Let's take the tin foil hats off for a second...
Wacko of the week decides to vent his anger on the world by barricading himself in his house. To make sure that everyone knows that he is unhappy with them, he displayes his anger by shooting at stuff in his neighborhood. Stuff like:
-Mailboxes.
-Stray dogs.
-Passing motorists.
-Neighbors.
-The cops who naturally show up after a while.
Now wacko of the week isn't answering his phone (or maybe it has been disconnected). Your job is to deliver a "throw phone" to wacko of the week so that the negotiators can convince him to return to earth for massive injections of Thorazine and Diazepam. Your choices in high-velocity fashion are:
A. A 2-3" in diameter metal badge, a couple layers of kevlar, a prayer and a smile.
B. A level IIIA balistic shield and cover fire from weapons that probably won't shoot through an exterior wall.
C. An ex-military APC that your department got for shipping charges (essentially free if it came from a nearby base).
I pick "C." What would your choice be?
Seriously, this scenario (or infinite variations thereof) probably happens in a medium-sized city 1-10 times a month (there is an interesting correlation between folks who twist off and hold themselves hostage and rate of Part 1 offenses for a community, but I digress). Your local cops, wanting to go home alive, generally tend to think in terms of risk mitigation. It apparently works pretty well, too, because the vast majority of barricaded persons incidents end peacefully, or at least with no serious injuries (OC exposure is not an "injury") and never even make the news.
Also ex-military armored vehicles come sans weapons systems, and tanks and the like are generally not available. As far as the M113 itself goes, it is not desirable from an LE perspective because:
1) Public perception is bad.
2) Maintenance is darn near impossible.
3) They are tough on roads.
4) They can be slow to respond.
5) They usually require a transporter (additional cost).
The supply of surplus wheeled APCs, mostly from Dragoon armored cars from MP units, and Peacekeeper armored trucks from missile base security, is basically exhausted. Most LE agencies that get armored vehicles will be going for commercial purchase of APCs that don't look like your military variants, generally starting at $250,000 (I do budgets, too).
There is a definite need for these for some situations, and they generally only get called out if someone is already shooting.