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States, Cities Look To Web Auctions To Generate Revenue

Posted on: Sunday, 15 March 2009, 15:50 CDT

Cash-strapped municipalities throughout the country are boosting their efforts to generate revenue by auctioning everything from  confiscated jewelry to slot machines to old police cars, helicopters and bicycles.

Hard-hit by the recession, these municipalities are moving fast to generate additional revenues by maximizing sales of these goods.  Indeed, the auctions themselves are becoming more sophisticated, moving from conventional sales once held in local parking lots to online Web auctions.

The Washington-based Center on Budget and Policy Priorities says that as many as 46 states are now suffering with budget deficits.  By law, these governments are required to close the gaps, and are seeking new and innovative solutions to the problem.

"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 the city of Tampa, in an interview with Reuters.

The city recently generated more than $300,000 by selling a 1978 Piper police airplane during an online auction on www.govdeals.com.  The Web site, created by a former investment banker and two partners, seeks to assist local governments in generating revenue from unwanted assets. 

The number of listings on the Web site has jumped substantially in recent months as governments begin digging deeper in their closets for more items to sell, according to CEO Bill Angrick.

For instance, agencies in Alabama sold roughly $3 million worth of goods during January and February of this year, compared with $9 million for 2007 and 2008 combined.  Some of the items auctioned included 27 confiscated bicycles the city of Montgomery sold for $270.

Agencies in Georgia have reached $1.8 million in sales during the first two months of 2009, compared with sales of $9.1 million for all of last year.   Among the items sold was a confiscated Yukon SL Crossbow, which the town of Rome sold for $147.  And last week, police in Austin, Texas generated $388,100 in an auction of confiscated slot machines.

State and local governments are "getting a lot of visibility and more competition" than they would using conventional auctions, a Reuters report quoted Angrick as saying.

Municipalities had previously sold assets in annual auctions, usually held in a local parking lot.  However, this meant they had to pay for storage until enough inventory had accumulated to hold an auction.  Furthermore, they were forced to rely upon the few buyers who typically turned up, according to Scott Bartley, an accountant in the controller's office of Charleston County, South Carolina.

Bartley said his county's revenues have almost tripled since it began boosting efforts to generate revenue, with the Web site helping it gain access to a larger number of buyers . The county began using the service in 2005, with revenues from sales climbing to nearly $1 million annually from an average of $170,000 to $200,000 before.

The county is now auctioning up to seven used police cars each week online.

“We're getting above bluebook value," Bartley said.

Roughly 1.2 million buyers have used the govdeals.com Web site, including companies, other states and municipalities, entrepreneurs and resellers.  The Web site prescreens all buyers to ensure their ability to pay.

Although vehicles are the site’s most popular items, Angrick believes highway maintenance equipment -- the second most popular item -- could increase significantly in light of the vast spending on infrastructure included in the recent economic stimulus plan.

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

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

Fort Oglethorpe, Georgia, is auctioning off a variety of confiscated jewelry, including a 10-carat gold necklace, and various watches and rings.   Meanwhile, the Nashville Metro Airport Authority is selling a 40-foot tall rotating beacon, with bids starting at $200.

Last November, the city of Baltimore put its 85-foot fireboat, "Mayor, J. Harold Grady," up for sale after 47 years of service.  Allan Johnson, owner of a marine contracting company in Akron, Ohio, won the auction for $80,000.  Although he was hoping to pay only $50,000, Johnson still thinks he got a good deal since a new one would likely cost over $1 million.

However, online auctions have not always been successful for municipalities.  While campaigning as John McCain's vice presidential running mate last year, Alaska Governor Sarah Palin notably touted her move to list a "luxury jet" used by the previous governor for sale on eBay.  But the jet failed to find a buyer, and she ultimately hired a broker to sell it.


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Source: redOrbit Staff

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