PORTLAND – The City Council is expected to appropriate nearly $1 million Monday to pay the Portland Company and settle a long dispute over compensation for easements near the city’s eastern waterfront.

The dispute dates to 2005, when the city was about to redevelop the eastern end of the waterfront with a new cruise-ship passenger terminal and a parking garage. Several private developments, including three large condominium projects, were also envisioned at one point.

Those plans were complicated by easements held by the Portland Company, which owns a significant amount of property in the area.

The easements, granted in 1865 by the Atlantic & St. Lawrence Railroad, gave the company the right to cross railroad property. Phineas Sprague, owner of the Portland Company, said the easements were needed because the company made steel for the rail line connecting Portland to Montreal and it had to load its products onto trains.

The railroad turned the land over to the city more than 20 years ago, but the easements to the Portland Company remained.

To clear the legal route for some of the development plans, the city had to get rid of the easements. Sprague said he offered to trade the easements for the right to expand his marina, but the city refused.

Then, the city asserted eminent domain to take the easements. The appraiser hired by the city put the value of the easements at a little more than $5,000, while the company’s appraiser came up with a figure of $2 million.

A court battle ensued, and in 2009 the Maine Supreme Judicial Court agreed with a lower court ruling that the city could take the property. But it sent the case back to Cumberland County Superior Court for a decision on the value.

Last week, a jury ruled that the easements are worth $715,000 and, with interest, the total due the Portland Company comes to nearly $970,000.

The city’s lawyers said politics may have played a role in the jury’s finding.

“Juries are impossible to predict, and it may well be that the current tea party, anti-government sentiment had some impact on the outcome,” read a post-verdict memo to the City Council from three lawyers with Jensen Baird Gardner & Henry.

The council will be asked to appropriate the money from undesignated funds that remain as Portland nears the end of its budget year on June 30, said Gary Wood, Portland’s lawyer.

Wood said the city will send the Portland Company a check for $795,000 next week.

The city is still disputing the interest awarded. The court said it’s being charged back to 2005, when the company contested the eminent domain proceedings. The city’s lawyers say Portland shouldn’t have to pay for the time it took for arguments in the case and the company’s appeal to the Supreme Court.

The lawyers are advising the city to contest that portion of the ruling.

The interest comes to more than $240,000. Wood said that if the city wins its argument, the interest will be slightly more than $71,000. The city is also paying some court costs, litigation-related expenses and interest due since the jury decision on May 28.

Sprague said he’s not celebrating the ruling.

“I am in tears,” he said, noting that several of his friends were involved in the condo projects that fell victim to the recession as the fight over the easements dragged on. “This is not a sweet moment.”

If the city had made a more reasonable offer at the outset, he said, those projects would likely have been built and occupied by now.

“I don’t think we should be looking across a dirt parking lot,” he said. “The vision (for the area) that everybody dreamed about was less important (to the city) than fighting a battle.”

Staff Writer Edward D. Murphy can be contacted at 791-6465 or at:

[email protected]