How does the police department dispose of evidence after it has been released by the courts?
It is not, as can be seen in this link, easy for police departments to know exactly what to do with evidence after a trial.
Of course, some evidence can be reclaimed by its rightful owner after trial. Other evidence, such as drugs, which have no rightful owner, ends up getting destroyed. The same thing happens to evidence which is unclaimed after a certain period and seems to have no further value. Some valuable evidence can be auctioned off to the public. In some cases, particularly murder cases, evidence will simply be retained indefinitely so that it can still be available in case of an appeal or other need.