Inquiry of the Week (12/29/97)

Question:

What procedures are recommended for the sale of surplus property or equipment?

Answer:

Some real or personal property owned by a city or county may become useless or surplus to its actual needs. Additionally, the property may be causing a drain on scarce resources by requiring continual maintenance.

For Washington counties, the procedures for the sale of surplus property and equipment are set out in chapter 36.34 RCW. Public notice, a public hearing, and a public auction are required, with certain exceptions, for sales of county surplus property (RCW 36.34.020 - .100). Certain types of county property acquired for specific purposes may also be subject to specific statutory provisions.

For cities and towns, however, the state law surprisingly sets out few requirements and very little guidance regarding the disposal of such surplus property. This office generally recommends the following procedures for the sale of surplus city property or equipment:

1. declare the property or equipment in question "surplus," either by resolution or ordinance and indicate that the property's sale is for the "common benefit;"
2. if the property or equipment has significant value, obtain an independent appraisal in order to establish fair market value; and
3. once these preliminary steps are completed, the property or equipment may be sold by bid, negotiation, auction or any other appropriate method desired by the city. The state statutes do not require that a competitive bid procedure be used to sell property. Nor is it necessary to hold an auction. These requirements would only be necessary if they were contained in a local ordinance or policy relating to the sale of property.

Obtaining Fair Market Value

If the sale is to a private party, the fair market value must usually be received to avoid the possibility of the Office of the State Auditor considering the sale to be a gift of public property to a private party. This would be in violation of the state constitution. However, there may be circumstances where a city is unable to obtain full value for property and which would justify accepting less than full value.

When disposing of property to another governmental entity, a city must also obtain full value, based on RCW 43.09.210. What is full value, however, depends upon the circumstances. See AGO 1997 No. 5.

Limitations on Who Can Purchase Surplus Property

In most cases, any public or private entity may purchase surplus property. However, the mayor and councilmembers may not purchase property from the city, regardless of the value, because of a specific statutory restriction. RCW 42.23.030. City employees in most cases may purchase surplus property as long as they pay fair value. State law does not prohibit the purchase of property by city employees. However, some cities have restricted this practice to avoid an appearance of impropriety. If an auction or bid procedure is utilized, then city employees may bid on the property but may not be given any advantage in regard to the sale that other members of the public do not have.

Special Rules for City Utility Property

If the property was originally acquired by a city for utility purposes, the city council must pass a resolution declaring that the property is surplus to the needs of the city and is not required for continued public utility service. The resolution must state the fair market value of the property and at least one public hearing must be held prior to the sale. RCW 35.94.040.

Additional Information

For more information check out our Web page on the sale of surplus city property.