A lawsuit over the ownership of sidewalks on Pioneer Way will not stand in the way or delay the street’s $8.35 million improvement project, city officials say.

“If we have to, we can build around that section of sidewalk,” said Eric Johnston, engineer for Oak Harbor.

Kristi Jensen and Frank Scelzi, the owners of Old Town Mall, are among the last of a slew of Pioneer Way property owners that refused a settlement offer from the city earlier this year for an easement to downtown sidewalks. While court documents indicate that nearly everyone else has given in under threat of lawsuit, Jensen and Scelzi are refusing to budge and have promised to fight for the sidewalks they claim belong to them.

In April, the City Council agreed to offer property owners $1,290 per parcel for easement rights to sidewalks along Pioneer Way. According to Johnston, the city was operating under the belief that it already owned the sidewalks, and therefore could not legally purchase them from someone else. And while it was prepared to press the issue in court if necessary, city officials hoped to skirt the problem by having property owners willingly sign easement agreements after accepting the offered settlement money.

“The payment was in effect a settlement to avoid a lawsuit,” Johnston said.

The sidewalk issue had to be addressed to move forward with the controversial Pioneer Way improvement project, an extensive downtown revitalization plan that will ultimately turn the road into an eastbound one-way street. The fear was that any litigation could delay or prolong the construction schedule, which is set to begin early in 2011.

However, 23 property owners did not accept the money and refused to sign the easement agreements. In May, the Bellingham-based law firm, Langabeer and Tull, P.S., which was hired in March to address the issue, upheld the city’s promise and took legal action in Island County Superior Court. The city’s suit named both private property owners and financial institutions, such as Whidbey Island Bank, Peoples Bank, and Banner Bank, that held the ownership rights of several properties.

City Attorney Margery Hite would not comment on the litigation, and Richard Langabeer of the Bellingham law firm declined to speak about details of the case.

However, court records appear to indicate that most of the cases, besides, Jensen’s and Scelzi’s, have since been resolved. Some never responded to court summonses, and were ruled against by default. Others with complicated title problems, such as those under lien by banks and another property owner who is in prison, are either already resolved or are expected to be soon.

Jensen and Scelzi, who have hired Langley attorney Carolyn Cliff, say the city has no claim to the sidewalks. City officials maintain that the city built them years ago, that they have been used by the public ever since, and that the city has paid to keep them up. But, according to Jensen, the city’s claim is questionable considering the condition of the sidewalks.

“If you go look down there, you’ll see nothing has been repaired,” she said.

Jensen acknowledged that she and Scelzi’s unwillingness to comply with the city’s request is linked to the improvement project. Both have been loud critics of the one-way street plan. Jensen said the city’s attempt to seize property she claims doesn’t belong to them is unfair and that she and Scelzi won’t stand for strong arm tactics.

“We’re saying forget it, we’re not going to just let you take it,” Jensen said.

The issue will go before a judge in Superior Court Aug. 26, at 9 a.m. The issue could be decided then, but if facts are unclear or in dispute and a summary judgement cannot be made, the matter could proceed to trial.