The Atascadero City Council decided Tuesday night to revoke their earlier action of asking for the resignation of Marty Tracey, the city's deputy director of redevelopment.
The Council met for about 30 minutes in closed session to discuss "anticipated litigation" before announcing their concession.
Tracey is expected back at work as early as tomorrow, Mayor Wendy Scalise said.
The Council had previously voted unanimously for Tracey's resignation due to allegations that he had threatened downtown property owners Pat and Sue Gaughan with eminent-domain litigation if they refused to sell their property.
"I can't comment now," Scalise said when asked what action the Council would take regarding the alleged threats.
However, the city agreed to totally back out on any dealings with the Gaughans in a meeting on Wednesday morning during which Gaughans' attorney, Roy Ogden, asked the city to "back off and allow the Gaughans to sell their property."
"If the city had let this happen in the first place, new construction may already be going on, Ogden said.