Reuters - Cash-hungry U.S. states turn to Web to auction goods

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Cash-hungry U.S. states turn to Web to auction goods

Saturday, Mar 14, 2009 10:11AM UTC

By Tom Ryan

NEW YORK (Reuters) - U.S. municipalities, strapped for cash as the recession decimates revenues, are stepping up sales of everything from old police cars, helicopters and bicycles to confiscated jewelry and slot machines in an effort to reduce swollen deficits.

And municipalities that previously relied on old-fashioned auctions conducted in local parking lots are getting more sophisticated, turning to the online world as they seek to maximize their sales.

As many as 46 states are struggling with deficits, according to the Washington-based Center on Budget and Policy Priorities. And governments, which are required by law to close budget gaps, are being creative in seeking ways to meet the shortfall.

"Anything that we can dispose of that generates revenue definitely helps to reduce any deficit that we have in the budget," said Greg Spearman, director of purchasing for Tampa, Florida.

Tampa recently raised more than $300,000 from the sale of a 1978 Piper police airplane. The sale was conducted by auction on www.govdeals.com, a website founded by a former investment banker and two partners to help local governments maximize returns on unwanted assets.

Listings on the site have increased significantly in recent months and governments are looking deep into their closets for things to sell, according to Chief Executive Bill Angrick.

Agencies from Alabama, for example, sold about $3 million worth of goods in the first two months of 2009, compared with $9 million for 2007 and 2008 combined. Items included a batch of 27 confiscated bicycles sold by the city of Montgomery for $270.

Georgia agencies have chalked up $1.8 million in sales in the first two months of 2009, compared with sales of $9.1 million for all of 2008. Among the goods sold was a confiscated Yukon SL Crossbow sold by the town of Rome for $147.

The Austin, Texas, police raised $388,100 in an auction of confiscated slot machines last week.

State and local governments are "getting a lot of visibility and more competition" than they would using the old-fashioned open-outcry auctions, said Angrick.

Scott Bartley, an accountant in the controller's office of Charleston County, South Carolina, said municipalities previously sold used equipment and other assets in annual auctions, typically held in a local parking lot.

That meant paying for storage until enough inventory had accumulated and relying on the largess of the few buyers who typically turned up.

Bartley said the county's revenues have roughly tripled since it stepped up efforts to generate cash, with the website helping it access a larger pool of buyers.

Since the county started using the service in 2005, revenues from sales have climbed to between $800,000 to $1 million a year from an average $170,000 to $200,000 previously.

The county is now selling up to seven used police cars a week online and "we're getting above bluebook value," he said.

About 1.2 million buyers have used the govdeals.com site, ranging from other states and municipalities to companies, entrepreneurs and resellers, all of whom are prescreened to ensure they can pay.

Vehicles are the most popular items sold on the site, although Angrick believes the second most popular item -- highway maintenance equipment -- could increase significantly with President Barack Obama's massive spending on infrastructure as part of his economic stimulus plan.

The largest ticket item auctioned in 2008 was a 1993 McDonnell Douglas MD520N helicopter sold by the Louisville-Jefferson County, Kentucky Metro Government, to a tour operator in Hawaii for $791,000.

Among the more surprising offers is an Arabian horse currently on offer from Virginia Polytechnic Institute and State University, with a starting bid of $50. The 100-mile endurance horse was used for exercise physiology and nutrition research at the university.

The Nashville Metro Airport Authority in Tennessee is selling a 40-foot tall rotating beacon for an airport with bids starting at $200.

Fort Oglethorpe, Georgia, is auctioning off a batch of confiscated jewelry including a 10-carat gold necklace and various rings and watches.

And, in November of last year, the city of Baltimore, Maryland, put its 85-foot fireboat, "Mayor, J. Harold Grady," on the block after 47 years of service.

Allan Johnson, owner of a marine contracting firm in Akron, Ohio, won the bidding at $80,000. Johnson, who was hoping to pay $50,000, still believes he got a good deal. A new one could be well over $1 million.

Of course, online auctions have not always been successful for municipalities.

Alaska Gov. Sarah Palin, campaigning as John McCain's vice presidential running mate last year, famously trumpeted her move to put a "luxury jet" used by the previous governor up for sale on eBay. What she shied away from mentioning was that the jet failed to find a buyer on eBay and she ultimately hired a broker to sell it.

(Additional reporting by Joan Gralla; Editing by Leslie Adler)