The simple answer to your question is yes.  It is permissible both under federal tax law and your state law for a charity to give things to a unit of local government when it is consistent with its mission, especially when it will get something of value in return. 

But this is one of those questions where I ask: who do I represent? If I represent the town, I love this deal.  If I represent the fire company, I’m not so sure. 

I feel a little bit subversive in saying that I don’t entirely trust local governments. They can be very fickle.  There can be significant and uncontrollable politics in certifying volunteer fire companies to provide coverage within the municipality. In Pennsylvania last year, when a volunteer fire company was decertified and couldn’t provide its services in its traditional area, the state Attorney General actually tried, unsuccessfully, to force the fire company to give its financial assets to another company. (See Nonprofit Issues®, Vol. XXX, No.1, “Attorney General Can’t Cy Pres Assets Of One Volunteer Fire Company to Another”)

I am always worried about place-based charities that enter into sale-leaseback transactions because at some point they can lose control of a mission-critical piece of real estate. I don’t know what the financial arrangements might be for your proposal. But if you proceed with it, you should be sure to get iron-clad rights to continue to use the station at a reasonable cost, perhaps with the right to rehabilitate it as well, for a really long time, like 99 years or something similar.  Thinking that far ahead may seem silly now, but long term leases eventually come to an end and you don’t want to be in position to lose your home in the foreseeable future.