At the federal courthouse, the class action lawsuit for tenants of the Philadelphia Housing Authority was seen as the case that wouldn't end.

But after 15 years, McDowell v. PHA could be nearing a close.

The sides have reached a preliminary agreement that calls for the authority to set aside $2.65 million to settle claims from tenants who say they were not receiving adequate home-heating subsidies when natural gas rates increased.

PHA also has agreed to cover $730,000 in legal fees for the plaintiffs' lawyers at Community Legal Services.

"We're glad that the parties have signed a settlement agreement after many years of litigation," said Rachel Garland, an attorney for Community Legal Services.

The agreement was reached Nov. 14 and awaits approval by U.S. District Judge Mitchell S. Goldberg, whose decision is expected shortly. Once that happens, the court will hold a fairness hearing within 75 days for members of the class before a final order is executed.

Kelvin Jeremiah, PHA's interim executive director, said he was eager to resolve the litigation after he took over the troubled agency last June.

PHA is under the control of the U.S. Department of Housing and Urban Development (HUD), which is conducting an exhaustive investigation of PHA's spending on outside legal counsel. Under former Executive Director Carl R. Greene, PHA spent $38.5 million on legal fees from 2007 to 2010 - far more than any big-city housing authority.

But Jeremiah said the $2.1 million spent on outside lawyers to defend PHA in the class action suit was well spent.

He said during the course of litigation, lawyers discovered that PHA was using flawed assumptions for determining gas subsidies for tenants. PHA has more than 4,000 scattered-site housing units. Tenants are paid a monthly subsidy to cover heating costs.

"We learned we were paying our residents too high," Jeremiah said in an interview. By reevaluating the formula for calculating rates, PHA is saving $5 million annually, he added.

"We've already far surpassed the cost of this by the savings we've gotten," Jeremiah said.

The class action lawsuit was filed in 1997 and quickly settled. Under a consent decree, PHA would have automatically increased allowances for gas bills.

"PHA signed," Jeremiah said, "but we never did it."

In 2002, Community Legal Services petitioned the court to hold PHA in contempt for not updating the allowance.

PHA hired Wolf Block to handle its defense. After that firm went out of business in 2009, the PHA legal team moved to Duane Morris, with Alan C. Kessler continuing as lead counsel.

"In this particular case, it was an appropriate use of outside lawyers," Jeremiah added. "While we now have a robust inside legal department, that didn't exist during the time frame of this case."

The settlement could affect 5,600 families who were covered by earlier consent decrees. Jeremiah said the payouts could amount to about $300 for eligible families.

The fund would cover subsidies during two periods: from July 1, 1999, to Dec. 31, 2002, and Oct. 31, 2005, to Nov. 30, 2006.