Just days after agreeing to a $36.7-million out-of-court settlement over Ottawa's cancelled north-south light rail project, the city wants to make the same section of track the first phase of its new transit plan.

The newly elected city council cancelled the contract to build the $778-million north-south LRT in late 2006 because it favoured an east-west plan instead.

Shortly after the contract was cancelled, Siemens Canada, PCL Constructors and Ottawa LRT Corp. announced they would sue the city for $177 million. That's the lawsuit that was settled last Friday at a cost of $36.7 million.

Mayor Larry O'Brien, who opposed the north-south line in 2006, now says it makes sense to start with that same line, which would run from Bayview to South Keys.

"It does alleviate an issue we all understand in terms of north-south. It gives us some time to work out the details of our western transit. It still gets us to Tunney's Pasture," O'Brien said Tuesday.

In a $1.8-billion funding request to its federal and provincial partners, the city identifies projects in what it calls "an advanced state of readiness," specifically:

• A downtown tunnel.
• Transitway conversion to LRT from Blair Road to Tunney's Pasture.
• Converting the diesel O-Train to dual-track electric light rail from Bayview to South Keys.

Councillors who support the north-south option say there are other reasons to move ahead with it now. As part of the settlement with Siemens, the company would hand over environmental assessments and design plans already completed for the corridor.

"It makes no sense to not move forward with something that has so much work done already," said Maria McRae, chair of the city's transportation committee.

McRae voted against cancelling the project in 2006.

McRae said Tuesday the $36.7-million settlement with Siemens might be a bitter pill to swallow, but council has to come to terms with the fact that it made a bad decision in 2006, and do the right thing now.

The mayor, meanwhile, said he hopes Ontario Premier Dalton McGuinty will be ready to make a funding announcement for Ottawa's transit plan "as soon as possible."