The city had threatened to evict the scouts for violating its anti-discrimination laws, and urged the group to reject national Boy Scouts of America policies that ban gays. But a jury this year found the eviction would infringe on the private group's right to free association.
Rather than appeal, the city will instead offer to sell the building to the Cradle of Liberty Council for $500,000, less than half its $1.1 million value, council lawyer Jason Gosselin said Wednesday.
In exchange, the scouts will forgive the nearly $1 million in legal fees the city was ordered to pay the scouts after losing the case.
"At the end of the day, the Boy Scouts will be writing a check to the city, rather than the other way around," Gosselin told The Associated Press. "This is a better solution than having to go through an appeals process."
City spokesman Mark McDonald cautioned that no deal has been signed, but otherwise declined comment.
The Boy Scout oath calls for members to be "morally straight," which the national group interprets to mean that gays cannot participate. In 2000, the Supreme Court ruled in a 5-4 split that the Boy Scouts, as a private group, can exclude gays.
The Cradle of Liberty Council, like other councils, has since tried to walk a fine line between appeasing the city, the United Way and other supporters, and the Irving, Texas-based Boy Scouts of America.
In 2003, it passed its own nondiscrimination policy but was forced to retrench when the Boy Scouts of America ordered it to conform with national rules.
Jurors at the eight-day trial felt the council was "between a rock and a hard place," in the words of the foreman, a former Eagle Scout from Lancaster County.
In Philadelphia, the council enjoys $1-a-year rent at the prime downtown site, a stately Depression-era building the scouts had built and maintained on city land. Rent is valued at about $200,000 a year. The council serves up to 75,000 children a year in various programs, including life-skills programs open to girls as well as boys.
There has been just one known case of a gay scout being ousted from the Philadelphia chapter, but the city argued at the June trial that many gay youths may be scared off by the national policy.
Former Scout Greg Lattera, then 25, testified at trial that scouting had meant the world to him as an inner-city child. He said he had not intended to become a flag bearer for gay rights when he spoke about being gay while wearing his scout uniform in a TV news interview. But the publicity cost him his scouts membership, he testified.
A city lawyer at trial urged Cradle of Liberty leaders to muster "the courage of their convictions" and fight the national office.
"This is a conversation taking place all across the country," Gosselin said Wednesday, speaking of gay rights in society and in scouting. "I don't think this conflict is going away, but hopefully it is with the Boy Scouts and the city of Philadelphia."