The backers of Philadelphia's own World Trade Center, who blamed local politics for derailing the billion-dollar waterfront development, would be exempt from a neighborhood-imposed height limit under a proposed legal settlement by the city.

Such a settlement would clear the highest political hurdle for Martin Schiffman, the lead developer in the Waterfront Renaissance Associates partnership. But actually building the first of four towers at the foot of Callowhill Street on Delaware Avenue remains another matter. The developers have acknowledged that the current economic climate would make financing difficult.

The city and Schiffman are locked in a 2007 lawsuit, filed by Waterfront Renaissance Associates against the city and local civic organizations who encouraged City Councilman Frank DiCicco to establish through legislation a 65-foot height limit in and around Old City.

The height limit was a way to give civic groups leverage by forcing developers to seek variances through Zoning Board of Appeals hearings in which the local neighborhoods groups would have a strong say. The developers claimed the groups, in doing so, breached earlier agreements with the World Trade Center partners to support it. The lawsuit originally focused on the inordinate power that a district City Council member - in this case, DiCicco - can wield over projects.

Two sources familiar with the lawsuit said the city had made the offer to Waterfront Renaissance Associates recently, but had not heard back from the group's attorney, Thomas Leonard. Other properties in the same Old City area would also be exempt to the height restriction as part of the city's solution, one of the sources said.

The World Trade Center would have to go before the Planning Commission for approval, through a new process under Mayor Nutter that puts more power in the hands of city planners than neighborhood groups.

Neither Leonard nor Schiffman, whose suit seeks damages not offered as part of the settlement, would comment. DiCicco, who is not a defendant, also would not comment.

Law Department attorney Benjamin Mather said only: "I can confirm that there have been settlement discussions among the parties, but that's all I'm going to say."

Mather said about 20 individuals have been deposed over the summer. They include DiCicco, Abernathy, and leaders of various civic associations. The case is entering a second phase of "expert discovery," and Mather noted that settlement discussions are not unusual for this point in any lawsuit.

The city and the neighborhood groups deny any wrongdoing, but the case provides a window into - and an indictment of, Schiffman and partners say - the power wielded by local civic groups in the absence of viable land-use laws and a more predictable planning process.

Mayor Nutter and others, including DiCicco, have called for a reform to the system, and a Zoning Code Commission authorized by voters is currently holding public hearings on its recommendations for a complete overhaul of zoning laws.

Schiffman and partners alleged that DiCicco was pandering to votes he needed for reelection in 2007 when he introduced the ordinance in December 2005. They argued that DiCicco forced developers into agreements with civic groups such as the Northern Liberties Neighbors Association. DiCicco has maintained he didn't force developers to do anything.

The developer of the 66-story Bridgman's View Tower at Delaware Avenue and Poplar Street agreed to pay $650,000 into a community development fund managed by NLNA, and developer of the Hoboken Brownstone development at 700 North Delaware Ave. agreed to payments including up to $88,000 a year "for the operation of NLNA's office," according to the lawsuit.

Those payments were contingent on the projects being built - they never were. The Northern Liberties organization was not part of the original agreements with World Trade Center, which was first proposed in 1989. The NLNA was not named as a defendant.

U.S. District Judge Lawrence F. Stengel threw out the conspiracy count in the complaint, however, and the lawsuit now boils down to a breach of contract between the Waterfront Renaissance Associates and three neighborhood groups - Old City Civic Association, River's Edge Civic Association, and the now-defunct Penn's Landing North Civic Association.

Arthur W. "Terry" Lefco, attorney for the three groups, also would not comment.

Contact staff writer Jeff Shields at 215-854-4565 or jshields@phillynews.com.