and continuing existing 

promotional efforts, followed by $10 to $15 million in fiscal year 2003 

for marketing activities to increase use of the new dollar coin. In 

general, the Mint’s marketing plan describes a program that is much 

smaller in scope than the marketing campaign used to launch the new 

dollar coin in 2000. The Mint plan addresses some but not all of the 

barriers to increasing use and recognizes that successfully achieving 

widespread use of the new dollar coin will be difficult if the dollar 

bill cocirculates with the new dollar coin. Although the Mint plan 

identified the key barriers in distribution--such as the unavailability 

of new dollar coins, commingling, lack of availability of new dollar 

coins in rolls, and additional fees charged by armored carriers--the 

plan does not specifically outline how those barriers will be dealt 

with, other than to conduct research. The plan also notes that recent 

negative media coverage following a Department of the Treasury’s Office 

of Inspector General report recommendation to temporarily suspend the 

coin’s production will be a significant challenge for the Mint’s 

marketing communications and public relations programs, but it does not 

provide details on how the Mint will counter this negative press.



The Mint’s 2001 report to Congress did not fully and accurately 

describe the costs of the marketing campaign, the results obtained, and 

problems encountered. The 2002 report gave more details on marketing 

costs and a fuller description of the problems encountered. However, in 

the 2002 report, the Mint did not provide a comprehensive analysis of 

the outcomes and progress in industry sectors in which the Mint 

promoted the new dollar coin, and the plan did not establish measurable 

future goals for these sectors.



Overall, although the Mint’s marketing program raised awareness of the 

coin, the new dollar coin is not widely used by the public in everyday 

transactions. Since the Mint does not have data showing that additional 

marketing and promotion efforts would have a long-term positive effect 

on dollar coin use, we are recommending that, aside from honoring its 

existing promotion agreements and conducting planned research on public 

acceptance and distribution barriers, the Mint suspend further 

expenditures for marketing and promoting the new dollar coin until it 

completes its research and can demonstrate that such expenditures are 

likely to produce a sustained increase in the coin’s use over the long 

term and/or are necessary to achieve Congress’s desire for 

cocirculation. We are further recommending that the Mint revise its 

marketing plan to reflect such an approach and work with Congress to 

reach agreement on an appropriate funding level. We provided a copy of 

a draft of this report to the Mint and the Federal Reserve, and they 

agreed with our recommendations.



Background:



The United States $1 Coin Act of 1997 authorized the new dollar coin to 

replace the Susan B. Anthony dollar coin, which began production in 

1979. Even though the Anthony coin was never widely circulated, it 

became clear by 1997 that the government’s supply of Anthony coins 

would soon be exhausted. In addition to giving the Mint authority to 

develop a new dollar coin, the act also specified that the coin be 

golden in color and have a distinctive edge and tactile and visual 

features to make it easier to distinguish from the quarter-dollar coin. 

To ensure that the new dollar coin would be recognized by vending 

machines and other coin-operated equipment designed for the Anthony 

dollar coin, the new dollar coin is the same size and has a similar 

electromagnetic signature[Footnote 5] that is similar to the Anthony 

dollar coin.



The $1 Coin Act authorized the Secretary of the Treasury, in 

consultation with Congress, to select the design of the new coin. In 

May 1998, the Secretary established a Dollar Coin Advisory Committee to 

consider alternatives and recommend a design concept for the obverse 

(heads) side of the coin. The final design selected was an artist’s 

rendition of Sacagawea, a Shoshone interpreter who assisted the Lewis 

and Clark expedition of 1804-06 to the Pacific Ocean.



The act also required the Secretary to create a marketing program to 

promote the use of the new dollar coin by commercial enterprises; mass 

transit authorities; and federal, state, and local government agencies. 

The Mint marketing program had three major components, including 

research to identify market opportunities, a national public awareness 

and education program that included a national advertising campaign, 

and a business marketing program that was designed to increase 

commercial use of the new dollar coin in targeted sectors. According to 

the Mint, the first shipments of the new dollars were sent to the 

Federal Reserve on January 18, 2000, and the Federal Reserve sent 

shipments to financial institutions beginning January 26, 2000. The 

Mint also shipped new dollar coins directly to Wal-Mart stores to 

support a large, nationwide promotion of the coin that began on January 

30, 2000.[Footnote 6]



While authorizing the production of a new dollar coin, the $1 Coin Act 

also provided that the dollar note should not be removed from 

circulation on the basis of provisions in the act. In authorizing the 

circulation of both the dollar note and dollar coin, the act did not 

establish a goal for the number of new dollar coins or establish a 

level of dollar coin circulation compared with the dollar note. The act 

also required the Secretary to conduct a study on the progress of new 

dollar coin marketing program and submit a report to Congress on the 

results of the study no later than March 31, 2001. The Mint submitted a 

March 30, 2001, report to Congress.[Footnote 7]



In reports accompanying the 2002 Treasury and General Government 

Appropriations Bill, the Senate and House Committees on Appropriations 

expressed concern that the Mint’s 2001 report to Congress did not 

adequately describe the nature and extent to which the new dollar coin 

was being used in commerce. The House report directed the Mint to 

submit a new report by March 31, 2002.[Footnote 8] In addition, the 

Senate report accompanying the 2002 Treasury and General Government 

Appropriations Bill also expressed concern that it had not received 

information on the contracts and agreements secured between the Mint 

and nongovernment entities and public relations firms mentioned in the 

Mint’s March 30, 2001, report. The Mint submitted its second report on 

March 29, 2002.[Footnote 9]



A Senate committee report and the Conference Report accompanying the 

2002 Treasury and General Government Appropriations Bill further 

directed the Mint to submit a marketing plan to the Appropriations 

Committees and stipulated that the plan must be approved by the 

committees before the Mint could draw additional funds from the Mint 

Public Enterprise Fund to promote the new dollar coin. The Mint 

submitted its plan, the “Golden Dollar Coin Marketing Plan for 

Congress,” on April 24, 2002.



In March 2002, coins of all denominations made up 5 percent, or $32.1 

billion, of the $642 billion in currency and coins that were in 

circulation. The demand for coins from businesses and the general 

public fluctuates, and the Mint and the Federal Reserve monitor several 

factors, such as economic growth, coin collection activity, and Reserve 

Bank coin inventories, to determine the number of coins that will be 

produced and shipped to the Federal Reserve. The Mint receives orders 

for coins from Federal Reserve Banks on a monthly basis and normally 

ships coins directly to Reserve Bank offices. The Federal Reserve 

provides coins to over 11,000 of the 20,000 U.S. depository 

institutions, such as banks, savings and loans, and credit unions. 

Smaller banks that do not order their cash and coins directly from the 

Federal Reserve obtain cash services through many of the larger banks. 

In addition to Federal Reserve offices, Reserve Banks use over 100 coin 

terminals generally operated by armored carriers to store and 

distribute coins. Besides functioning as Federal Reserve coin terminal 

operators, the armored carriers wrap and deliver coins for a fee to 

banks and retail customers to meet public demand. Reserve Banks 

normally fill coin orders from banks by first paying out previously 

circulated coin until this inventory is depleted and then by using new 

coin inventories to meet demand.



To support the introduction and promotion of the new dollar coin, the 

Federal Reserve departed from its normal policy and held all previously 

circulated Anthony dollar coins received by Reserve Banks and filled 

orders only with new dollar coins. However, in January 2002, Reserve 

Banks returned to their normal practice of filling orders with 

previously circulated coins. Nevertheless, Reserve Banks will continue 

filling requests for new dollar coins until their inventories of new 

dollar coins are depleted. On the basis of the public demand for the 

dollar coin, the Federal Reserve estimated that, at the end of April 

2002, it had over a 1-year supply of dollar coins. Since the older 

Anthony and new dollar coin have a similar electronic signature and 

neither the Reserve Banks nor armored carriers have equipment to 

separate them, the supply of circulated coins consists largely of 

commingled Anthony and new dollar coins. The Federal Reserve estimated 

that, as of April 2002, 70 percent of the dollar coin inventory is 

commingled Anthony and new dollar coins and about 30 percent is new 

dollar coins. In its response to a March 2002 Treasury Office of 

Inspector General report, the Mint said it would temporarily suspend 

production of the new dollar coin on March 31, 2002, and reevaluate the 

need for producing coins for general circulation in the first quarter 

of fiscal year 2003.[Footnote 10]



In our May 1990 report on proposals to introduce a new dollar coin in 

the United States, we noted that the government did not successfully 

manage the introduction of the Anthony dollar coin because the dollar 

note was not simultaneously eliminated, the coin too closely resembled 

the quarter, and the coin was not effectively promoted. We identified 

several key ingredients for a successful conversion, including a 

reasonable transition period, a well-designed dollar coin, a public 

awareness campaign, support from the administration and Congress, and 

withdrawal of the dollar note from circulation.[Footnote 11] We 

estimated in April 2000 that replacing the dollar note with a coin 

would save the government an average of $500 million a year, because 

coins last much longer than currency and there are lower government 

costs to distribute coins than currency.[Footnote 12]



The new dollar coin is profitable on a per unit basis. While it costs 

the Mint about $0.12 to produce the coin, the government receives $1.00 

of spending power for each coin, thereby leaving a margin of $0.88 per 

coin.



New Dollar Coin Marketing Program Cost $67.1 Million and Generated $968 

Million in Seigniorage, but the Coin Is Not Widely Circulated:



The Mint spent at least $67.1 million to promote the new dollar coin 

from 1998 to 2001, including $62.3 million for four contracts involved 

with creating the marketing program and advertisements. Of the 

remaining $4.8 million, the Mint spent $0.4 million to conduct public 

relations events and programs to publicize the new dollar coin’s launch 

that distributed 1,251,000 coins; $4.4 million for 23 promotion 

partnerships with banking, entertainment, retail, grocery, and 

restaurant chains that distributed an estimated 132 million dollar 

coins; and $36,000 to conduct promotional events with transit systems 

that distributed 36,000 coins. Most of the $62.3 million in contracts 

for creating the marketing program and advertisements was used for a 

$40.5 million national advertising campaign featuring George Washington 

that was designed to build public awareness, generate acceptance, and 

encourage the new dollar coin’s use. The Mint also worked with 

contractors to stimulate the new dollar coin’s use in state and local 

government operations and used its own staff for marketing activities 

in federal government facilities. However, the Mint did not track the 

costs for the use of Mint staff for these efforts.



Though initial public awareness generated by the advertising was 

strong, the new dollar coin, like the Anthony dollar coin, has failed 

to achieve widespread use. Federal Reserve data show a net 

payout[Footnote 13] of 558 million new dollar coins in 2000, the year 

the dollar coin was introduced. But, in 2001, demand and public 

interest in collecting the new dollar coin dropped, and the net payout 

decreased by 65 percent to 194 million coins and remained at lower 

levels in the first half of 2002. In May 2002, the Federal Reserve 

estimated an annualized figure of $120 million in new dollar coin net 

payout for 2002. The Mint has estimated that people use the dollar coin 

in 4 percent of dollar transactions, but Mint data from July 2001 show 

it to be about 1 percent.



Marketing Contractors Conducted Key Components of the New Dollar Coin 

Marketing Program:



To create and execute the new dollar coin marketing program, the Mint 

contracted with outside firms for the three major components of the 

program: research, business marketing, and a public awareness campaign. 

The research component, designed to help identify target markets for 

the new dollar coin before its January 2000 launch, was conducted under 

a $1.5 million contract with Marketbridge, a marketing services 

company. To provide the Mint with the necessary market research data, 

Marketbridge first analyzed existing Anthony dollar coin use in various 

industry sectors. Marketbridge also analyzed each industry for 

potential new dollar coin use by looking at several factors, such as 

the size of the industry, the average transaction size, and the current 

coin equipment capability in that industry. Using this market analysis, 

Marketbridge determined that certain industry sectors, such as food and 

drink vending, postal machines, transit systems, and car washes, had 

the highest potential for new dollar coin use. Table 1 provides 

information on the Mint’s marketing program contractors.



Table 1: Marketing Program Contractors as of December 2001:



[See PDF for image]



[A] The Mint determined it was not satisfied and terminated the Double 

Eagle contract in June 2000. :



Source: U.S. Mint.



[End of table]



The Mint contracted with Double Eagle in April 1999 to perform business 

marketing activities that concentrated on outreach to businesses in 

certain industry sectors to increase the commercial use of the coin. 

Double Eagle focused its marketing efforts on businesses with a high 

potential for using the coin. To persuade these businesses, such as 

food and drink vending, transit, postal, car wash, and retail 

industries, to use the new dollar coin, Double Eagle conducted various 

business marketing activities, including personal sales visits and 

telephone calls to decision-makers, and attended conventions and 

meetings. The Double Eagle contract totaled $8 million. In June 2000, 

the Mint determined that it was not satisfied with Double Eagle’s 

progress and terminated the contract. In October 2000, the Mint 

contracted with Fleishman Hillard for $4 million, to take over the 

responsibilities for business marketing.



The Mint also secured the services of the Fleishman Hillard 

communications firm in May 1999 to create and implement the public 

awareness and education campaign. Fleishman Hillard first conducted 

public opinion polls and focus groups before the new dollar coin’s 

launch in January 2000 to assess consumer attitudes and create and test 

the advertising campaign. In tests of potential advertising campaigns, 

focus group participants generally preferred the “Golden Dollar” to the 

Sacagawea or Millennium dollar coin. To budget ad dollars and to reach 

those more likely to use coin-operated technology, such as vending 

machines and public transit, the Mint established the primary target 

audience as 18-to 49-year-old adults who live in urban and suburban 

areas.



The $40.5 million paid advertising campaign that was developed to 

communicate to this target audience included 11 weeks of ads on 

television nationwide and print, radio, transit, and Internet ads. The 

paid advertising campaign, which began in March 2000, accounted for 

approximately two-thirds of the contracted new dollar coin marketing 

program expenditures between 1998 and 2002. The media plan for the 

advertising campaign featuring an image of George Washington was 

designed to build positive awareness, generate acceptance, and 

encourage the coin’s use. The television ads reached an estimated 92 

percent of the target audience an average of 15 times.



The ad featured the image of George Washington from the dollar bill; 

however, the Mint reported that, according to Treasury officials, it 

could not point directly to the advantages of the dollar coin over the 

dollar bill in its television advertising campaign. One television ad 

proposal, for example, had a scene showing a dollar bill being rejected 

from a vending machine. According to Mint officials, that part of the 

ad was not approved and was never aired because some Treasury officials 

thought that it negatively portrayed the dollar bill. Current Mint 

officials said that a former Mint Director participated in the meeting 

in which the ad was discussed, and that they do not know which Treasury 

officials were at the meeting. Current Mint officials also said the 

policy to avoid direct comparisons of the dollar coin to the dollar 

bill was not a formal written policy. According to a current Treasury 

official, the $1 Coin Act authorizing the new dollar coin called for 

both the dollar coin and the dollar note to cocirculate and Treasury 

interprets that to mean that it should not favor the coin or the note. 

The Treasury official said that the Mint and the Bureau of Engraving 

and Printing are sister agencies that can create public awareness 

campaigns for new coins and notes without directly comparing the 

advantages and disadvantages of each.



As part of the marketing program, the Mint and Fleishman Hillard also 

developed a public relations campaign to support the new dollar coin’s 

launch, which included a float in the Macy’s Day Parade in November 

1999. The new dollar coin was also featured in promotions with 

Coinstar, a company that operates supermarket-based coin-counting 

machines; the Wheel of Fortune game show; and General Mills’s Cheerios. 

These promotions resulted in the distribution of 1,251,000 coins and 

cost $413,500, according to Mint data.



The Mint also formed a retail partnership with Wal-Mart to distribute 

the dollar coin as change at its 2,900 Wal-Mart and Sam’s Club stores 

throughout the United States beginning in January 2000. In addition to 

the Wal-Mart agreement, between 2000 and 2001, the Mint created a 

number of promotion partnerships in many of the targeted industry 

sectors with potential dollar coin circulation. As table 2 indicates, 

the Mint formed 23 promotion partnerships to stimulate use of the new 

dollar coin. Most of the estimated 132 million dollar coins distributed 

during the promotions were to customers in the retail, banking, 

entertainment, restaurant, and grocery industries.



Table 2: Mint Promotions Distributing New Dollar Coins, Ranked by 

Number of New Dollar Coins to Be Distributed:



[See PDF for image]



Note: According to the Mint, three of the minor league baseball teams, 

the New Orleans Zephyrs, the Ogden Raptors, and the Norfolk Tides have 

promotions for the new dollar coin that extended into the 2002 season.



[A] These data were developed on the basis of the Mint’s dollar coin 

distribution goal from each promotion agreement. Many promotion 

agreements required the promotion partner to submit reports to the Mint 

on the number of coins distributed, but the Mint did not keep track of 

these reports or verify the number of new dollar coins distributed 

during each promotion.



Source: U.S. Mint.



[End of table]



In general, the Mint said it tried to achieve a ratio of 10 new dollar 

coins distributed for every dollar in marketing costs. The Mint 

reported that the promotions, on average, distributed 30 dollar coins 

for every dollar in marketing cost. However, the actual number of new 

dollar coins distributed may have been more or less than the number 

shown, because the Mint did not track the actual number of coins 

distributed by each promotion partner.



The Mint also marketed to state, local, and federal governments to 

increase the use of the new dollar coin. For example, the Mint and 

Fleishman Hillard conducted promotional events to increase the use of 

the coin in the transit systems in New York, Chicago, Philadelphia, and 

San Diego. The promotional events included a giveaway of free new 

dollar coins to transit riders for fare card purchases and radio and 

newspaper coverage of the promotions. The transit promotions resulted 

in the distribution of about 36,000 new dollar coins to transit riders. 

According to the Mint, the transit promotions cost $36,000 in media and 

promotional items. In addition, as part of the Mint marketing effort 

targeting state and local governments, the Mint also worked with bridge 

and road authorities to increase the use of the new dollar coin in 

tollbooths and encouraged cities to convert parking meters to accept 

the coin. The Mint also conducted marketing events using its own staff 

to stimulate use in the federal government facilities’ retail 

operations, such as cafeterias. For example, the Mint conducted a new 

dollar coin day’s event at the Pentagon during which about 56,000 new 

dollar coins were distributed, but the Mint did not track the 

associated costs for the use of Mint staff.



The total cost of the new dollar coin marketing contracts, 23 

partnerships, and launch and transit promotions was $67.1 million, 

excluding costs associated with using Mint staff.



The Mint’s Marketing Program Did Not Result in Wide Circulation:



The Mint’s new dollar coin marketing program raised public awareness of 

the new coin but did not produce long-term increases in circulation. 

Regular surveys conducted by Fleishman Hillard to monitor the impact of 

the new dollar coin marketing program indicated that the advertising 

campaign and other marketing activities considerably increased public 

awareness. According to the surveys, about 27 percent of the public was 

aware of a new dollar coin in July 1999, shortly after the final dollar 

coin design was announced. By July 2000, after the national advertising 

campaign, awareness had increased to 91 percent. A December 2001 poll, 

which is the latest available public opinion poll on new dollar coin 

awareness, showed that public awareness of the dollar coin remained 

relatively high, about 83 percent.[Footnote 14]



As shown in figure 1, the demand for dollar coins as measured by net 

payout to banks from the Federal Reserve peaked during the year that 

the new dollar coin was introduced and has since decreased 

significantly. Net payout of the Anthony dollar coin from the Federal 

Reserve was $72 million in 1999, the year before the new dollar coin’s 

release. However, with the introduction of the new dollar coin in 2000, 

net payout and demand for dollar coins increased sharply to $558 

million. But, in 2001, demand and public interest in collecting the new 

dollar coin dropped, and net payout decreased by 65 percent to $194 

million and remained at lower levels in the first half of 2002. In May 

2002, the Federal Reserve estimated an annualized figure of $120 

million in new dollar coin net payout for 2002.



Figure 1: Federal Reserve Net Payout of Susan B. Anthony and New Dollar 

Coins, 1998-2002:



[See PDF for image]



Note: To meet demand for dollar coins before the new dollar coin was 

available in January 2000, the Mint produced 33 million Anthony dollar 

coins in late 1999 and 40 million Anthony dollar coins in early 2000.



Source: Federal Reserve.



[End of figure]



As of January 2002, the Mint said that it had produced 1.4 billion new 

dollar coins and had about 300 million in inventory. According to the 

Mint, from January 2000 to December 2001, it released approximately 1.1 

billion new dollar coins into circulation that generated approximately 

$968 million in seigniorage after subtracting costs. According to the 

Federal Reserve, it received approximately 980 million and paid out 964 

million new dollar coins during this period.[Footnote 15] The Federal 

Reserve held about 248 million dollar coins in inventory as of December 

2001.[Footnote 16] As indicated in table 3, the number of dollar coins 

shipped to the Federal Reserve peaked with the coin’s introduction in 

2000 and dropped significantly during the following 2 fiscal years.



Table 3: Number of Dollar Coins that the Mint Shipped to Federal 

Reserve Banks, Fiscal Years 1998-2000:



Numbers in millions.



[See PDF for image]



Source: Department of the Treasury, Office of Inspector General, The 

Mint Suspends Its FY2002 Planned Production of Golden Dollar Coins, 

OIG-022-066 (Washington, D.C.: Mar. 19, 2002).



[End of table]



Public Resistance Is the Greatest Barrier to Increased Use of the New 

Dollar Coin:



The Mint faces a number of barriers in its efforts to increase public 

use of the new dollar coin, the most substantial of which is the 

widespread use of the dollar bill in everyday transactions and public 

resistance to start using the dollar coin. Encouraging people to switch 

to using the dollar coin is especially difficult because retailers will 

not stock the dollar coin until they see the public using it; the 

public is unlikely to use the coin until they see retailers stocking 

it; and banks and armored carriers are reluctant to invest in new 

equipment to handle the coin until there is wide demand for it. This 

interdependency of demand, which economists call the “network effect,” 

will be difficult to overcome. Other countries, such as Australia, 

Canada, and Japan and many European countries, have successfully 

introduced a similar denomination coin but only by phasing out the note 

of the same value. Other barriers that hinder wider circulation of the 

new dollar coin by the public include potentially negative public 

perceptions of a dollar coin after two failed introductions, 

insufficient public understanding of dollar coin savings to the 

government and other advantages of the dollar coin’s use, and the 

weight and bulk of the coin. For commercial users, additional barriers 

limit the coin’s use. Among these are commingling with the Anthony 

dollar coin, the coin’s unavailability at some banks, packaging 

concerns, and higher delivery fees. Problems unique to individual 

promotion partners also created barriers to the new dollar coin’s use.



Public Resistance to Using New Dollar Coin Is the Most Substantial 

Barrier:



Our previous work and the early experience with the new dollar coin 

have shown that the most substantial barrier is public resistance to 

switch to using the dollar coin rather than the dollar bill in everyday 

transactions. To overcome this resistance, the Mint will have to 

persuade businesses, consumers, and suppliers to change at the same 

time. Increasing the coin’s use is especially difficult because of the 

network effects previously discussed, which will be difficult, if not 

impossible, to overcome with the dollar bill in circulation.



Economists have noted that this phenomenon is not limited to dollar 

bills and coins. For example, researchers noted in a February 1998 

Federal Reserve paper that network effects may help explain why the 

public, despite apparent advantages, was switching so slowly from 

paper-based forms of payment to electronic forms of payment.[Footnote 

17] Network effects may also help explain the country’s slow adoption 

of high-definition television (HDTV). Until demand reaches a certain 

level, television stations are reluctant to make the investments in the 

new equipment that is necessary to transmit HDTV; consumers, in turn, 

are reluctant to purchase HDTV sets until more stations are 

transmitting HDTV signals. Similarly, until a sufficient number of new 

dollar coins are in circulation, retailers and other businesses that 

handle a lot of coins may not be willing to spend the time and money 

needed to carry them.[Footnote 18]



We have reported public resistance to new dollar coins in previous 

studies. For example, in May 1990, we evaluated the acceptability of 

the dollar coin to replace the dollar note by reviewing survey data and 

interviewing the public and industry associations.[Footnote 19] In this 

study, we found public resistance to a dollar coin in the United 

States. Nearly all of the general public and private-sector respondents 

indicated that the dollar note would have to be eliminated for a dollar 

coin to circulate successfully. These respondents uniformly believed 

that if a dollar note and dollar coin were both available at the same 

time, the public would choose to use the note.



For our May 1990 report, we also contacted officials in other 

industrialized countries and found that most of the countries that had 

introduced high-denomination coins faced public resistance to the 

change. Officials in these countries said that a high-denomination coin 

could not be introduced successfully unless the note of similar value 

was withdrawn. For example, officials in the United Kingdom said that 

as long as the equivalent note circulates, the public would resist new 

coins. Similarly, French officials said the public accepted their new 

coin only when the note was demonetized. Mint, Bureau of Engraving and 

Printing, and Treasury officials said, in our 1990 report, that the 

experience of many of the European countries in successfully replacing 

a note with a coin of similar value might not be a valid indicator of 

the prospects the United States would have in mandating a dollar coin. 

These officials said that because of basic differences in these 

countries, such as a parliamentary form of government that made it 

easier to impose unpopular changes on the public, a central banking 

system with more control over banks, and a smaller scale of coin and 

currency, it would be much harder for the United States to successfully 

replace a dollar coin with a dollar note.



More recently, four of the European countries we reviewed in our 1990 

report joined eight other European Union countries on January 1, 2002, 

and introduced 56 billion new euro coins into circulation, which 

included 1-euro and 2-euro coins and a 5-euro note. (For more 

information on the euro coins, see table 4.):



In a March 1993 report on the dollar coin, we described Canada’s 

experience in introducing a dollar coin in June 1987.[Footnote 20] 

Canada stopped issuing the equivalent dollar note in June 1989. We 

reported that the public resisted the coin initially, but 3 years after 

the note was withdrawn, according to public opinion survey data, only 

18 percent disapproved of the coin. Similarly, businesses and 

associations we surveyed in the grocery, transit, and vending 

industries said that the majority of public resistance lasted from 3 

months to 2 years. Officials in Canada said that the decision to 

withdraw the dollar note from circulation was based on the experiences 

of other countries, including the United Kingdom and Australia, as well 

as on the failed introduction of the Anthony dollar coin in the United 

States.



More recently, we analyzed the use of coins and notes in countries that 

make up the G-7 (see table 4) and found that the United States is 

unique in attempting to cocirculate a high-denomination coin and note 

of the same value. Consumers in Germany, France, and Italy have the 

choice of 1-euro and 2-euro coins, but there is not a note of equal 

value to compete with the coins. The lowest value euro note is the 5-

euro note. Japan, the United Kingdom, and Canada have succeeded in 

introducing high-denomination coins by withdrawing the note of similar 

value.



Table 4: Circulation of Highest Value Coins and Lowest Value Notes in 

G-7 Countries:



Value in U.S. dollars.



[See PDF for image]



Source: GAO analysis of currency conversion rates, June 27, 2002.



[End of table]



Other Barriers Limit the Public’s Use of the New Dollar Coin:



Another barrier to wider circulation is the potential negative public 

perception of the dollar coin because the government has tried and 

failed to introduce successfully both the Anthony and the new dollar 

coin. A March 2002 Treasury Inspector General report recommending that 

the Mint temporarily suspend production of the coin resulted in 

additional negative media stories. The Mint said that some of these 

reports incorrectly concluded that the Mint had ceased to produce all 

new dollar coins.



Another obstacle is that the Mint, in its advertising, did not fully 

explain to the public dollar coin savings to the government. A December 

2001 survey, the latest available, showed that the public would more 

strongly favor the dollar coin when the savings were 

explained.[Footnote 21] When asked if they would be in favor of 

replacing the dollar bill with the new dollar coin, 68 percent of the 

respondents who opposed such a plan said they would favor the 

replacement if doing so would save the government and taxpayers $500 

million a year.



Another barrier, an informal Treasury restriction on the Mint 

prohibiting it from comparing the advantages of the dollar coin 

directly with the dollar bill in consumer advertisements, hindered the 

Mint in explaining to consumers why they should switch to the dollar 

coin. One television ad proposal, for example, showed a person at a 

vending machine reacting to a dollar bill being rejected. According to 

Mint officials, that part of the ad was not approved and was never 

aired because some Treasury officials thought that it negatively 

portrayed the dollar bill. Current Mint officials said that they did 

not participate in the meeting in which the ad was discussed, and that 

although the policy to avoid direct comparisons to the dollar bill is 

not a formal written policy, they believe that the policy is still in 

effect. According to a current Treasury official, the $1 Coin Act 

authorizing the new dollar coin called for both the dollar coin and the 

dollar note to cocirculate, and Treasury interprets that to mean that 

it should not favor the coin or the note. A Treasury official said that 

the Mint and the Bureau of Engraving and Printing are sister agencies 

that can create public awareness campaigns for new coins and notes 

without directly comparing the advantages and disadvantages of each.



The Mint faces another barrier in convincing the public that the 

durability and other benefits of the new dollar coin outweigh the ease 

of carrying the dollar bill. As we reported in 1990, focus groups 

recognized the durability of a dollar coin but cited negative aspects 

of the coin, such as the bulk in transporting the coin. We further 

noted that consumer associations said the coin would be bulky and would 

add weight to wallets and pockets. In the last available public survey 

conducted by the Mint in July 2001, 1-1/2 years after the new dollar 

coin was introduced, respondents said they were much more likely to use 

the dollar bill. They also said they were more likely to keep or save 

the dollar coin, show it to friends or family, or give it as a gift 

than spend it on everyday items.[Footnote 22]:



Distribution Problems Limit Use and Hinder the Promotion of the New 

Dollar Coin:



In addition to public resistance, the Mint also faces barriers in 

distributing the new dollar coin. Promotion partners and other 

commercial users reported that supplies of new dollar coins are 

commingled with Anthony dollar coins. This commingling of the Anthony 

and new dollar coin, which occurred more frequently in 2001 and 2002, 

adversely affected some promotions that prominently featured the new 

dollar coin. For example, in 2001, a national restaurant chain changed 

all of its menus to feature a menu item called the “Golden Dollar” 

pancake, but, in some cities, the restaurant chain had difficulty 

obtaining supplies of the coin to support the promotion. In some cases, 

the banks had a supply of dollar coins, but half of the coins were new 

golden dollar coins and half were silver-colored Anthony dollar coins. 

Commingling occurs when Anthony and new dollar coins are used in 

commerce and later are processed by Federal Reserve Banks and armored 

carriers. Machines used in the coin distribution system are not able to 

separate the two coins because they have a similar electromagnetic 

signature.



Businesses also reported difficulty in obtaining a reliable supply of 

new dollar coins. For example, in its assessment of a large new dollar 

coin promotion with a national grocery chain, Marketbridge noted that 

the coin was not always available from armored carriers. Some of the 

distribution problems occurred because some armored carriers lack 

adequate equipment. According to the Mint, to handle high volumes of 

new dollar coins, Brinks, a large armored carrier, would have to invest 

$40,000 for coin-rolling machines in many of its 154 branch office 

locations around the country. Other armored carriers, according to the 

Mint, would also likely need to upgrade equipment to handle high 

volumes if the dollar coin became popular.



Although the Wal-Mart promotion served to distribute over 90 million 

new dollar coins, there were also early reports of availability 

problems related to the promotion. In their discussions with the Mint 

in late 1999, banks asked the Mint to delay the launch of the new 

dollar coin until March 2000 because expected year 2000 problems would 

require the banks to concentrate on these problems in January and 

February, 2000. The Mint agreed to delay the launch of the new dollar 

coin until March. However, in December 1999, the Mint announced the 

partnership with Wal-Mart and began to distribute the coins to Wal-Mart 

in January 2000. The publicity surrounding this launch created public 

demand for the coin at banks throughout the country. Bank customers who 

requested the coin could not always find them, and soon the banks had a 

significant backlog of orders for the coin with the Federal Reserve. 

The Mint and the Federal Reserve, responding to delays in the new 

dollar coin’s distribution to banks, such as community banks, credit 

unions, and savings and loans, set up a temporary Direct Shipment 

Program beginning March 1, 2000. The program gave banks the ability to 

place orders on the Internet for up to 2,000 new dollar coins in rolls 

and have them shipped directly from the Mint. However, according to the 

Mint, only a small percentage of the banks that received a letter on 

the direct ship program had ordered coins a month after the program 

began. Bank officials said that these initial shortage problems were 

limited to the first few months of the new dollar coin’s launch in 

2000.



According to the Mint, some businesses were also reluctant to order 

dollar coins because they were charged higher delivery fees by the 

armored carriers. The armored carriers generally charge additional 

amounts to retailers and other businesses for delivery of dollar coins 

because they weigh more than paper dollars. For example, some carriers 

charged $2 per $1,000 box to deliver rolled dollar coins compared with 

$0.25 cents for the equivalent value in dollar bills.



A Marketbridge report also noted that some businesses wanted a greater 

choice of coin packaging options and quantities. While large-volume 

coin-operated businesses, such as car washes, might want coins in large 

bags, and other businesses might want a full box of 1,000 coins, 

smaller businesses attempted to obtain coins wrapped in rolls of 25 

dollar coins, but could not always find them. To make rolls of dollar 

coins more available and reduce the cost to businesses for obtaining 

coins, the Mint, from August to December, 2000, contracted with outside 

companies to have 282,240,000 dollar coins wrapped in rolls at a cost 

of $927,982. These Mint-wrapped rolls were to be provided to businesses 

by armored carriers and financial institutions without those businesses 

being charged for wrapping. Though the coin-wrapping contract increased 

the supply of new dollar coins in rolls, the Mint found that some 

businesses were still subject to other armored carrier fees such as for 

moving and storing the coin. Some Mint officials said that the wrapping 

of dollar coins in rolls by Mint contractors might have created more 

problems because the armored carriers were not forced to develop a 

rolling capability. Without proof of demand for the new dollar coin, 

armored carriers were reluctant to invest in new equipment to roll 

dollar coins, even when demand for the coin was high in the first half 

of 2000.



Many of these distribution barriers were identified in a Marketbridge 

promotion progress report in August 2001. As table 5 indicates, of the 

distribution problems identified by Marketbridge, commingling and 

difficulty in finding coins were the most common by far.



Table 5: New Dollar Coin Distribution Problems Identified in Telephone 

Calls to the Mint from January to August 2001:



Problem reported: New dollar coin commingled with Anthony dollar coin; 

Percentage reported: 44.



Problem reported: New dollar coin not available when requested; 

Percentage reported: 43.



Problem reported: Excess fees charged for new dollar coin delivery; 

Percentage reported: 5.



Problem reported: Late delivery or no delivery of new dollar coin; 

Percentage reported: 5.



Problem reported: Wrong coins delivered; Percentage reported: 3.



Problem reported: Total; Percentage reported: 100.



Source: Marketbridge analysis of telephone calls made by Mint promotion 

partners to Fleishman Hillard.



[End of table]



To evaluate the extent that these barriers affected promotion partners, 

we sent surveys to 10 large promotion partners that had agreements with 

the Mint to promote the new dollar coin. In our survey of these large 

promotion partners, we attempted to obtain information on the extent 

that barriers such as commingling hindered the success of their new 

dollar coin promotions. Seven promotion partners completed the survey. 

When asked the extent that commingling hindered the success of their 

promotions while they were in progress, 2 of the partners said to a 

very great extent, 1 said to a great extent, and 4 said to no extent. 

When asked if commingling hindered the use of the new dollar coin in 

their business after the promotion, when dollar coin use became less 

frequent, only 1 said to a very great extent, 1 said to a great extent, 

3 said to no extent, and 2 did not know or said not applicable because 

the promotion was still in progress at the time of the survey. In 

contrast to public reports, only 2 promotion partners said that they 

had difficulty obtaining new dollar coins for their promotions. In 

general, when asked the extent that coin-wrapping fees and shipping 

costs hindered their promotions, most of the survey respondents said 

these problems had little or no effect.



Our promotion partner survey also indicated that while the promotions 

distributed new dollar coins, it is unlikely that they had resulted in 

a long-term increase in the coin’s use. We asked the 7 firms how 

frequently customers used the new dollar coin to make purchases during 

the promotion. One of the promotion partners said very frequently, 1 

said frequently, 3 said sometimes, and 2 said very infrequently. The 

survey indicated even lower levels of use after the promotion. When 

asked if customers were using the coin to make purchases after the 

promotion, 1 said sometimes, 3 said infrequently, 2 said very 

infrequently, and 1 did not know or said not applicable because the 

promotion was still in progress at the time of the survey. No promotion 

partner said customers were using the coin to make purchases frequently 

or very frequently after the promotion. A majority of promotion 

partners agreed that the dollar bill would need to be eliminated for 

the public and businesses to accept and regularly use the new dollar 

coin.



In addition, in its promotion program assessments, Marketbridge found 

indications that use of the new dollar coin was not sustained in these 

businesses during and after the promotions. For example, in its 

assessment of a national grocery chain promotion, Marketbridge noted 

that the average number of dollar coins distributed decreased over time 

from 3,600 per month at the beginning of the promotion, to 1,400 per 

month 60 days into the promotion, to 600 per month toward the end of 

the promotion. About 8 months after the promotion began, the average 

number of dollar coins distributed had dropped to 340 per 

month.[Footnote 23]



Results of Marketing Efforts in Government Sector Were Mixed:



The Mint promoted the use of the new dollar coin in the government 

sector, but the results of these efforts were mixed. For example, the 

Mint contacted local transit authorities to increase awareness of the 

new dollar coin and increase the number of transit systems using it. As 

part of this transit marketing effort, the Mint, working with Fleishman 

Hillard in selected cities, created promotional events that included a 

giveaway of free new dollar coins to transit riders, radio promotions, 

media coverage, and attendance by local officials. For example, the 

Mint distributed about 12,000 new dollar coins to transit riders in New 

York; 12,000 coins in Chicago; 6,000 coins in Philadelphia; and 6,000 

coins in San Diego.



The Mint said that many of the largest transit systems retrofitted or 

purchased new equipment and have the capability to use the dollar coin. 

In April 2002, the U.S. Federal Transit Administration reported that 19 

of the largest 20 transit system agencies accept the dollar coin in 

either their bus or rail systems.[Footnote 24] The Federal Transit 

Administration found that buses in the Washington Metropolitan Area 

Transit Authority, the fifth largest transit system, accepted dollar 

coins in buses but the subway system did not. The Federal Transit 

Administration also found that the Bay Area Rapid Transit system, the 

twelfth largest transit system, did not accept the dollar coin in 

either bus or rail. Mint officials said that they were not able to make 

progress in increasing the use of the dollar coin in these two transit 

systems. The Mint also worked with state and local bridge and road 

authorities to increase the use of the new dollar coin in tollbooths 

and encouraged cities to convert parking meters to accept the coin. 

(For more information on the use of the dollar coin in state and local 

government transit systems and tollbooths, see app. II.):



According to Mint officials, the Mint used its own staff to conduct 

marketing events to stimulate the new dollar coin’s use in retail 

operations, such as cafeterias within federal facilities. For example, 

the Mint conducted a new dollar coin event at the Pentagon. According 

to the Mint, this promotion distributed about 56,000 new dollar coins. 

Mint officials also met with officials on military bases to discuss the 

dollar coin’s use, but these meetings did not result in formal 

promotional programs or increase new dollar coin circulation.



As part of its federal government marketing efforts, the Mint also 

sought to increase the number of postal vending machines using the new 

dollar coin but had limited success. In December 1998, before the 

coin’s launch, a Mint contractor study noted that the U.S. Postal 

Service had approximately 11,000 stamp vending machines that 

distributed dollar coins. However, in April 2002, over 2 years since 

the introduction of the new dollar coin, the Postal Service still had 

only 12,000 of its 34,000 vending machines able to distribute the 

dollar coin as change. The Postal Service said that it was only able to 

upgrade an additional 1,000 vending machines between 1998 and 2002 

because it lacked the funds to upgrade or replace the older machines. 

Despite the lack of progress, the Mint said that the Postal Service is 

still the largest distributor of dollar coins. In general, the Mint did 

not track the costs for the use of its own staff for marketing efforts 

to federal government agencies.



The Mint’s Marketing Plan Identifies but Does Not Provide Details on 

How It Will Address Barriers to Increased Coin Use:



In general, the Mint’s April 24, 2002, marketing plan for fiscal years 

2002 and 2003 describes a program that is much smaller in scope than 

the marketing campaign used to launch the new dollar coin in 2000. The 

Mint plan provides a listing of most of the barriers to increasing new 

dollar coin use. In addition, the plan notes the importance of 

conducting research and gives a description of planned research 

regarding consumer resistance, distribution barriers, and sustaining 

use of the coin by businesses. Although the plan estimates that the 

dollar coin is used in 4 percent of dollar transactions, the plan does 

not lay out a specific market share or net payout goal for fiscal year 

2003. As is consistent with previous studies, the Mint plan also notes 

that successfully achieving widespread use of the new dollar coin will 

be difficult if it cocirculates with the dollar bill. However, the plan 

does not discuss specifically how to address interdependent demand or 

network effects. The plan also notes that the recent negative media 

coverage of the new dollar coin will be a significant challenge for the 

Mint’s marketing communications and public relations programs, but the 

Mint does not explain in detail how it will counter this challenge. 

Although the plan notes potential government savings, it does not 

provide a strategy for explaining dollar coin government savings to the 

public or for directly comparing the advantages of the dollar coin with 

those of the dollar bill.



A key element of the new marketing plan is a description of the 

barriers that hinder the distribution and circulation of the new dollar 

coin. Although the Mint’s plan identifies the key barriers in the 

distribution channel, such as the unavailability of coins, commingling, 

the lack of availability of new dollar coins in rolls, and additional 

fees charged by armored carriers, the marketing plan does not 

specifically outline how the Mint will address those barriers. Instead, 

the Mint calls for research on barriers in the first phase of the new 

plan that would be conducted in collaboration with the Federal Reserve 

Bank System, banks, armored carriers, and commercial users.



Although the Mint plan notes that cocirculation with the dollar bill is 

a barrier, the Mint does not provide much detail on the nature and 

extent of the barrier or how it will attempt to overcome public 

resistance. In addition, the Mint does not fully describe previous 

attempts in other countries to cocirculate a high-denomination note and 

coin. The plan does not include any information on network effects or 

indicate how an understanding of the network effects in currency and 

coins and other payment systems could improve future marketing 

strategy.



The Mint plan includes some future programs to market to consumers that 

are designed to increase public demand for the coin. However, the plan 

does not describe how these programs will help the Mint overcome 

specific barriers and increase new dollar coin circulation. For 

example, included in the plan section on increasing sustained 

circulation is a description of a licensing agreement with The Source 

International (TSI). The intent of the agreement is to build brand 

awareness for the Mint and the new dollar coin among National 

Association for Stock Car Auto Racing (NASCAR) fans. Under the TSI 

agreement, in the 2002 Cadillac Grand Prix in July and in one race each 

year from 2003 to 2008, TSI will have one car with an image of the new 

dollar coin on the hood and a Web site address for the Mint on the rear 

spoiler. The agreement also calls for TSI to sell die cast replica 

models of the new dollar coin racing car. The Mint also said the 

agreement would require no outlay of funds and the Mint will receive 

royalty payments from each new dollar coin model car sold.[Footnote 25] 

The Mint said that TSI will also make an attempt to have new dollar 

coins dispensed as change to spectators for cash purchases during each 

race. While the TSI agreement could increase new dollar coin brand 

recognition and awareness at one race each year and with model car 

sales, the plan does not describe how the agreement would contribute to 

an increase in the coin’s widespread use and circulation.



The Mint also has an existing product licensing program that encourages 

the placement of products related to coin collection into the retail 

market. In addition, the Mint plans to work with the Department of the 

Army’s Corps of Engineers on new dollar coin promotion activities such 

as placing a new dollar coin image on brochures associated with the 

Lewis and Clark Bicentennial activities that will occur along the 

expedition’s route from 2003 to 2006. Although these programs could 

increase awareness of the new dollar coin among coin collectors or 

those visiting Corps of Engineer facilities, the Mint plan does not 

provide much detail on how these marketing programs would increase the 

public’s use of the coin in everyday transactions.



Unlike the earlier new dollar coin marketing program, the new plan does 

not envision a large national advertising campaign directed at the 

public. The plan calls for research on public resistance to the new 

dollar coin before a full marketing program is implemented to stimulate 

consumer use of the new dollar coin. The Mint plan requests $0.5 to 

$1.0 million in fiscal year 2002 followed by $10 to $15 million in 

fiscal year 2003 for a program to maintain the new dollar coin’s 

presence in the marketplace. The plan calls for a continuation of 

ongoing promotions and, following research, the identification of key 

target markets before marketing activities are implemented. Mint 

officials said that transit and vending, in addition to governments, 

are likely markets to target.



The Mint plan does include some plans for a public relations and a 

media outreach program to overcome negative consumer perception. 

However, the plan does not provide any specifics on how it will 

overcome recent negative media coverage or the public’s impression that 

the coin may have been discontinued. The plan does not address the 

advantages of including a description of dollar coin savings to the 

government in its marketing communications or discuss any restrictions 

on directly comparing the advantages of the dollar coin with those of 

the dollar bill. Mint officials said that the official policy is for 

cocirculation of both the dollar coin and note and that the Mint did 

not describe dollar coin savings to the government in its marketing 

because the savings could only occur if the dollar bill were withdrawn 

from circulation. Treasury said that it interprets cocirculation to 

mean that marketing programs for the coin or note should not directly 

compare the advantages of the dollar coin with those of the dollar 

note.



A key element of the plan is an assessment by the Mint of the progress 

made in new dollar coin circulation. The Mint plan attempts to first 

establish the existing level of dollar coin circulation by comparing 

the number of new dollar coins in circulation with the number of dollar 

bills in circulation. The Mint marketing plan estimates that people 

used the dollar coin in about 4 percent of dollar transactions.

[Footnote 26] To arrive at this number, the Mint took data from a 
public 

opinion poll[Footnote 27] and then estimated that about one-third of 
the 

850 million coins distributed to the public, or about 300 million 
coins, 

were actually used and in circulation. The Mint’s estimate of 300 
million 

coins in “circulation” was then calculated to be about 4 percent of the 

7.5 billion in dollar bills in circulation.



Other Mint surveys indicate that the new dollar coin market share as a 

percentage of all dollar transactions may be lower. For example, a July 

2001 public opinion survey was conducted by the Mint to test the impact 

of the new dollar coin marketing program. Among other survey questions, 

respondents were asked the number of dollar bills and dollar coins they 

received and spent in the last few days. Respondents said that in July 

2001, they received 25 and spent 24 dollar bills. In contrast, 

respondents said they received 0.2 new dollar coins and spent 0.3 new 

dollar coins. This equates to a new dollar coin share of about 1 

percent of all dollar transactions. The Mint plan does not set goals in 

market share, net payout, or number of dollar coins for fiscal year 

2003.



The increase in the number of dollar coins shipped to the Federal 

Reserve from 1999 to 2000 did not have a measurable effect on the 

number of dollar notes in circulation. The Federal Reserve said that 

the number of dollar notes in circulation increased from 1999 to 2000 

at the same time that dollar coin shipments were increasing and that 

changes in demand for dollar notes is normally due to fluctuations in 

economic activity. The Federal Reserve said that it was unlikely that 

the slight decrease in the number of dollar notes in circulation, from 

7.65 billion in 2000 to 7.64 billion in 2001, could be attributed to 

the new dollar coin, and that the decline was more likely due to a drop 

in economic activity in 2001.



The Mint plan includes some actions to promote the use of the new 

dollar coin in certain targeted markets. For example, the Mint plan 

indicates it will try to increase circulation of the new dollar coin in 

federal agencies and on military bases, but the plan does not explain 

the lack of success in increasing the use of the new dollar coin in 

federal agencies or provide specific objectives or programs for how the 

Mint will increase circulation. The plan also states that the Mint 

intends to honor existing agreements with several minor league baseball 

teams. The Mint lists the teams and notes that the agreements with 

minor league teams distributed over 1 million coins. Despite the noted 

potential in dollar coin distribution and past promotions with baseball 

teams, beyond honoring several existing agreements, the Mint does not 

include additional baseball team marketing activities in its future 

marketing plan.



The Mint plan also states that it will explore opportunities in parking 

meters, toll roads, and transit systems but no data are given on how 

the Mint chose these as potential markets or how much each of these 

markets might yield in increased new dollar coin circulation or at what 

cost. Although the Mint through its contractors, previously evaluated 

and identified the markets with a high potential for new dollar coin 

use, the plan does not fully incorporate this information into its 

analysis.



Another key element of the new marketing plan is a description of the 

barriers that hinder the distribution of the new dollar coin. The Mint 

has identified the key barriers in the distribution channel, which 

moves the dollar coin through the Federal Reserve Bank System, banks, 

and armored carriers to commercial users, such as retailers. It states 

that unavailability of the coins at banks, commingling, and the lack of 

availability of new dollar coins in the right mix of bags and rolls are 

obstacles to stimulating commercial use of the new dollar coin. In 

addition, the Mint identifies other distribution barriers, such as the 

additional fees charged by armored carriers for coins compared with 

fees charged for bills, and other perceived barriers, such as the lack 

of room in the cash drawer.



To address distribution barriers, the plan calls for research. Research 

on barriers in the distribution of the new dollar coin would be 

conducted in collaboration with the Federal Reserve Bank System, banks, 

armored carriers, and commercial users. In addition, the plan calls for 

a collaborative study with the Federal Reserve on the feasibility of 

using machines to separate the Anthony and new dollar coins that are 

commingled. The plan states that the research on distribution barriers 

is intended to help the Mint validate its understanding of the barriers 

and identify ways to overcome them. However, the plan does not indicate 

what effect the removal of barriers would have on circulation. For 

example, if the Mint resolved the commingling problem, the plan does 

not indicate whether this would lead to an increase in use of the 

dollar coin. Table 6 shows a summary of the Mint’s plans to address the 

key barriers.



Table 6: Summary of Actions in Mint Marketing Plan to Address Barriers								:



Barrier: Consumer resistance; Planned actions: * Research consumer new 

dollar coin attitudes and behavior.; * Conduct media outreach to change 

negative public perception.; * Honor existing promotions with sports 

teams in three minor league cities.; * Encourage use in industries in 

which coins are used, such as in vending and transit.; * Stimulate use 

in federal, state, and local governments.; * Feature new dollar coin in 

one NASCAR race each year until 2008.; * Promote the new dollar coin 

with the Army’s Corps of Engineers during Lewis and Clark Bicentennial 

from 2003-06..



Barrier: Distribution channel problems; Planned actions: * Collaborate 

with Federal Reserve and armored carriers to address commingling issue 

and other problems such as upgrading coin processing equipment and 

higher coin delivery fees.; * Address commingling by conducting a study 

on ways to separate Anthony and new dollar coins..



Source: Mint Marketing Plan, April 2002.



[End of table]



The 2001 and 2002 Mint Reports to Congress Did Not Fully Describe the 

Marketing Program, Results, or Problems Encountered:



As required by the $1 Coin Act of 1997, which authorized the new dollar 

coin, the Mint provided a report on the progress of the marketing of 

the new dollar coin on March 30, 2001.[Footnote 28] However, the Mint’s 

2001 report did not provide details on the nature and extent to which 

the new dollar coin was being used in commerce; provide full 

information on contracts and agreements that the Mint had engaged in to 

market the new dollar coin, including the costs of the marketing 

campaign; or give a detailed description of the barriers that the Mint 

encountered. The 2002 report, which was directed by the House report 

accompanying the Treasury’s 2002 appropriations act, gave more 

information on demand for the coin, contracts and promotional 

agreements with nongovernment entities, marketing costs, and a fuller 

description of the distribution and other problems 

encountered.[Footnote 29] However, in the 2002 report, the Mint did not 

provide a comprehensive analysis of the nature and extent of coin use, 

describe the outcomes and progress made in increasing Federal Reserve 

net payout in all of the industry sectors in which marketing efforts 

were targeted, or establish measurable future goals for these sectors.



The 2001 Mint Report Did Not Contain Information on Use of the Coin:



The Mint’s March 2001 report provided an overview of the public 

awareness and business marketing programs during 2000, but the report 

did not fully describe the nature and extent of the new dollar coin’s 

use in commerce, all of the promotional efforts used by the Mint, or 

the barriers encountered. According to the 2001 report, in the first 

year of the coin’s production, the Mint produced over 1.2 billion new 

dollar coins and released into circulation over 700 million of these 

coins. However, there is no information in the 2001 report that shows 

how many of these coins were actually used in commerce.



The 2001 report noted that the Mint collects information on a regular 

basis to quantify marketing program progress, but the report did not 

provide an analysis of this information. The Mint report also said that 

the growing list of promotional agreements is evidence that the public 

is using the new dollar coin, and that people are collecting the coin, 

but the 2001 report did not quantify the amount of sustained increases 

in circulation generated by the promotions.



There is a very limited citing of survey data that might provide some 

insight into public acceptance and use in the 2001 report. The report 

cited survey data showing that, rather than using the coin, 66 percent 

of the public said that they were saving the coins. The report briefly 

noted that, in late 2000, 29 percent of the surveyed adults said that 

they would prefer to receive the coin in change instead of the dollar 

bill. The survey data on preference for receiving change is somewhat 

useful, but they do not give any indication of what portion of these 

people will use the coin once they have received it as change. The 2001 

report also noted that a May 2000 survey showed that 57 percent of the 

public would likely use the new dollar coin for everyday transactions 

as the coin becomes commonly circulated. This is one of a number of 

indicators collected in the survey; however, this is information that 

was, at the time, almost a year old, and the survey is limited because 

it shows the likelihood of use when the coin at some point in the 

future becomes “commonly circulated.” The same Mint survey had 

information that indicated low public use of the coin, but these data 

were not included in the 2001 report. For example, the survey showed 

that in May 2000, 33 percent of those surveyed had received the coin 

and, of these, only 21 percent were at least somewhat likely to spend 

the new dollar coin on everyday items.



The 2001 report provided an overview of the public awareness program, 

but it did not provide information describing the details of the use of 

contractors for advertising and public relations or the costs for these 

contracted activities. The report noted that the Mint had targeted 

eight industries and had entered into partnership agreements with 

commercial entities to promote the new dollar coin. However, although 

the report provided examples of these promotion agreements, it did not 

provide a comprehensive list of the promotion agreements, the promotion 

target for the number of new dollar coins to distribute, or the cost to 

the Mint for each promotion.



The 2001 report provided a generally positive picture of the new dollar 

coin and made only a brief mention of the barriers to increasing its 

use. For example, the Mint noted the challenges presented by the 

failure of the Anthony dollar coin and also noted that some banks and 

financial institutions were reluctant to order the new dollar coin.



The 2002 Report Was More Detailed but Did Not Explain What Needs to Be 

Done to Increase Coin Circulation:



The Senate committee report and the conference report for the 

Treasury’s fiscal year 2002 appropriations directed the Mint to submit 

a marketing plan concerning its promotional efforts relating to the new 

dollar coin to the Appropriations Committees and stipulated that the 

plan must be approved by the committees before the Mint could draw 

additional funds from the Mint Public Enterprise Fund to promote the 

dollar coin. The Mint’s March 2002 report provided an overview of the 

public awareness and business marketing programs, but there was still 

limited information on the nature and extent of the coin’s use in 

commerce. The Mint did provide an estimate of the percentage of new 

dollar coins used compared with the dollar bill. As previously noted, 

the Mint has stated that, on the basis of survey estimates and the 

number of new dollar coins in circulation, people use the dollar coin 

in 4 percent of dollar transactions. This figure is a very rough 

estimate, and it does not give a full evaluation of dollar coin use 

that can be used to make future decisions on marketing programs. The 

Mint, however, through contractors, collected information in public 

surveys on a regular basis that was not used in the 2002 report, and 

these survey data may have been more useful. For example, one of these 

surveys was conducted in May 2000 and May and July, 2001, to help the 

Mint assess a number of key questions, such as consumers’ likelihood 

for saving and using the dollar coin as well as the number of new 

dollar coins used relative to the dollar bill. Respondents to the 

July 2001 survey indicated that they used the dollar coin in about 

1 percent of dollar transactions.[Footnote 30]



The 2002 report gave a much more comprehensive description of the use 

of nongovernmental contractors for advertising and public relations and 

the costs for these contracted activities. Unlike the 2001 report, the 

2002 report provided an appendix, which contained a list of promotion 

agreements with commercial entities in which the Mint engaged. In 

addition, the Mint provided, for each promotion agreement, the goal for 

the number of new dollar coins to distribute and the cost to the Mint 

to implement each promotion. As previously mentioned, the Mint did not 

consistently monitor the actual number of coins distributed, therefore, 

we were not able to substantiate the exact number of coins that were 

actually distributed.



Unlike the 2001 report in which the Mint provided a generally positive 

picture of the new dollar coin, the 2002 report described in more 

detail the barriers to increasing use of the new dollar coin. For 

example, the Mint described commingling of the Anthony and new dollar 

coins as a significant barrier. But, the plan did not indicate what 

effect on circulation would result from resolving the commingling 

issue. The 2002 report also gave additional information on other 

reported barriers, such as the availability of rolls of new dollar 

coins, extra fees for delivery and handling, and public resistance to 

switch to using the new dollar coin instead of the dollar bill. 

However, the 2002 report did not provide information on how it will 

overcome these barriers or what effect on overall circulation could 

result from removing the barriers.



Conclusions:



Although the Mint’s $67.1 million marketing and advertising program to 

promote the new dollar coin to the public significantly raised 

awareness of the coin, it is not widely used by consumers in everyday 

transactions. In addition, the Mint does not have data showing that 

increased marketing and promotion efforts would have a long-term 

positive effect on dollar coin use as long as the coin cocirculates 

with the dollar note.



While the Mint said it could assist armored carriers in purchasing 

equipment to roll dollar coins or pay for directly shipping to 

businesses new dollar coins that are not commingled with Anthony coins, 

this would not necessarily mean that the public would demand or use the 

coin. As a result, continuing to spend funds for these programs may not 

result in increased use of the new dollar coin. However, recognizing 

Congress’s desire for cocirculation of the dollar coin and the dollar 

note, it appears reasonable for the Mint to conduct planned research to 

further assess distribution barriers and determine the appropriate 

steps and costs that are necessary to resolve these barriers.



Recommendations for Executive Actions:



Because the Mint does not know whether additional marketing is likely 

to increase use and past efforts have had limited effects, we recommend 

that aside from honoring existing promotion agreements and conducting 

planned research on public acceptance and distribution barriers, the 

Director of the Mint suspend further expenditures for marketing and 

promoting the new dollar coin until research is completed and the Mint 

can demonstrate that such efforts are likely to increase long-term coin 

circulation and/or are necessary to achieve Congress’s desire for 

cocirculation. We further recommend that the Mint revise the marketing 

plan it submitted to Congress to reflect such an approach and work with 

Congress to reach an agreement on an appropriate amount of funds to use 

for these activities.



Agency Comments and Our Evaluation:



We provided copies of the draft of this report for comment to the 

Secretary of the Treasury; the Director of the Mint; and the Chairman, 

Board of Governors of the Federal Reserve System. On August 30, 2002, 

we received written comments from the Director of the Mint, which are 

reprinted in appendix III, and on August 23, 2002, we received written 

comments from the Director of the Division of Reserve Bank Operations, 

Federal Reserve Board, which are reprinted in appendix IV. The 

Secretary did not provide comments.



The Director of the Mint said that the Mint generally concurred with 

the findings and recommendation in our report. The Mint Director also 

offered some additional comments on the barriers that we identified and 

how the Mint plans to address them. The Mint Director said the Mint 

agrees that there is no available evidence that the elimination of 

distribution barriers would have a long-term positive effect on dollar 

coin use. She said the Mint would examine several possible research 

approaches to study the removal of distribution barriers, but it would 

not invest substantial funds until it can support the expenditures. The 

Mint Director also said the Mint will conduct research to identify and 

further assess the barriers to the new dollar coin’s use in daily 

commerce. The Director said the Mint would incorporate the results of 

that research and an understanding of network effects into a revised 

new dollar coin marketing plan, as we recommended.



The Mint Director also commented on the different approaches our report 

discussed that were used to calculate the level of new dollar coin 

circulation. The Director noted that the Mint’s 4 percent figure is 

based on the number of dollar coins issued as a percentage of the 

number of dollars issued and the other measure cited in our report is 

based on the number of new dollar coins used in financial transactions 

as a percentage of the number of dollars used in financial 

transactions. We believe that the latter estimate of 1 percent may be a 

more representative measure of the coin’s actual use by the public 

because it is based on a nationally representative public poll 

conducted for the Mint that asked questions specifically about the 

number of dollar coins and notes used in transactions in the past few 

days. Nevertheless, while we recognize that there are various measures 

with which to gauge the public’s use of the new dollar coin, neither 

approach cited in the report indicated widespread use.



In addition, the Director said that a major deficiency of the Anthony 

dollar coin was that people avoided using it because they were unable 

to distinguish it from a quarter-dollar coin. In our past reports, we 

cited this as one barrier, but also reported that the continued 

circulation of the dollar bill was the most substantial barrier to the 

Anthony dollar coin’s use.



The Director of the Division of Reserve Bank Operations, Federal 

Reserve Board, said that the Federal Reserve concurred with our 

recommendations.



We are sending copies of this report to the Chairmen and Ranking 

Minority Members of the Senate Committee on Banking, Housing, and Urban 

Affairs; the House Committee on Financial Services; and the 

Subcommittee on Treasury, Postal Service, and General Government, House 

Committee on Appropriations; the Secretary of the Treasury; the 

Chairman of the Board of Governors of the Federal Reserve System; and 

other interested parties. We will also make copies available to others 

on request. In addition, this report will be available at no charge on 

the GAO Web site at http://www.gao.gov.



Major contributors to this report were Brad Dubbs, John S. Baldwin, 

Emily Dolan, Bess Eisenstadt, Susan Michal-Smith, Walter Vance, and 

Greg Wilmoth. If you or your staff have any questions, please contact 

me on (202) 512-2834 or at ungarb@gao.gov.



Bernard L. Ungar

Director, Physical Infrastructure Issues:



Signed by Bernard L. Ungar:



[End of section]



Appendix I: Objectives, Scope, and Methodology:



In studying the United States Mint’s marketing of the new dollar coin, 

our objectives were to (1) describe the Mint’s new dollar coin 

marketing program costs, the contracts and promotional programs in 

which the Mint engaged, and the revenues that were generated; (2) 

assess the barriers the Mint faces in increasing the public’s use of 

the new dollar coin; (3) describe the Mint’s future plans to promote 

the new dollar coin and the extent that these plans address the 

barriers; and (4) assess the extent that the Mint’s 2001 and 2002 

reports to Congress on the marketing of the new dollar coin fully and 

accurately described the marketing programs, the results obtained, and 

the problems encountered.[Footnote 31]



To obtain information regarding marketing program contracts, 

promotional programs, costs, and revenues, we interviewed officials 

from the Mint and the Federal Reserve System and managers from the 

marketing program contractors. We also collected and reviewed marketing 

program contracts, progress reports, plans, promotion agreements, press 

releases, and other related documents from the Mint and contractors. In 

addition, we requested information from the U.S. Postal Service on 

dollar coin use in vending machines and reviewed a Department of 

Transportation report on dollar coin use in transit systems and toll 

roads, but we did not independently verify the data from those 

agencies. Although we reviewed signed promotion agreements to determine 

the number of promotions the Mint conducted, the Mint did not provide 

documentation that would enable us to verify the actual number of coins 

distributed during each of the promotions. Our review did not include a 

financial audit of the marketing program. Also, we did not conduct an 

audit of paid advertising expenditures or audit the media to determine 

if all of the ads ran as planned. We also did not conduct a review of 

the contract award process or a review of how internal controls were 

applied during contract management.



To evaluate the barriers to increasing dollar coin circulation, we 

reviewed our previous reports, and the laws and congressional hearings 

related to the new dollar coin; interviewed officials from the Mint, 

Mint contractors, and the Federal Reserve; examined Mint and contractor 

marketing documents, reports, and surveys; obtained information on 

high-denomination coins and notes from industrialized countries; and 

interviewed businesses and trade associations. We also sent 

questionnaires regarding barriers to increased circulation to 10 

promotion partners that distributed new dollar coins. We focused on 

these large promotion partners because these firms represent all of the 

targeted industry sectors and make up 99 percent of the total promotion 

partner distribution goal. Seven of the 10 promotion partners responded 

to our survey. We did not survey the other promotion partners because 

of resource limitations and because most of the other promotions were 

with minor league baseball teams in smaller cities that had coin 

distribution goals of under 300,000 dollar coins. In interviewing 

businesses and associations, we contacted those we believed were most 

affected by the introduction of a new dollar coin, including bank trade 

associations, a trade association representing coin-operated 

businesses, and armored carriers. We also reviewed articles on the 

Susan B. Anthony dollar coin and interviewed the authors of these 

articles. Further, we obtained data on the highest value coins and 

lowest value notes used by the G-7 countries as of June 27, 2002.



To obtain information on the Mint’s plans to overcome the barriers to 

increased dollar coin circulation, we interviewed officials from the 

Mint, Federal Reserve, Mint contractors, and trade associations and 

reviewed Mint documents and the 2002 new dollar coin marketing plan. We 

also reviewed our previous reports and studies on the dollar coin. We 

then identified specific actions in the Mint plan and analyzed the 

extent that these actions address the barriers identified in our 

review.



To determine the extent that the 2001 and 2002 Mint reports to Congress 

fully and accurately described the marketing of the new dollar coin, 

results obtained, and problems encountered, we interviewed Mint 

officials and reviewed the reports. We also reviewed marketing program 

contracts, progress reports, plans, promotion agreements, and other 

related documents from the Mint, contractors, and the Federal Reserve. 

We then compared the information on marketing programs, costs, 

barriers, and use in the 2001 and 2002 reports with the information 

obtained in our review. We used some of the data on awareness and use 

from regular Mint surveys conducted during the marketing of the new 

dollar coin; however, we did not conduct a comprehensive review of the 

methodology used in these surveys. Our review did not include an audit 

of the contracts or promotion partner agreements noted in the Mint 

reports.



We did our work from September 2001 to September 2002 in Washington, 

D.C., in accordance with generally accepted government auditing 

standards.



[End of section]



Appendix II: State and Local Governments: Dollar Coin Use Data in the 

Largest Transit Systems and Toll Roads:



From market research, the Mint and its contractors determined that 

within the state and local government sectors, transit system 

authorities and toll roads had good potential for dollar coin use. As 

shown in table 7, in April 2002, 19 out of the 20 largest transit 

systems accepted new dollar coins in either bus or rail modes.



Table 7: Transit Agencies Accepting the New Dollar coin, as of April 

2002:



Rank: 1; Transit agency: Metropolitan Transportation Authority; 

Urbanized area: New York, N.Y.; Accepts dollar coin: yes.



Rank: 2; Transit agency: Regional Transportation Authority; Urbanized 

area: Chicago, Ill.; Accepts dollar coin: yes.



Rank: 3; Transit agency: Los Angeles County Metropolitan Transit 

Authority; Urbanized area: Los Angeles, Calif.; Accepts dollar coin: 

yes.



Rank: 4; Transit agency: Massachusetts Bay Transport; Urbanized area: 

Boston, Mass.; Accepts dollar coin: yes.



Rank: 5; Transit agency: Washington-Metro; Urbanized area: Washington, 

D.C.; Accepts dollar coin: Bus only.



Rank: 6; Transit agency: Southeastern Pennsylvania Transportation 

Authority; Urbanized area: Philadelphia, Pa.; Accepts dollar coin: yes.



Rank: 7; Transit agency: San Francisco Municipal Rail; Urbanized area: 

San Francisco, Calif.; Accepts dollar coin: yes.



Rank: 8; Transit agency: New Jersey Transit; Urbanized area: New York, 

N.Y.; Accepts dollar coin: yes.



Rank: 9; Transit agency: Metro Atlanta Rapid Transit Authority; 

Urbanized area: Atlanta, Ga.; Accepts dollar coin: yes.



Rank: 10; Transit agency: Maryland Mass Transit; Urbanized area: 

Baltimore, Md.; Accepts dollar coin: yes.



Rank: 11; Transit agency: King County Department of Transportation; 

Urbanized area: Seattle, Wash.; Accepts dollar coin: yes.



Rank: 12; Transit agency: Bay Area Rapid Transit; Urbanized area: San 

Francisco, Calif.; Accepts dollar coin: Not accepted.



Rank: 13; Transit agency: Metro Transit - Harris County; Urbanized 

area: Houston, Tex.; Accepts dollar coin: yes.



Rank: 14; Transit agency: Tri-County Metro District; Urbanized area: 

Portland, Oreg. & Vancouver, Wash.; Accepts dollar coin: yes.



Rank: 15; Transit agency: Metro-Dade Transit Agency; Urbanized area: 

Miami, Fla.; Accepts dollar coin: yes.



Rank: 16; Transit agency: Port Authority of New York; Urbanized area: 

New York, N.Y.; Accepts dollar coin: yes.



Rank: 17; Transit agency: The Greenbus Company; Urbanized area: New 

York, N.Y.; Accepts dollar coin: yes.



Rank: 18; Transit agency: Regional Transportation District; Urbanized 

area: Denver, Colo.; Accepts dollar coin: yes.



Rank: 19; Transit agency: Port Authority of Allegheny County; Urbanized 

area: Pittsburgh, Pa.; Accepts dollar coin: yes.



Rank: 20; Transit agency: Metro Transit; Urbanized area: Minneapolis, 

Minn.; Accepts dollar coin: yes.



Note: Transit agencies’ ranking from Federal Transit Administration 

data, National Transit Database 2000.



Source: Federal Transit Administration and the U.S. Mint.



[End of table]



The Mint also targeted toll roads for some of its marketing efforts. 

Table 8 shows some data on dollar coin use in 20 large toll road 

operators as of December 2001.



Table 8: Dollar Coin Use in Toll Road Operators, as of December 2001:



Rank: 1; Name of toll operator: Florida Department of Transportation 

Turnpike; City, state: Tallahassee, Fla.; Total toll lanes: 693; 

Actively distribute in manual lanes: No; If operate ACMs, do 

they accept?: No.



Rank: 2; Name of toll operator: Illinois State Toll Highway Authority; 

City, state: Downers Grove, Ill.; Total toll lanes: 484; 

Actively distribute in manual lanes: No; If operate ACMs, do they 

accept?: Yes.



Rank: 3; Name of toll operator: New York State Thruway Authority; City, 

state: Albany, N.Y.; Total toll lanes: 357; Actively 

distribute in manual lanes: Yes; If operate ACMs, do they accept?: No.



Rank: 4; Name of toll operator: New Jersey Highway Authority; City, 

state: Woodbridge, N.J.; Total toll lanes: 324; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: No.



Rank: 5; Name of toll operator: Oklahoma Turnpike Authority; City, 

state: Oklahoma City, Okla.; Total toll lanes: 284; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: Yes.



Rank: 6; Name of toll operator: Mass. Turnpike Authority; City, state: 

Boston, Mass.; Total toll lanes: 236; Actively distribute in 

manual lanes: No; If operate ACMs, do they accept?: No.



Rank: 7; Name of toll operator: Harris County Toll Road Authority; 

City, state: Houston, Tex.; Total toll lanes: 218; Actively 

distribute in manual lanes: Yes; If operate ACMs, do they accept?: Yes.



Rank: 8; Name of toll operator: Orlando-Orange County Expressway 

Authority; City, state: Orlando, Fla.; Total toll lanes: 185; 

Actively distribute in manual lanes: Yes; If operate ACMs, do they 

accept?: Yes.



Rank: 9; Name of toll operator: MTA Bridges and Tunnels; City, state: 

New York, N.Y.; Total toll lanes: 150; Actively distribute in 

manual lanes: Yes; If operate ACMs, do they accept?: N/A.



Rank: 10; Name of toll operator: Transportation Corridor Agencies; 

City, state: Santa Ana, Calif.; Total toll lanes: 126; 

Actively distribute in manual lanes: No; If operate ACMs, do they 

accept?: Yes.



Rank: 11; Name of toll operator: Ohio Turnpike Commission; City, state: 

Berea, Ohio; Total toll lanes: 118; Actively distribute in 

manual lanes: Yes; If operate ACMs, do they accept?: N/A.



Rank: 12; Name of toll operator: Maine Turnpike Authority; City, state: 

Portland, Maine; Total toll lanes: 88; Actively distribute in 

manual lanes: Yes; If operate ACMs, do they accept?: Yes.



Rank: 13; Name of toll operator: Port Authority of NY & NJ; City, 

state: New York, N.Y.; Total toll lanes: 65; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.



Rank: 14; Name of toll operator: South Jersey Transit Authority; City, 

state: Hammonton, N.J.; Total toll lanes: 52; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: No.



Rank: 15; Name of toll operator: Delaware Turnpike Administration; 

City, state: Newark, Del.; Total toll lanes: 43; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.



Rank: 16; Name of toll operator: Dulles Greenway (TRIP II); City, 

state: Sterling, Va.; Total toll lanes: 30; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.



Rank: 17; Name of toll operator: Detroit International Bridge Co.; 

City, state: Detroit, Mich.; Total toll lanes: 27; Actively 

distribute in manual lanes: Yes; If operate ACMs, do they accept?: N/A.



Rank: 18; Name of toll operator: Indiana Department of Transportation-

-Toll Road Division; City, state: Granger, Ind.; Total toll lanes: 20; 

Actively distribute in manual lanes: Yes; If operate ACMs, do 

they accept?: No.



Rank: 19; Name of toll operator: Delaware River Port Authority; City, 

state: Camden, N.J.; Total toll lanes: 16; Actively distribute 

in manual lanes: No; If operate ACMs, do they accept?: N/A.



Rank: 20; Name of toll operator: Delaware River & Bay Authority; City, 

state: New Castle, Del.; Total toll lanes: 13; Actively 

distribute in manual lanes: No; If operate ACMs, do they accept?: N/A.



Legend: 



ACM: Automatic Coin Machine:



N/A: Not Applicable:



Source: U.S. Mint contractor analysis.



[End of section]



Appendix III: Comments from the United States Mint:



DEPARTMENT OF THE TREASURY:



UNITED STATES MINT WASHINGTON, D.C. 20220:



August 30, 2002:



Bernard L. Ungar:



Director, Physical Infrastructure Issues United States General 

Accounting Office Room 2A10:



441 G Street, N.W. Washington, D.C. 20548:



Dear Mr. Ungar:



We have reviewed the General Accounting Office’s (GAO) draft report, 

“New Dollar Coin, Marketing Campaign Raised Awareness but Not 

Widespread Use,” and generally concur with its findings.



The report recommends that the United States Mint suspend further 

expenditures to market and promote the Golden Dollar until it has 

performed research and analysis that can support a plan that is likely 

to increase the coin’s long-term circulation or is necessary to achieve 

Congress’s desire for co-circulation. We believe that this 

recommendation is consistent with the Senate Committee Report’s 

expectation that the Mint would not draw funds from its Public 

Enterprise Fund to promote the Golden Dollar until the Mint has an 

approved marketing plan. We generally agree that it would be 

inappropriate to expend public funds on such endeavors until we have 

performed the market research, completed the necessary analysis, 

coordinated proposed strategies and funding levels with the Department 

and Congress, and revised the plan we laid out in our June 17, 2002, 

Report to Congress, entitled “Golden Dollar: Overcoming Barriers to 

Circulation” (Golden Dollar Plan) accordingly.



The report also specifically identifies several major concerns in the 

Golden Dollar program that are within the scope of the Mint’s authority 

to address, either on its own or in collaboration with other public or 

commercial entities. These concerns, and the United States Mint’s 

responses to them, are as follows:



* Constraints posed by barriers against the supply of the dollar coin.



The GAO report confirms the existence of barriers on the supply side of 

the dollar coin circulation model. In particular, it noted that (1) the 

coin is not readily available at banks; (2) the Golden Dollar and the 

quarter-like Susan B. Anthony dollar coin (SBA) are regularly 

commingled, which effectively nullifies the deficiencies in the SBA 

that the Golden Dollar was designed to overcome;* (3) currency 

ordering systems do not facilitate the ordering of dollar coins; and 

(4) the wrapping, handling, and shipping costs associated with using 

the dollar coin can make it considerably more expensive than the paper 

dollar for some commercial users.



United States Mint Response: As the GAO report confirms, there is ample 

evidence of the existence of these barriers. The United States Mint 

acknowledges that it has no empirical evidence to suggest that the 

elimination of these barriers will actually increase circulation of the 

Golden Dollar coin. However, some increase in demand for the Golden 

Dollar might result if the United States Mint were to increase the 

coin’s availability through the elimination of these barriers. For 

instance, if the United States Mint worked with the Federal Reserve 

Banks to remove SBAs from inventories and deposits, the availability of 

the Golden Dollar might increase because the Federal Reserve Banks 

would have to order additional Golden Dollars to meet dollar coin 

demand. Still, we cannot predict the magnitude of any such increase in 

demand, nor whether such an increase in demand would result in a 

sustained growth in dollar coin use.



Although the United States Mint can take measures to eliminate the four 

barriers enumerated above, we believe that it will be difficult to 

formulate a research methodology that could predict the likely results 

in quantifiable terms. Therefore, we intend to explore several options 

to address this problem. For instance, we will consider contracting the 

services of an expert or consultant that has the professional acumen to 

design such a methodology. Another potential alternative would be to 

take an incremental approach-that is, we could seek to eliminate these 

barriers in particular markets by employing pilot programs in which we 

would closely monitor costs relative to measurable increases in dollar 

coin circulation. An additional option is to compose a panel of 

government, industry, and academic leaders to examine this issue. Any 

of these approaches will cost some money to pursue. However, the Mint 

generally concurs with the GAO report’s recommendation and will not 

make a substantial investment in any of these approaches until it has 

developed a sound business case that supports such expenditures.



* Constraints posed by the public’s attitude toward the dollar coin.



The report notes that there is a cultural bias against the use of a 

dollar coin. It specifically concludes that (1) negative perceptions, 

(2) lack of information about the cost and benefits of using the coin, 

(3) lack of awareness of the coin’s advantages, and (4) the ease of 

carrying a paper equivalent of the same denomination foster this 

cultural bias.



United States Mint Response: The United States Mint will procure the 

services of a private firm to conduct an independent study to identify 

and assess the barriers to utilizing a dollar coin in daily commerce. 

Three target groups will be interviewed: consumers, commercial vendors, 

and distribution channel personnel. We plan to have the contractor 

begin this independent study in October and expect it to be completed 

by the end of the calendar year. We will adjust the Golden Dollar Plan 

in accordance with the results of this study.



* Constraints posed by lack of demand for the dollar coin.



The report recognizes the significance of the “network effect” and its 

importance to the dollar coin’s gaining a foothold in circulation. The 

report specifically acknowledged the dilemma that the public is not 

likely to demand the coin until it is more readily available.



United States Mint Response: Economists’ and the GAO report’s 

acknowledgements of the validity of the “network effect” suggest that 

one way to overcome the substantial public resistance to using the 

dollar coin is to simultaneously persuade businesses, consumers, and 

suppliers to change their procedures and usage habits. There must be 

sustainable channels for successful distribution of the Golden Dollar. 

Accordingly, in developing a marketing strategy to overcome the lack of 

demand for the Golden Dollar, the Mint will modify its Golden Dollar 

Plan to ensure that it also focuses on ways to take advantage of the 

“network effect.”:



In addition to the concerns cited in the report, we agree with the 

report’s recommendation that the United States Mint should honor 

existing promotional agreements that were aimed at encouraging 

circulation of the new dollar coin. We also will consider entering into 

new agreements that are consistent with the approved Golden Dollar Plan 

when they are supported by strong business cases indicating that they 

are likely to contribute to the Plan’s objective to effect measurable, 

sustainable, and long-term increases in Golden Dollar circulation, or 

when they are necessary to achieve Congress’s desire for co-

circulation. As outlined in the Golden Dollar Plan, the United States 

Mint also will continue to pursue efforts with the Postal Service, the 

military and transit agencies to facilitate the continued and expanded 

use of the Golden Dollar in their retail and related financial 

operations. We would welcome the Congress’s support in these endeavors.



Finally, we wish to clarify one item in the GAO report: the distinction 

between a currency’s circulation and its velocity. The Mint has 

reported that the Golden Dollar represents about four percent of the $1 

currency now in circulation, while the report indicates that the Golden 

Dollar represents only about one percent of the $1 currency’s velocity. 

The Mint’s four percent circulation figure is based on the number of 

dollar coins issued as a percentage of $1 currency issued. The report’s 

one percent velocity figure, on the other hand, presumably represents 

the number of financial transactions in which a dollar coin is used as 

a percentage of $1 currency used in all such transactions.



I would like to take this opportunity to extend our sincere 

appreciation to you and your colleagues in the General Accounting 

Office for their comprehensive assessment of the Golden Dollar program.



Sincerely,



Henrietta Holsman Fore:



Director:



United States Mint:



Signed by Henrietta Holsman Fore:



[End of section]



Appendix IV: Comments from the Federal Reserve Board of Governors:



BOARD OF GOVERNORS OF THE:



FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551:



LOUISE L. ROSEMAN:



DIRECTOR DIVISION OF RESERVE BANK OPERATIONS AND PAYMENT SYSTEMS:



August 23, 2002:



Mr. Bernard L. Ungar:



Director, Physical Infrastructure Issues United States General 

Accounting Office Washington, D.C. 20548:



Dear Mr. Ungar:



Thank you for the opportunity to comment on the General Accounting 

Office’s draft report New Dollar Coin Marketing Campaign Raised 

Awareness but Not Widespread Use. The GAO recommended that marketing 

expenditures for the golden dollar only be incurred if it can be 

demonstrated that such efforts are likely to increase the coin’s long-

term circulation. We believe this is a reasonable standard to also 

apply to other significant expenditures that are intended to increase 

the circulation of the golden dollar coin.



We have provided technical comments to the report under separate cover.



Sincerely,



Signed by Louise L Rosen:



[End of section]



FOOTNOTES



[1] 31 U.S.C. 5112 and note.



[2] U.S. Mint, Report to Congress: On the Marketing of the Golden 

Dollar (Washington, D.C.: Mar. 30, 2001), and Report to Congress: The 

Golden Dollar, Achievements and Challenges (Washington, D.C.: Mar. 29, 

2002).



[3] U.S. General Accounting Office, New Dollar Coin: Public Prefers 

Statue of Liberty Over Sacagawea, GAO/GGD-99-24 (Washington, D.C.: Jan. 

22, 1999); Coin and Currency Production: Issues for Congressional 

Consideration, GAO/T-GGD-97-146 (Washington, D.C.: June 26, 1997); A 

Dollar Coin Could Save Millions, GAO/T-GGD-95-203 (Washington, D.C.: 

July 13, 1995); 1-Dollar Coin: Reintroduction Could Save Millions If It 

Replaced the 1-Dollar Note, GAO/T-GGD-95-146 (Washington, D.C.: May 3, 

1995); 1-Dollar Coin: Reintroduction Could Save Millions If Properly 

Managed, GAO/GGD-93-56 (Washington, D.C.: Mar. 11, 1993); A New Dollar 

Coin Has Budgetary Savings Potential But Questionable Acceptability, 

GAO/T-GGD-90-50 (Washington, D.C.: June 20, 1990); Limited Public 

Demand for New Dollar Coin or Elimination of Penny, GAO/T-GGD-90-43 

(Washington, D.C.: May 23, 1990); and National Coinage Proposals: 

Limited Public Demand for New Dollar Coin or Elimination of Pennies, 

GAO/GGD-90-88 (Washington, D.C.: May 23, 1990).



[4] Seigniorage is the difference between the face value of a coin and 

the coin’s cost of production.



[5] Coin mechanisms on vending machines use magnetic impulse to 

distinguish coin denominations. This magnetic impulse is referred to as 

the coin’s electromagnetic signature. Coin mechanisms in many existing 

vending and transit machines in the United States were already 

programmed to accept the Anthony dollar coin. To avoid expensive 

retrofitting costs and to ensure that the new dollar coin could be 

readily used in vending and transit systems, the Mint developed an 

alloy that was a different color than the Anthony dollar coin, but that 

appeared to be the same as the Anthony coin to vending and transit coin 

mechanisms. After testing over 20 different alloys, the Mint selected 

an alloy for the new dollar coin that is 77 percent copper, 12 percent 

zinc, 7 percent manganese, and 4 percent nickel.



[6] To meet the demand for dollar coins before the new dollar coin was 

available in late January 2000, the Mint produced 33 million Anthony 

dollar coins in fiscal year 1999 and 40 million Anthony coins in fiscal 

year 2000.



[7] U.S. Mint, On the Marketing of the Golden Dollar.



[8] H.R. Conf. Rep. No. 107-253 at 55 (2001); S. Rep. No. 107-57 at 31 

(2001); H.R. Rep. No. 107-152 at 30 (2001).



[9] U.S. Mint, The Golden Dollar: Achievements and Challenges.



[10] U.S. Department of the Treasury, Office of Inspector General, The 

Mint Suspends Its FY 2002 Planned Production of Golden Dollar Coins, 

OIG-022-066 (Washington, D.C.: Mar. 19, 2002). In a third quarter 

fiscal year 2002 report to congress on operations, the Mint noted that, 

because supplies of new dollar coins were sufficient to meet general 

circulation demand, it had temporarily suspended production as of May 

2002, and that production would resume as warranted by future 

circulating demand. As of August 2002, the Mint had produced 7 million 

2002-dated new dollar coins to meet coin collection demand from the 

public and no 2002-dated coins for general circulation.



[11] GAO/GGD-90-88.



[12] U.S. General Accounting Office, Financial Impact of Issuing the 

New $1 Coin, GAO/GGD-00-111R (Washington, D.C.: Apr. 7, 2000).



[13] Net payout is the difference between the number of circulating 

coins paid out to depository institutions and number of circulating 

coins returned from depository institutions.



[14] On the basis of the Coinstar National Currency Poll, December 

2001. In survey awareness questions, the Mint asked respondents if they 

had seen or heard of the new dollar coin, and the Coinstar survey asked 

if they were familiar with the coin.



[15] During this period, the Mint shipped approximately 980 million new 

dollar coins to the Federal Reserve system and another 117.7 million 

directly to non-Federal Reserve locations such as Wal-Mart for a total 

of 1,097,700,000 new dollar coins (we rounded this figure to 1.1 

billion).



[16] Federal Reserve inventories include both Susan B. Anthony and new 

dollar coins.



[17] Osterberg and Thomson, Federal Reserve Bank of Cleveland, “Network 

Externalities: The Catch-22 of Retail Payments Innovations,” Economic 

Commentary (Feb. 15, 1998).



[18] Mark Wynne, Federal Reserve Bank of Dallas, “The Economics of One 

Dollar,” Southwest Economy (July/August 1997); Caskey and Laurent, “The 

Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions,” 

Journal of Money Credit and Banking (August 1994); Lotz and Rocheteau, 

“On the Launching of a New Currency,” Journal of Money Credit and 

Banking (August 2002); and Gupta, Jain, and Sawhney, “Modeling the 

Evolution of Markets with Indirect Network Externalities: An 

Application to Digital Television,” Marketing Science (1999).



[19] GAO/GGD-90-88.



[20] GAO/GGD-93-56.



[21] Coinstar National Currency Poll, December 2001.



[22] Mint Survey, July 2001.



[23] Marketbridge interviewed 30 stores for the grocery chain promotion 

assessment; however, this is not a statistically representative sample, 

and the results cannot be projected to all 1,200 stores.



[24] U.S. Department of Transportation, On the Benefits and Feasibility 

of Implementing Transit and Toll Road Fare Card Technology Capable of 

Accepting the Sacagawea Dollar (Washington, D.C.: April 2002).



[25] Under an existing licensing program, the Mint currently receives 

royalty payments for placing numismatic-related products, such as 

storybooks, magnifiers, and coin albums, into the retail market. The 

U.S. Forest Service is an example of a government agency with a 

licensing program. It receives royalties for allowing private 

enterprises to use the Smokey the Bear and Woodsy Owl images.



[26] As of January 2002, the Mint said that it had produced 1.4 billion 

new dollar coins and had 300 million in inventory. The 1.1 billion 

remaining new dollar coins were shipped to the Federal Reserve Banks. 

Of these 1.1 billion new dollar coins, approximately 850 million were 

distributed to banks and other depository institutions and 250 million 

remained in Federal Reserve inventory.



[27] Hart and Teeter Poll cited in the Financial Times, September 8, 

2001. The poll indicates that two-thirds of the public are holding onto 

coins, but this is not the same as two-thirds of the dollar coins.



[28] U.S. Mint, On the Marketing of the Golden Dollar.



[29] U.S. Mint, The Golden Dollar, Achievements and Challenges.



[30] Results from the July 2001 survey were based on 1,018 interviews 

with adults 18 years or older in the continental United States from 

July 20-22. Respondents were asked whether they had received or spent 

the new dollar coin and the dollar bill in the past few days. We did 

not determine the quality of these data from the survey.



[31] U.S. Mint, Report to Congress: On the Marketing of the Golden 

Dollar (Washington, D.C.: Mar. 30, 2001), and Report to Congress: The 

Golden Dollar, Achievements and Challenges (Washington, D.C.: Mar. 29, 

2002).



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