NEW YORK (CWNews.com) - The City of New York agreed to a settlement with a Brooklyn museum on Monday, in terms the museum said were a victory for its position.

    The city filed a lawsuit six months ago after the Brooklyn Museum of Art opened an exhibit that included a portrait of the Virgin Mary smeared with elephant dung and surrounded by pornographic images. The suit attempted to evict the museum from the city-owned site for violating terms of the long-term lease. The city also froze and annual $7.2 million operating subsidy.

    After the museum filed its own lawsuit in federal court, US District Judge Nina Gershon declared the sanctions unconstitutional late last year in a preliminary order restoring funding. The city appealed the decision.

    The settlement agreement requires both sides to drop their lawsuits and commits the city to spend an additional $5.8 million over the next two years for a museum renovation project. The city is also barred from retaliating or punishing the museum.

    The Virgin Mary painting, part of a British exhibit entitled "Sensation," started a furor with critics, including Mayor Rudolph Giuliani, calling the display blasphemous and anti-Catholic. First Lady Hillary Clinton, running for US Senate in New York, expressed her support for the exhibit.