BANGOR, Maine — City councilors are expected to vote on a council order Monday that would formalize details of a three-year agreement with the American Folk Festival.

Council Chairman Richard Stone and folk festival board Chairwoman Maria Baeza have been meeting over the past two weeks to come up with a compromise that avoids any further discord between the festival and its host city.

“We’ve had some good, tough conversations that I think needed to be had, but now we’re at the same table,” Stone said this week.

Added Baeza: “We’ve worked to develop clarity in the relationship, which I think it what everybody wanted.”

The four major points of the agreement that the council will consider are:

— Drafting a promissory note to address the nearly $300,000 in debt owed to the city by the folk festival. The total will not necessarily be paid back during the three-year agreement, according to City Solicitor Norman Heitmann.

— Turning over fiscal agent duties from the city, which has handled the festival’s books since its inception, to festival staff sometime before the start of the 2010 festival.

— Removing the two City Council representatives from the folk festival’s board of directors, a provision that Stone stressed was the city’s request.

— Outlining a defined level of in-kind services — either in monetary value or hours of employee time — that the city will commit each year to support the festival. Recently, city finance director Debbie Cyr projected last year’s in-kind contribution to the festival at about $154,000, a total some festival board members disagreed with.

Although the council order does not appear on the council’s agenda for Monday, Stone indicated that he would suspend rules to bring the matter forward. He expected the council’s support.

Late last month, the folk festival board unveiled its 2010 budget, which trimmed $140,000 from the expense side while maintaining the event’s quality and keeping it free to all patrons. Some of the changes addressed in the reduced budget include: reducing the number of stages from six to four, contracting directly for technical services rather than relying on an outside service and expanding the selection of crafters and vendors to increase revenue.

The folk festival’s decision to release its budget publicly before its conversation with the City Council riled some councilors. That displeasure spilled over into a meeting earlier this month between councilors and folk festival representatives, during which some councilors delivered sharp criticisms and others threatened to dissolve the casual partnership.

Since then, Stone and Baeza have worked privately to smooth the relationship.

Monday’s council order does not address the city’s annual cash contribution to the folk festival through the Commission on Cultural Development. Stone said that relationship would not change.

Rick Fournier, treasurer for the folk festival’s board of directors, said any contribution made by the cultural commission would be used to pay down the debt owed to the city. There is now a $45,000 grant pending that the council will vote on at a later date.

Fournier also stressed that all revenue projections related to the 2010 budget were conservative and that any surplus would go toward paying down the debt.

The American Folk Festival on the Bangor Waterfront branched off from the National Folk Festival in 2005 and has been a popular event every year. Unfortunately, the festival has accumulated substantial debt over the course of five years, most of which has been paid by the city of Bangor through surplus funds. The city cut off its funding last year and the previously undisclosed financial relationship between the city and the festival went public, prompting festival organizers to take a harder look at the budget.

“When the National Folk Festival came in 2002, everyone wanted to help. We just jumped in,” Heitmann said, explaining the evolution of the relationship between the city and the festival. “Over time, there was never an impetus to examine that relationship and it just evolved. Now, I think both sides are at an agreement on the expectations and we can move forward.”

If the three-year agreement is passed on Monday, Heitmann said it’s something that could be extended at the council’s pleasure once the three years are up.