BANGOR – City councilors authorized a three-year lease Wednesday with Shaw House Development Inc., the local developer working to create affordable housing in the city’s historic waterworks complex.

The move allows the developer to hold onto a federal grant while the project remains hung up in the courts.

Project director Doug Bouchard applauded the city’s support.

“This is just another indication of two things: one, that the city is very dedicated to saving the waterworks, and two, that this project is, in no way shape or form, going away,” Bouchard said in a telephone interview before Wednesday’s meeting.

Shaw House Development Inc. is a for-profit subsidiary of Shaw House Inc., the nonprofit group that runs a shelter for homeless teens on Union Street.

The waterworks property on State Street, vacant since the 1970s, is the focus of a $6 million redevelopment plan that aims to convert the complex, a collection of century-old brick buildings, into 35 efficiency units for low-income adults.

Besides helping meet a need for affordable housing, the project would preserve the complex, which continues to deteriorate as time goes by.

Shaw House is working with the city and several other development partners, including the U.S. Department of Housing and Urban Development.

Though Shaw House has a development agreement with the city, the agreement does not give Shaw House sufficient control of the city-owned property under HUD’s grant guidelines, according to T.J. Martzial, the city’s housing programs director.

To that end, Shaw House needs the lease in order to retain a grant.

On Wednesday, councilors meeting as the business and economic development committee authorized the city’s legal department to execute a three-year lease giving Shaw House Development the needed “site control” in exchange for $1. They did so without debate.

Shaw House initially planned to start work in the spring of 2003. Instead, the project became mired in a legal morass.

The battle began in the fall of 2003, when Maine Central Railroad petitioned Penobscot County Superior Court seeking to reverse the state Department of Transportation’s June 2003 approval of a needed railroad crossing near the waterworks, citing safety concerns.

In March, Justice Andrew Mead upheld the DOT’s decision to grant the crossing. Maine Central appealed to the Maine Supreme Judicial Court.

Oral arguments took place in October. A decision is expected shortly, Assistant City Solicitor John Hamer said Wednesday.

More recently, the railroad filed a civil lawsuit in Penobscot County Superior Court opposing the city’s August decision to take the land needed for the crossing by eminent domain. The city paid $500 for the land, an amount typically paid in such cases, Hamer said at that time.

In its civil suit, called an 80B ruling, the railroad alleged that the city did not follow property procedures when it took the land, that it paid too little for it, and that the taking should not have occurred until after the Law Court ruled.