Water District 19 and developer Dan McClary have signed a settlement that puts a final end to a long-standing dispute over water availability for a proposed inn at Vashon Village, the water utility announced on Wednesday.

The settlement, as announced in November when the parties reached a tentative agreement, allows McClary to build a smaller, 16-room inn; requires that he reconfigure his existing Vashon Village so that it’s four buildings rather than eight buildings in size; and requires that he use water-saving measures in the inn, for his landscaping and in the other buildings at the small commercial center.

The dispute, according to a news release issued by the water district, was both costly and time-consuming. All told, the small utility poured thousands of staff hours into the 33-month dispute and spent about $50,000 in legal fees and expenses not covered by the district’s insurance pool. Ultimately, the district said in its release, McClary got concessions the district was willing to offer up two years ago, when McClary took the water utility to court.

“The long episode was an expensive lesson in the value of learning how to work out differences,” the district said in its release, which was issued by Frank Jackson, who chairs the district’s three-member commission.

“While the board fully intends to maintain diligent stewardship over the resource and careful management of the cost to ratepayers, it has an important message to those needing more water: ‘Please come in and talk. Within the parameters of the district policies, we’ll do our best to work with you,'” the release said.

McClary, who lives in Federal Way and has a second home on Vashon, said he disagreed that he could have gotten the concessions from the water district had he not sued.

“I never wanted to file the lawsuit in the first place,” he added.

The dispute began when McClary asked the water district to reconfigure his water shares for his eight-building commercial center, freeing up seven shares for a proposed 24-room inn. The district refused, saying such a reconfiguration went against its one-meter-per-building policy and was a veiled attempt on McClary’s part to jump to the head of a decade-long waiting list the district established when it issued a moratorium for new water shares.

In July 2007, McClary sued the water district. After months of legal wrangling, the two parties announced a tentative settlement last November.