PORTSMOUTH — City Council voted 8-1 to approve a settlement agreement with Redgate/Kane, ending a potentially costly lawsuit and allowing the city to move forward with “the community plan” to redevelop the property of the Thomas J. McIntyre Federal Building.

The community plan, featuring a design for a market shed or pavilion, was developed by city consultants, Principle Group, following a series of public consultation meetings.

The project is expected to include commercial, retail, residential and public spaces.

The vote to approve the settlement agreement with the city’s private development partners, Redgate/Kane, took place at a special meeting of City Council Wednesday evening at City Hall, attended by 25 to 30 people.

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Councilman Andrew Bagley cast the only vote against approving the settlement agreement. He called it a “very difficult vote”.

As part of the settlement, Redgate/Kane agreed to drop its lawsuit against the city with prejudice — meaning it cannot be restarted — but the city must repay $2 million to its development partners.

The $2 million is “for prior project expenses that were rendered unusable due to the move to the community plan,” according to the 13-page settlement documents.

City Manager Karen Conard proposes that the $2 million will come from the city’s fund balance.

City Attorney Robert Sullivan revealed at the meeting that the settlement “was driven in very, very large part by the actions of the General Services Administration,” which owns the property of the federal building.

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The GSA informed Conard 13 days ago that “time is running out” on the city’s efforts to secure the property for $1 through the historic landmarks program, Sullivan said.

The city has been trying to acquire ownership of the federal building for several years under the program.

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The GSA gave the city 14 days to show it could move forward with a request to redevelop the property or “the GSA was going to unplug us,” Sullivan said.

If that happened, the GSA would sell the property at market value, Sullivan said.

The biggest hurdle in convincing the GSA that the city could move forward was the lawsuit the city faced from Redgate/Kane, he said.

That led city officials to negotiate with Redgate/Kane over the past 13 days, culminating in an agreement between the two parties at 4 p.m. Tuesday, Sullivan said.

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The settlement protects the city from having to pay what Redgate/Kane attorneys said was tens of millions of dollars due to the city’s alleged breach of contract, Sullivan said.

“We don’t concede that they can prove that, but we’re avoiding this fight,” he said.

The 13-page settlement is conditional on the GSA granting the city a minimum six-month extension to file an application to redevelop the property.

“If the GSA does not grant such an extension, this Agreement will be null and void and the status quo immediately prior to the execution of this Agreement will be restored,” according to the settlement.

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Several residents spoke out against the settlement agreement and questioned the process that led to city council voting on it with 24 hours’ notice at a special council meeting.

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Peter Whelan, former city councilman and chairman of the McIntyre subcommittee, was one of several former city councilors who spoke out on Wednesday against approving the deal.

“The one-word settlement agreement is awful. It means a lot to them,” Whelan said.

He also asked if Redgate/Kane had spent $2 million on their plan, which had been approved by a previous board, saying “prove it, show me the bills”.

He called the settlement a “black hole for the city and the taxpayers.”

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Resident Patricia Bagley questioned the 24 hour notice for the meeting and said ‘everything we don’t hear you hide under the word litigation. You don’t tell us anything.”

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The settlement states that “until NPS (National Park Service) and local council approvals are obtained without appeal, the city will reimburse the developer for half of the third party costs incurred to advance the project that are approved by the city ​​before the time they are engaged. »

The NPS administers the Historic Landmarks Program.

The city and Redgate/Kane acknowledged in the settlement “that public financial support from the city will be required to develop and construct the community plan.”

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Resident Thomas Nies told council he understood their efforts to try to resolve the issue.

But he added that it is “a bit inadmissible that you are committing the city to an undetermined amount of expenses”.

Mayor Deaglan McEachern said his priorities are to settle the Redgate/Kane lawsuit and find a way to build the community plan design for the project.

“I wanted to see this plan come to life. I believe that gives us the best path,” he said at Wednesday’s meeting.

Deputy Mayor Joanna Kelley said, “We are all concerned about the overall cost of this project. She acknowledged “we can’t give you” the overall cost of the project.

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Councilman John Tabor called the deal a “settlement agreement and restart agreement,” which allows the city to move forward with redevelopment.

He predicted that the community plan and its market hall will be “a gathering place for all of downtown.”

Tabor added: “Public investment in major city centers pays off in the long term. I think that’s what we need to remember.

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Councilor Kate Cook said council was faced with “making a decision based on the least worst option”.

“I don’t think there is a good option, there is no ideal option for the city,” she said.

A previous city council voted to approve the Redgate/Kane redevelopment plan in 2019, which included renovating the existing McIntyre building for office space and adding two new mixed-use residential buildings to the site.

The previous city council rejected a proposed ground lease with Redgate/Kane, leading developers to take legal action against the city which is being terminated.