I'm curious what does the input frequency yield? What do you hear. You hear just the cars in the clear?
Generally, probably like 99% of the time, If a transmission is encrypted, it will have been encrypted at the radio making the original transmission, it is possible, but rare and makes no sense, for a message to be received in the clear and a repeater set up so that when it transmits the message it is encrypted.
Do the local Police do this, I very much doubt it.
I don't know in what situation it would be legal, but some folks I know tested it, just because they could, in a repeater situation on a farm and it worked. Low power walkie talkies transmitted to the repeater in the clear, the repeater ( cross band situation ) then encrypted the transmission an transmitted it from the tower at full power.