Lawyers for both sides informed the Common Pleas Court that they had reached an agreement Feb. 12.
City Solicitor Shelley R. Smith on Wednesday asked Council's Appropriations Committee to move money into a fund used to pay routine settlements.
That fund, she said, was depleted by the Isaac settlement and a large payout in a breach-of-contract case.
The Isaac settlement also is pending approval from Orphans' Court, which has authority because Isaac's minor children are beneficiaries.
The District Attorney's Office in 2010 cleared Officer George Marko of criminal charges for firing into the home, saying his actions were justified.
Marko and his partner had spotted a man at Boyer and Woodlawn Streets firing celebratory gunshots at the stroke of midnight - a Philadelphia New Year's tradition.
They said they got out of their marked car and ordered the man to drop the gun. The suspect, later identified as Dontate Mitchell, ran into a home on Boyer.
Marko said Mitchell paused in the doorway and pointed the gun at him. Marko fired 11 shots from the curb as Mitchell entered the house.
Mitchell was wounded in an elbow. He escaped out the back of the house, but was arrested the next day.
In addition to Isaac, another man at the party was seriously wounded and a 9-year-old boy was grazed in the back.
The shooting sparked lawsuits from 27 people who were at the party.
Charges against Mitchell were dropped because Marko could not testify against him while under investigation.
The police Public Affairs Office on Wednesday could not immediately determine Marko's employment status or the outcome of an internal investigation into the shooting.
The Isaac settlement eclipses the $1.2 million settlement reached last year with the family of an unarmed Overbrook man killed on New Year's 2007. In that case, police were responding to a report of gunfire in the area.
Isaac worked at the Hospital of the University of Pennsylvania and bought and fixed up homes on the side, said Yatvin, who handled the case with lead attorney Howard Popper.
"He was an ordinary working guy," Yatvin said. "He was at a friend's house on New Year's Eve, raising a glass, and the next thing, bullets come through the door."
Contact Troy Graham
at 215-854-2730 or email@example.com, or follow on Twitter @troyjgraham.