LAFAYETTE -- Facing the threat of a lawsuit, city officials are considering an ambitious proposal to replace plans for a fiercely debated apartment complex on a prominent Lafayette hillside -- a plan for up to 45 single-family homes and a number of public amenities.

Officials made the decision to consider the new proposal Monday night after hearing a presentation from City Manager Steve Falk on an alternative to the proposed Terraces of Lafayette development. That development calls for 315 moderate-income housing units spread among 14 buildings on 22 privately owned acres near Acalanes High School and has been challenged by some residents.

Officials also instructed the city attorney to draft an agreement with developer The O'Brien Land Co. that will temporarily halt suits against the city the developer and property owners threatened should the apartments be rejected, as well as repercussions if affordable housing is denied. The council is expected to review the agreement on Jan. 13.

City leaders will then decide whether to pursue the single-family home development after receiving public input at a meeting Jan. 22. According to Falk, the privately owned property would be split into two parcels -- an 8.7-acre parcel would house the subdivision of market-rate homes, and another parcel the city would purchase from the developer for $1.8 million.

The developer would then use those funds to build a public all-weather soccer and lacrosse field; a new tot-lot or playground; a dog park; a 75-space public parking lot that could be used for overflow parking from Acalanes High School; and a 10-foot-wide public bike path bypass on Deerhill Road, Falk said. The city is proposing to split the first $300,000 in cost overruns with the developer for the public projects and would be entirely responsible for any additional costs.

"The reason we are doing that is to create an incentive to build this in an ecomonically efficient way," Falk said in an interview.

If officials proceed, the new project would receive an analysis as an option under the project's existing environmental impact report. It would also be reviewed by the city's circulation, design review, parks, trails and recreation, and planning commissions.

If the council decides not to move forward, the hearings for the 315-unit development will resume immediately, Falk said.

Attorney Allan Moore, who represents the property owners and the developer, praised the deal.

"We think this is a great alternative," Moore said. "We hope we have the opportunity to move forward in partnering with the council and staff and the community on this alternative."

A few residents also voiced their support and said the plan was "saner" than the previous proposal.

Others asked the city not to rush, saying there is still some "lingering resentment" over the site's zoning, which allows administrative and professional offices, and residential housing with a land use permit. According to the city, the new project would reduce the proposed zoning from 35 units per acre to an overall density of not more than 2 units per acre.

One resident Monday night said many critics believed the 315-unit project was part of the developer's strategy to "go with something that was so egregious it could never be approved and then come in with something that was better just to try to make everybody go 'thank God we didn't get the other thing.'"

The public meetings to consider the agreement and the project will be held at the Lafayette Veterans Memorial Building.