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Council approves reimbursement resolution to replenish hospitality taxes for fire-rescue vehicle purchases (up to $12M)
Summary
The council approved a resolution allowing the town to reimburse hospitality-tax funds already or soon-to-be expended for fire-rescue vehicle purchases via proceeds of a future tax-exempt lease (amount not to exceed $12,000,000); staff said 10 vehicles were ordered under a 2021 agreement with Safe Industries and delivery has begun.
Hilton Head Island’s Town Council on July 23 approved a resolution declaring the town’s intent to reimburse certain expenditures for the purchase of fire-rescue vehicles, enabling the town to replenish hospitality-tax funds used for initial payments by later using proceeds from a tax-exempt lease agreement.
Assistant Finance Director John McGowan described the background: the town entered a December 2021 purchase agreement with Safe Industries for an initial fleet totaling about $7.45 million (an amendment in 2024 moved the figure closer to $7.5 million) to buy 10 vehicles (eight pumpers and two quints). Delivery began in late June; McGowan said the town has received one truck and expected additional deliveries within weeks, with final delivery by the fourth quarter of the calendar year. The resolution would allow the town to reimburse hospitality-tax funds already expended for those purchases and to amortize lease payments over an approximately 10-year term aligned with vehicle useful life.
McGowan said the town will publicly advertise and solicit bids for the lease arrangement; the proceeding reimbursement resolution is an IRS-compliance step that starts a regulatory clock allowing the town an 18-month window to take delivery and secure financing. Council members asked clarifying questions about cash flow, whether the town pays cash up front and later reimburses itself, and whether the lease will involve a financial institution; staff confirmed checks are being written on delivery and the lease proceeds will be used to reimburse the town through a tax-exempt equipment lease arranged through a bank or other financial institution.
Council also discussed the financial rationale: staff noted that current investment returns on town funds may exceed the likely lease rate, making it financially beneficial to maintain liquidity rather than depleting hospitality-tax balances. The motion to approve the resolution, which caps reimbursement at $12 million, passed unanimously on a 7–0 vote.
Council directed staff to follow procurement rules and return with the market solicitation and final lease terms when available.
