In a packed room in Washington Township, leaders of Gloucester County's most populous municipality sparred once more Wednesday night over a controversial tax agreement for a long-planned mixed-use project - and ultimately voted to delay making a decision.

The Township Council's 3-2 vote to table a decision on a payment-in-lieu-of-taxes (PILOT) agreement for the Washington Square redevelopment plan again halted a project in the works since 2008. The decision also put off a related settlement agreement that would have squashed a lawsuit with the appointed redeveloper, meaning the matter will likely make its way through court.

The action Wednesday rejected the advice of a team of lawyers for the town who, for the last year, have negotiated the planned settlement agreement with the redeveloper, which sued the municipality in 2013 after the council voted against a similar PILOT proposal.

The Washington Square project calls for 330 rental apartment units, 100 for-sale townhouses, and about 170,000 square feet of retail and office space. The 35-acre area on Hurffville-Cross Keys Road is largely open land that officials said last year generated about $7,900 in taxes.

Jeff Surenian, an attorney for the township, said he and other township professionals unanimously agreed that the settlement and a modified 30-year PILOT were a "win-win" situation. Township officials said language in its 2008 agreement with the redeveloper was clear in allowing for a possible PILOT or tax abatement in order to make the project economically feasible.

But some officials - and much of the at times rambunctious crowd - said the tax deal was not in the town's best interest.

"I'd rather let the judge be the judge," said Council President Giancarlo D'Orazio, who supported tabling the vote, along with Vice President Scott Newman and Councilman Chris Del Borrello.

Opponents feared new residential units would add students to the school district but not provide the district with new revenue. The district would not receive PILOT money, which was projected to provide the municipality $1.8 million in the first year of the project's completion.

The decision to table a vote was met by applause from the crowd, but ire from a representative for the redeveloper, Washington Square Partners, a joint venture of the Atkins Cos. and Woodmont Properties.

"We're not waiting for them," Nicholas Menas, an attorney for the firms, said after the vote. "What happened here tonight is unprecedented."

Last year, the council voted, 3-2, to reject a PILOT. The redeveloper then sued the town, saying it had breached its 2008 contract and challenging the township's affordable-housing requirements.

After spending about $150,000 to deal with the lawsuit, including hiring an economics expert, the town moved to settle the matter. Business Administrator Robert Smith, who declined to comment after Wednesday's vote, said one day earlier that the township stood to lose if the lawsuit is not settled.

The amendment to the redevelopment agreement drafted for the planned settlement included several changes to the plan. A planned police substation was removed from the proposal, instead offering the township a one-time payment of $100,000.

The PILOT deal was also amended to allow the township's share of the project's gross revenues to be 12 percent. Last year's proposal called for the township to collect 10 percent.

The township's professionals projected that fewer than 50 school-age children would be added to the district and said the municipality could potentially provide compensation to the district. No agreement had been made.

The lack of a clear stream of revenue for the schools was disconcerting to some residents. Many predicted there would be more schoolchildren in the apartments and townhouses than estimated by the experts.

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