PORTLAND (AP) – The city and the owner of the Scotia Prince ferry are set to enter arbitration this fall in hopes of resolving competing claims against each other for millions of dollars in alleged damages.

Owners of the ferry pulled out of Portland and filed a $20-million claim accusing city officials of doing little to eliminate mold at the International Marine Terminal.

Since then, Scotia Prince has increased its claim to $164.5 million for lost revenue. The city wants Scotia Prince to pay $2.5 million for lost lease revenue and terminal repairs.

The case stems from mold growth, water leaks and ventilation problems that led the ferry company to evacuate the city’s International Marine Terminal and cancel its 2005 sailing schedule between Portland and Yarmouth, Nova Scotia.

Both sides could point to a federal report released last week that indicates the city would have to rebuild the entire terminal to eliminate mold.

“Eventually, mold will return,” said Nancy Burton, an industrial hygiene team leader with the National Institute for Occupational Safety and Health, which issued the report after surveying the building in March 2005.

The report bolsters Scotia Prince’s claims, but the city could also point to the report to show that city didn’t ignore the problem altogether, said David Plimpton, a Cape Elizabeth attorney who specializes in arbitration.

The city and Scotia Prince are in arbitration because the lease specified it to resolve disagreements. Arbitration is similar to a trial, Plimpton said, but it is held privately before a professional arbitrator.

The outcome can be contested in courts.

Assistant City Manager Larry Mead said the city has done everything but build a new terminal to fulfill the recommendations of the federal report.

Wet or molding walls and furnishings were replaced, some vapor barriers were installed, pavement near exterior doors was built up to keep water from getting in, all openings in the building were sealed and the ventilation system was fixed.

The city has established a regular maintenance program for the terminal, including quarterly environmental testing that costs $40,000 per year, Mead said.

So far, Portland has spent $292,000 in outside legal fees and it could spend $250,000 more this year, city officials said.

As for the International Marine Terminal, it will be replaced when the city builds a new Ocean Gateway terminal. For the time being, it remains in use. Owners of the high-speed ferry The Cat are the terminal’s new tenant.