The City of Boston agreed to pay $1 million to settle a six-year-old sexual harassment lawsuit against the city’s former health chief Felix G. Arroyo, an amount that will ultimately be borne by taxpayers.

Hilani Morales officially dropped her claims against her former supervisor Arroyo and the city, “with prejudice,” per the terms of a settlement agreement signed by both Morales and a city attorney, and reviewed by the Herald on Friday.

Morales continues to deny any liability to Arroyo, and the city continues to deny any liability to Morales, per the settlement agreement.

“The city has come to a mutually agreeable settlement for this case that dates back to 2017 under a prior administration,” a city spokesperson said in a statement. “Through this settlement, the city avoids substantial additional costs from further litigation.”

Morales had alleged in her lawsuit that she was sexually harassed by Arroyo, and that the city had retaliated against her with a demotion after she complained. She will be paid $644,000 for “alleged emotional distress damages,” while the law firm that represented her will receive $356,000 to cover the cost of her attorneys’ fees, per the settlement agreement.

The terms of the settlement were first reported by the Boston Globe.

John Tocci, a partner with Tocci & Lee, LLC, confirmed in a Friday statement that his client had signed the settlement, thereby accepting its terms. He has declined to say why Morales chose to drop her lawsuit.

“It was very heartening for my client to hear so many prospective jurors testify that they understood that it takes courage for a woman to come forward with allegations of sexual harassment, and that they should be believed,” Tocci said. “It was also heartening for her to know that she was not alone, and to know that there are a lot of people in society supporting her.

“She certainly feels vindicated and is looking forward to moving on with her life.”

The high-profile case was dismissed on the morning it was set to go to trial in Suffolk Superior Court this past May, after the city reached a last-minute settlement with Morales.

The trial was expected to feature testimony from heavy-hitters in Boston’s political and legal circles, including then-Mayor Marty Walsh, who fired Arroyo after an internal investigation, Walsh’s former chief of staff Daniel Koh and federal senior Judge Mark Wolf.

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Arroyo has denied the harassment claims and filed a counterclaim against Morales for defamation, which has not been resolved to date, is not subject to the settlement agreement, and is scheduled to go to trial in June 2025. Arroyo has stated that he never harassed Morales and that she was a bad employee.

The case derailed Arroyo’s once-promising political career, and is among a series of scandals that have plagued his well-known political family in recent years.

Arroyo is a former city councilor who ran for mayor in 2013. His legal team featured his brother, Ricardo Arroyo, a former city councilor who was defeated in last fall’s election cycle after a string of scandals that included being slapped with a $3,000 ethics fine for continuing to represent his brother legally in that case after joining the City Council.

His father, Felix D. Arroyo, is also known for being a former city councilor, School Committee member and Suffolk registrar of probate and family court. The family patriarch filed for bankruptcy earlier this year, amid a lawsuit over an $86,379 unpaid legal bill tied to his past suspension as register of probate.