Updated at 3:17 p.m.

City officials agreed to settle a lawsuit Friday brought by preservationists who successfully stopped demolition of Nicollet Mall's Peavey Plaza -- agreeing instead on some ways to rehab the site.

Among the possible improvements is a new water feature that could be drained and transformed into a walkable area for events.

The city initially hoped to demolish Peavey -- which is in disrepair -- to make way for a more accessible, event-oriented space. Preservationists sued, arguing that the M. Paul Friedberg designed plaza is a historic resource.

During the course of litigation, the site was listed in the National Register of Historic Places and the city's demolition permit expired.

On Friday, the two sides agreed to settle the suit by agreeing to a $2.3 million list of mutually acceptable improvements. Just when that might happen remains to be seen, since several funding questions aren't settled.

City spokesman Matt Lindstrom said the final costs of the project will be "far in excess" of $2.3 million when factoring in the fountains and shallow pool. The city already secured $2 million in state bonding dollars for a Peavey Plaza rehab, but needs to ensure those dollars are not rescinded. Private donations may also need to be identified to make up any shortfalls.

"If sufficient funds cannot be identified for the full project, consideration will be given to phasing the work or a strategic smaller project," Lindstrom said in an e-mail.

Moving forward depends on action from the mayor and City Council, who are already busy working on a redo of Nicollet Mall and an overhaul of Downtown East.

"[The settlement] really provides a framework, so whenever this discussion is picked up in the future...we don't have to start from square one," assistance city attorney Erik Nilsson told a council committee this week.

The improvements (below) include making the site handicap accessible from 11th Street and replacing broken fountains and stairs. The agreement also suggests replacing the existing reflecting basin with a "water feature" about a quarter inch deep that can be drained so people can walk on it during events. 

Peavey Plaza sits adjacent to Orchestra Hall, which has just completed its own renovations. But Nilsson pointed out that the ongoing orchestra lockout is likely to hinder private fundraising for the Peavey rehab.