Steve:
First, governmental entities have inherent immunity. This comes from our common law history, where you couldn't sue the King without his permission. So step one is find some specific grant of authority to sue the city. They aren't subject to negligence in the same way you, I and corporations are.
Second, fire departments enjoy special immunity (for very good public-policy reasons) for decisions made about how they choose to control a fire. Courts will generally not second guess a fire departments decision about how they fight a fire. (In this case the fire was put out, just not to the satisfaction of some people on this list. So it is really not a question of whether, but how, it was put out.)
It may seem "March Madness" to some, but given these considerations, I think the slam dunk will go to the city.
I'm as sorry as anyone about the loss of this historic equipment. This is the reason why insurance should be carried and a risk-management plan should be in place.
I wonder if the owners of the equipment ever took the time before the fire to advise the fire department of what they had and where it was. Most fire departments are happy to pre-plan a response. They will meet with a property owner and advise on ways to minimize fire dangers and will arrive on the scene informed in the event the worst occurs.
Burr Hubbell