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Beaufort and Port Royal would pay the fire district an annual fee for emergency response in areas annexed after 1995 -- money the district claimed it has not received in the past.
Beaufort will pay about $198,000 annually throughout the seven-year agreement, city manager Scott Dadson said.
An estimate of Port Royal's annual rate was not immediately available Tuesday evening.
Beaufort City Council members unanimously approved the agreement at a meeting Tuesday.
"The settlement resolves any ambiguity in what is expected," Mayor Billy Keyserling said. "It is a fixed contract -- no ifs, ands or buts about it -- so there's no guessing."
The fire district Board of Commissioners and Port Royal Town Council must also approve the agreement before it can take effect.
The fire district is slated to vote on the settlement Thursday and Port Royal within the next two weeks, officials from both entities said.
"I think the final outcome is going to meet everyone's needs," Burton Fire Chief Harry Rountree said Tuesday afternoon.
Last year, the fire district threatened to stop providing first-response service to areas annexed into Port Royal after 1995 and into Beaufort after 1999 -- including Picket Fences, Shadow Moss and the Walmart on Robert Smalls Parkway -- unless the municipalities paid it higher fees.
A Beaufort County judge granted the city a restraining order late last year to prevent the district from dropping those services until the parties reached a new agreement. The judge ordered the parties to settle the matter through mediation.
At the heart of the legal battle was a decade-old, mutual-aid agreement that left the entities disputing how much the municipalities had to pay for the fire district's emergency response services to the annexed areas.
The mutual-aid agreement expired last month, and the district has been functioning under the restraining order while it settles the dispute and reaches a new agreement.
Beaufort's new fee is based on a set formula -- 19 percent of Burton's millage rate multiplied by the assessed value of Beaufort's annexed properties, according to the settlement.
Port Royal's fee is similar, although it will pay 25 percent of the Burton millage multiplied by the assessed value of Port Royal's annexed properties because property values are lower, officials said.
