Several waterfront residents in Cape Elizabeth have agreed to pay the town $500,000 to prevent the development of a public shore path between their multimillion-dollar homes and scenic Broad Cove, possibly bringing an end a decade-old neighborhood dispute over seaside public access.

Cape Elizabeth officials have reached a mediated court settlement proposal with the residents, who filed a lawsuit against the town in January claiming ownership of an undeveloped portion of Surf Side Avenue that runs along the rocky edge of the Shore Acres subdivision.

Under the proposed settlement, which is on Monday’s Town Council agenda, the residents would drop the lawsuit and the town would vacate any claim to the so-called paper street, an 800-foot strip of land along Broad Cove that triggered a wider community conflict last summer over maintaining public access to the waterfront. The residents would assume ownership of the land and pay taxes on it.

While the proposed settlement likely will disappoint many of the 1,400 Cape residents who have signed a petition urging the council to accept and develop Surf Side Avenue as a public way, town officials involved in the mediation say they have negotiated the best deal for the town and the neighborhood.

“We’ve done the best we could, given that there hasn’t been the will on the council to accept the paper street,” Jessica Sullivan, council chairwoman, said Thursday. “We’ve also protected and strengthened the deeded and implied rights of neighbors in the Shore Acres subdivision so they can continue walking along the shore.”

Other town officials who participated in the mediation were councilors Jamie Garvin and Sara Lennon, Town Manager Matthew Sturgis and Durward Parkinson, an attorney for the town. The council must approve the settlement proposal before it can take effect.

Sullivan said she has long wanted to accept Surf Side Avenue as a public way, but some questioned whether the town would be able to develop a shoreline path along the paper street. She noted that the $500,000 would be used to buy and preserve public land elsewhere in town, possibly with better access along the waterfront.

Parkinson said the settlement is “the best deal possible,” one that would allow the town to “avoid costly litigation.”

“It’s a balancing act between the legal rights of the property owners and the town’s rights in its paper streets,” he said.

SETTING A PUBLIC HEARING

Sullivan doesn’t expect councilors to spend much time discussing the proposed settlement Monday evening because their primary goal will be to schedule a public hearing for September. The council held an executive session July 30 to review the settlement terms, which were developed in mediation with retired Superior Court justice Robert Crowley.

Public comment offered at the 7 p.m. meeting will likely include strong criticism, especially from some inland residents of the 115-home Shore Acres subdivision.

“I’m pretty unhappy with (the proposed settlement) they came up with,” said Jim Morra, a Shore Acres resident who helped to circulate the petition to preserve public access.

“I’m a strong proponent of the town doing the right thing for the majority of residents,” Morra said. “I think (the proposed settlement is) bad from the town perspective because it says money speaks and 1,400 signatures don’t. These days if you want to sit on the rocks and read a book, you’re kinda running out of places to do that.”

Morra said a lawyer for the Shore Acres Improvement Association would have to review the proposed settlement before he could say whether it would protect and strengthen neighborhood access to the waterfront.

Surf Side Avenue first appeared on a 1911 plan for the Shore Acres subdivision, but it was never completed or formally accepted by the town. Atlantic Place, an adjacent paper street, isn’t addressed by the proposed settlement.

The plaintiffs in the paper street lawsuit live on Pilot Point Road. They are Imad and Hulda Khalidi, David and Kara Leopold, Andrew Sommer and Susan Ross, Stewart and Julie Wooden, and Pilot Point LLC, according to the settlement proposal. Each property is valued at $1 million to $2 million for tax purposes. Rock Dam Development, a limited liability company previously listed among the plaintiffs, recently sold its vacant half-acre property on Pilot Point Road and is no longer part of the lawsuit, according to the previous owners.

The plaintiffs couldn’t be reached for comment Thursday. Their attorney, John Shumadine, didn’t respond to a call for comment.

In their lawsuit, the property owners claim the town’s right to establish a public way on Surf Side Avenue has lapsed because they were allowed to encroach on the undeveloped street and “(exhibit) ownership in a manner inconsistent with a public way for a period exceeding twenty years.”

RIGHTS IN CONFLICT

The complaint notes that the property owners have incorporated the paper street into their backyards, installing items such as a wooden deck, a brick patio, a fenced-in garden, an established hedgerow, an irrigation system, stairways, lighting, stone landscaping and fencing.

While inland residents of Shore Acres have for decades enjoyed the deeded right to hike along Broad Cove, their newer waterfront neighbors have indicated in recent years that they want to stop the town from extending that right to the general public. The simmering dispute has sometimes flared into neighborhood confrontations, especially after the town’s Conservation Committee identified Surf Side Avenue and Atlantic Place as potential trails in the town’s 2013 Greenbelt Plan.

The council decided in October 2016 to extend the town’s right to accept the paper streets for an additional 20 years, but the abutters and some of their neighbors wanted the council to take immediate action.

At a packed meeting in November, the council was scheduled to either vacate, accept or continue to extend the town’s right to accept the paper streets. Councilors heard lengthy testimony from residents and tossed around several options, such as holding a nonbinding referendum and seeking an easement from the abutters before vacating the paper streets.

Finally, the council voted unanimously to extend the town’s right to accept paper streets until 2036 and hire a facilitator to help the neighborhood work through its concerns and inform future council actions.

At a pair of public forums held in February, 64 of 84 townspeople who attended said they favored accepting the paper streets, while 13 wanted to vacate and seven wanted to delay action for an additional 18 years as allowed under state law. About a dozen people attended both meetings.

The Pilot Point plaintiffs skipped the forums.

Correction: This story was updated on Aug. 24, 2018, at 1 p.m. to show recent changes in plaintiffs and property owners involved in the lawsuit.

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