The city will agree to reduce its building permit fees by 5 percent for the next two years to end a lawsuit brought forth by the community’s home building industry.

After a closed-door executive session Tuesday evening, city commissioners unanimously agreed to accept a proposed settlement agreement with the Lawrence Home Builders Assn. and several of its members to end a lawsuit that alleges the city uses building permit fees to fund activities not related to traditional building inspections.

The settlement, which still must be approved by Douglas County District Court Judge Michael Malone, includes a new policy spelling out how the city sets its building permit fees.

Lawrence attorney Terrence Campbell said in a written statement that the association and other plaintiffs in the case were satisfied with the settlement.

The city said it was not admitting any wrongdoing by accepting the settlement, but said the new policy would add more specifics and transparency about how the city sets its building permit fees.

Also included in the proposed settlement is a requirement that the city produce an annual report detailing the budget of the buildings inspections program. That report will show how much money is collected in building permit fees and how much is spent for inspectors’ salaries and other related building inspection services.

Builders filed the lawsuit in 2004. The case was set to go to trial this summer.