Comptroller Scott Stringer said settling Jonathan Fleming's claim is "in the best interest of all parties."
"We cannot give back the time that he served, but the city of New York can offer Jonathan Fleming this compensation for the injustice that was committed against him," Stringer said.
Fleming was released last year after the Brooklyn district attorney's office said it had come to agree that his alibi — which he offered from the start — was valid.
His lawyers praised the city for moving expeditiously to settle with Fleming, who filed notice last year that he planned to sue for $162 million.
"The swift settlement will enable Jonathan and his family to build a new life without the painful and costly prospect of further litigation" with the city, attorneys Paul Callan and Martin Edelman said. He still has an unresolved claim against the state.
But Fleming's relief was streaked with sadness: Shortly after signing the settlement documents, Fleming, 53, went to a hospital where his mother was near death, his lawyers said.
Her only son was behind bars for nearly half his life, convicted of shooting a friend in Brooklyn in August 1989, though he had told authorities he was in Orlando, Florida, at the time and had plane tickets, videos and other material to show it. A woman testified that she had seen him commit the crime.
But then that eyewitness recanted, newly found witnesses implicated someone else and prosecutors' review of authorities' files turned up documents backing Fleming's alibi. That evidence included an Orlando hotel receipt he paid about five hours before the shooting and had in his pocket when arrested. Authorities had never given his defence that receipt or a 1989 Orlando police letter telling New York detectives that some employees at the hotel remembered Fleming.
"No amount of money will ever give him back that time" he unjustly served, Brooklyn District Attorney Kenneth Thompson said Tuesday.
While the city has a legal department that fields lawsuits, the comptroller also can settle claims. Stringer has made a point of doing that in civil rights cases, saying that resolving them quickly saves the city money on legal fees.
He reached a $6.4 million settlement with a man exonerated in the 1990 killing of a rabbi; agreed to a $2.25 million payout to the family of a mentally ill inmate who died in a Rikers Island jail cell that sweltered to 101 degrees because of a malfunctioning heating system; and helped put together a $17 million settlement in the case of three half brothers who spent a combined 60 years in prison before their convictions were thrown out.
Reach Jennifer Peltz on Twitter @ jennpeltz.