Santa Fe city councilors are crafting a deal with Santa Fe Railyard developers that appears to be an effort to avoid litigation and save some cash on office leases.

A proposed lease scheduled for a vote next week at the City Council's regular Wednesday meeting would call for moving city offices out of the Joseph Montoya Federal Building on Federal Place and into the top floor of Market Station, the building in the Railyard that also houses REI.

For several years, city officials have been meeting behind closed doors to discuss "pending or threatened litigation" involving the Railyard Co. development firm and the city's role in paying for a parking structure built beneath Market Station.

City Manager Robert Romero said Tuesday that the City Council is expected to again hold an executive session at its April 27 meeting to discuss a proposed settlement agreement on at least some of the unresolved issues.

The scheduled vote on leasing the office space comes immediately after that item on the council's agenda.

"The two are related," Romero said, adding that he would not discuss more details, however, until a formal settlement agreement is signed by the city and the development company.

Developers agreed to lease the space to the city for a lower price than they had advertised a year ago, when officials were shopping for new offices. Then, the asking price was $25 per square foot. The proposed lease under consideration is about $18.50 per square foot, which means the city will spend about $6,800 less each year for the office space than it pays now, Romero said.

Last year, the city tried to lease Alvord Elementary School to relocate the offices from the federal building. That deal fell through in December because of prohibitive renovation costs.

Romero said the proposed lease agreement at Market Station includes more than $1.4 million in tenant improvements paid by the developer.

A representative of Railyard Co. issued a statement late Tuesday that said the company was excited to hear that the city Finance Committee had voted in favor of the plan Monday.

"We look forward to approval of the lease and the settlement agreement," read a statement issued by partners Rick Jaramillo, Steve Duran, Allen Branch and Marco Gonzales.

The firm did not answer questions about whether the lease would mean any change in stalled movie-theater project it also plans to build.

Last year, City Councilor Matthew Ortiz said if the city leased space in Market Station, the move would help the developers secure construction financing to finish the building's interior and get closer to starting the theater next door.

Although Railyard property managers don't have a decision-making role, the director of the Santa Fe Railyard Community Corp. said the group advocates the lease because "it will help stabilize one of the biggest projects in the Railyard."

"It will bring life to the Railyard during the day, and it will acquaint the public with the Railyard," said Richard Czoski, director of the nonprofit that manages the city-owned land. "In other words, they will have to go to the city agencies to do their normal business, and it will encourage traffic. We are hoping that while they are there, they will stop and have lunch or have dinner or go to one of the retailers."

Earlier this month, the corporation's board of directors notified occupants of the historic Santa Fe Depot that the city would soon take over that Railyard space as well.

The Santa Fe Southern Railway has leased the depot for 18 years, but only on a month-to-month basis in recent years. Officials plan to open a tourist welcome center operated by the city Convention and Visitors Bureau.

Contact Julie Ann Grimm at 986-3017 or jgrimm@sfnewmexican.com.