The Boy Scouts, however, vowed to continue fighting for its 18-acre headquarters even without city support, because it believes its constitutional liberties are at stake. Last month, the group received a letter of support from the U.S. Justice Department, stating the group's predicament raised "substantial concerns" that the group's rights were being violated.

The ACLU filed the lawsuit against the city and the Boy Scouts in August 2000, two months after the U.S. Supreme Court ruled that the Boy Scouts could refuse to admit gay troop members or troop leaders. The lawsuit said the city showed favoritism toward a religious organization by leasing the Scouts land for $1 a year.

The city's settlement was announced yesterday, though the City Council made the decision Dec. 9 in a closed session. As part of the deal, the city agreed to pay $790,000 of the ACLU's legal fees and $160,000 in court costs.

The city also agreed to drop its defense of a separate but similar lease of land at Fiesta Island. That matter is still pending in San Diego federal court but could go to trial this year.

The Scouts will be allowed to continue using the Balboa Park and Fiesta Island facilities until both parts of the case are resolved, including during appeals.

The council voted 6-2 to approve the settlement, with Mayor Dick Murphy and Councilman Jim Madaffer dissenting. Councilman Brian Maienschein was absent.

Murphy didn't return repeated calls seeking comment. Instead, he released a two-sentence statement.

"I disagreed with the settlement and voted against it," he said. "In my opinion, it is a bad idea both legally and financially."

Madaffer said he voted against the settlement on principle, though he added that "from a financial standpoint, it might have made sense."

"Of course, that's assuming the Boy Scouts would ultimately lose and assumptions aren't always a good way to make a decision," he said.

The ACLU lawsuit was filed on behalf of a lesbian couple and an agnostic couple. Each couple has a son who wants to become a Scout.

The youth organization has occupied its current site, at the northwest corner of the park near the San Diego Zoo, since 1946. The group had a 50-year lease that was due to expire in 2007.

But in December 2001, the council voted 6-3 to renew the lease for 25 years with a city option to extend the lease an additional 15 years. Toni Atkins, Donna Frye and Ralph Inzunza opposed the extension.

Under terms of the lease, the Scouts must spend $1.7 million to upgrade Camp Balboa. The group also must pay the city an annual administrative fee initially set at $2,500.

In July, U.S. District Judge Napoleon Jones Jr. ruled that the Balboa lease violated the constitutional separation of church and state, concluding there was "overwhelming and uncontradicted evidence" showing that the Boy Scouts of America is a religious organization.

But the group, which immediately appealed the decision, was allowed to remain in the park while the case was pending.

Until the settlement was reached, the city and the Scouts had jointly defended the leases, saying they weren't discriminating against any groups because the facilities were open to anyone who wanted to use them.

Since the Supreme Court's 2000 ruling in favor of the Scouts' position on gay membership, schools, cities and charitable organizations across the nation have reconsidered their relationships with the Scouts.

"The Boy Scouts have argued for years and all the way up to the Supreme Court that they are a private religious organization that is entitled to engage in discrimination, and they've won that argument," said Jordan Budd, the ACLU's legal director in San Diego. "But in winning that argument they have lost the right to a public subsidy for their discriminatory practices."

George A. Davidson, a New York attorney representing the Scouts in the park dispute, predicted the group will win the appeal it plans to file and will remain at the park.

The Scouts deny any discriminatory practices, he said, and will argue that the city is discriminating against the group because of its religious policies.

"The U.S. Supreme Court says the government cannot discriminate on the basis of viewpoint," Davidson said. "Judge Jones' order is forcing the city to discriminate against the Boy Scouts because of their belief in God."

A civil rights attorney with the U.S. Justice Department appears to agree with the Scouts' argument.

In response to a letter from Davidson asking for support in the case, Eric W. Treene, special counsel for religious discrimination, said Jones' ruling raises "substantial" constitutional questions.

"Indeed, singling out the Boy Scouts for exclusion from such a program based on their viewpoint would raise serious First Amendment concerns," Treene wrote in a Dec. 8 letter. "The Civil Rights Division has an interest in participating in cases of this nature."

Justice Department officials could not be reached for comment late yesterday.

Davidson said the Justice Department might be willing to file a "friend of the court" brief on behalf of the Boy Scouts when the group appeals. "Having the United States government's civil rights division on your side is a good thing," he said.

No matter what happens following the city's settlement with the Boy Scouts, no one involved predicts the Scouts will be leaving Balboa Park soon.

Deputy City Attorney John Mullen said it could be years before the entire matter is resolved by an appeals court.

"We're not kicking them out at this stage," Mullen said.

If the ACLU prevails, Mullen said the Balboa Park land would be returned to the city.

Madaffer, an assistant scoutmaster with two sons in scouting, hopes to find some way to keep the Boy Scouts in Balboa Park even if the ACLU wins. He said the city might be able to lease the land to another organization, such as the Girl Scouts, who could run the camp with the understanding that the Boy Scouts could sometimes use the land for its programs.

"As far as I'm concerned, the Boy Scouts need to stay there," Madaffer said. "We need to figure out a creative solution to keep them there."

But Atkins, who is a lesbian, said the city was wrong to renew the lease in 2001 because of the Boy Scouts' discriminatory policies. "The settlement," she said, "was a matter of fiscal responsibility."

Continuing to fight the ACLU was pointless, Atkins said, because the lower court ruling "pretty much indicates to us what the eventual outcome will be."

The ACLU estimates that its legal costs at this point are about $2 million. Without the settlement, the city could have been liable for all of these costs, plus a share of any additional legal expenses the ACLU might incur in continuing its lawsuit.

One question not addressed by the settlement is whether the city would have to compensate the Scouts for improvements the group made at the site.

City officials believe the terms of the lease allow them to cancel it because of the constitutional dispute, but the Scouts have said the organization deserves millions of dollars for its investments at the two sites.

Another unresolved matter is whether the Scouts can continue to lease land on Fiesta Island in Mission Bay, where the city gives the group free use of a half-acre for an aquatic center. That lease expires in 2012 and has not been extended.

The Scouts spent $2 million to build the aquatic center, which is on an unused landfill.

Jones refused to rule on the Fiesta Island lease, saying he hadn't seen enough evidence to make a decision. A trial to resolve that issue is expected to be scheduled later this year.

The Scouts' earlier appeal of Jones' ruling on the Balboa Park lease was rejected by the 9th U.S. Circuit Court of Appeals, which said the organization had to wait until Jones resolved the whole case