Foxwoods, the proposed riverfront casino in South Philly, has settled a legal dispute with the city about its property taxes as part of a larger agreement on how the project will invest in nearby neighborhoods.

The city agreed to shave more than $1 million off the back taxes and allow Foxwoods to pay half now and half when it opens.

Foxwoods appealed first to the city's Board of Revision of Taxes this year and then to the Court of Common Pleas after the property taxes on its 18.5-acre site increased from $277,670 in 2005 to $1,377,641 last year.

That increase was caused by the $64.7 million paid by Foxwoods investors for the site in 2005.

City Department of Revenue records show Foxwoods owes $2.8 million for 2006 and 2007 in back taxes, interest, penalties and legal fees.

The agreement, due to be finalized by Friday, has Foxwoods paying $1,750,000 for 2006 and 2007, with $875,000 due within 10 days and another $875,000 to be paid when Foxwoods opens.

Foxwoods must pay the balance by January 2010 if the casino doesn't open by then.

City Solicitor Romulo Diaz said he agreed to the tax settlement because it is part of a larger agreement on future Foxwoods investments.

That includes up to $5 million for new sewer pipes to deal with storm water that causes flooding in neighborhood homes, $50,000 to start a Neighborhood Services District and another $1 million a year to run the district.

Foxwoods also expects to pay between $64 million and $82 million in property taxes to the city in the next 12 years.

"I thought, in that larger context, the tax settlement was very reasonable," Diaz said.

Foxwoods attorney Ira Gubernick said the property tax deal is a compromise, with the proposed casino paying close to what it considered appropriate for 2006 and close to what the city wanted for 2007. That's no bargain, he said.

"We don't view it that way," Gubernick said.

"We feel we had a very good reason to appeal this.

"Otherwise, we would have paid all the taxes on day one." *