The decision to end the appeal - which was to be heard in Commonwealth Court next week - marks the end of a long and dramatic legal battle with the International Association of Fire Fighters Local 22, one of the three city unions working without contracts since 2009.
For years, firefighters protested Nutter at seemingly every opportunity. They harassed him at the opening of a fire station in Tacony. They packed Council chambers when administration officials testified on Fire Department issues. And they were among the union members who drowned out the mayor's annual budget address to City Council in March with screams and whistles.
Nutter reflected on the saga yesterday: "From before I was mayor or even during my time as a member of City Council, I've had the rock-solid perspective that managing the city's finances properly would sometimes - well, it won't make you a whole lot of friends."
The disputed arbitration award covered July 2009 to July 2013. The two sides are negotiating the contract period that began this summer.
Despite increased costs from the award, the city anticipates having positive, albeit diminished, fund balances for the next five years, thanks to improved tax revenues. Finance Director Rob Dubow said that fact could have undermined the administration's position in court, because the city would be arguing it couldn't afford the award despite showing more than enough money for it in projected fund balances.
Nutter's decision comes two months after the union ousted its president, Nutter antagonist Bill Gault. He was replaced by Battalion Chief Joe Schulle, who promised to hit the reset button on the union's poisonous relationship with Nutter.
"We are grateful the city has elected to drop the appeal," Schulle said yesterday. "We are hopeful that this is the first step for all the city unions to have contracts."
Councilman Jim Kenney, the son of a firefighter and a critic of the mayor's handling of labor, said it was about time Nutter gave up the fight.
"I'm glad he came to his senses or stopped his tantrum," Kenney said. "I wish he had come up with that [decision] about $1 million in legal costs ago."
The city's primary attorney in the litigation was Shannon Farmer of Ballard Spahr. Nutter spokesman Mark McDonald said yesterday that he did not know the cost of the litigation but that the mayor's decision to pursue the appeal was in taxpayers' interest.
City Controller Alan Butkovitz said he thinks the real reason Nutter ended the appeal was to avoid a possible change to the Home Rule Charter that would require City Council approval to appeal an arbitration award - a proposal Butkovitz said he came up with.
Schulle began pushing for the change shortly after becoming union president, and Kenney plans to introduce it next week.
Breaking its policy of not commenting on bills before they are introduced in Council, the administration immediately opposed the proposal, saying labor negotiations should be handled by the chief executive alone.
"It's obvious that proposal's going to be adopted by Council and approved overwhelmingly by the voters," Butkovitz said.
Momentum for the charter change is likely to slow now that it won't tie Nutter's hands with Local 22, although Schulle said yesterday he would continue to push for it.
Kenney said he still will introduce the charter change - "to have the discussion, at least."
On Twitter: @SeanWalshDN