Instead of calling the local police first, why not just ask the campers if they have permission to camp there? Then they could have shown you their fire permit issued by the town.
For future use of the town's beach by other town residents it seems like the town should make a decision on this and then place a sign on the Cow island beach with a list of campng rules so's your Tuftonboro neighbors will understand what's expected of them.
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... down and out, liv'n that Walmart side of the lake!
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