Dreams of a park in the sky may soon be dashed. Just before Christmas, the Giuliani administration inked an agreement with some West Side property owners to divide the cost of razing the High Line, the abandoned elevated rail line that stretches above much of western Chelsea and the meat packing district.

In late December, an appellate court lifted a temporary restraining order that had blocked the city from signing the demolition agreement, so that 23 adjoining property owners could sign up to help fund the estimated $12 million demolition.

The court decision and subsequent agreements are a blow to Friends of the High Line, a group that has lobbied for years to turn the railway into public green space. “We view it as a setback,” said Friends co-founder Robert Hammond, “but we are cautiously optimistic.” Hammond’s group, which has received support from such luminaries as U.S. Senator Hilary Clinton, wants to convert the 1.5 miles of old freight tracks into a public promenade and park.

In addition to soliciting the support of Mayor Mike Bloomberg, the Friends of the High Line have gone to court to challenge the city’s agreement with the property owners. Any plan to change the line, they say, should go through the city’s Uniform Land Use Review Procedure (ULURP) of public hearings. Justice Diane Lebedeff of Manhattan Supreme Court is expected to make a decision by March.

Community Board 4 District Manager Anthony Borelli agrees that the public needs to be involved in any final decision about the railroad. “Board 4 does not have a position one way or the other, but it does believe it should follow through the complete public review process,” said Borelli.

Adjoining property owners applauded the judge’s ruling. They’re hopeful that they’ll finally be able to get rid of the abandoned rail line that they claim is unsafe. “Pieces of concrete and steel have been falling for the last 15 years,” said Michael Lefkowitz, attorney for Edison Properties, which has a nearby parking lot. “It’s a miracle nobody has been hurt.” Lefkowitz and other property owners believe that converting the High Line is an impractical dream, pointing to cost estimates of $20 million to $200 million. “Give that money to Hudson Park,” said Lefkowitz. “It’ll help more people, anyway.”

Despite their initial court loss, Friends of the High Line don’t plan on fading away anytime soon, and they’re looking to their strongest ally for help. On February 6, the group is releasing a planning study from the Design Trust for Public Space that includes a supportive introduction written by Mayor Bloomberg.

A Bloomberg spokesperson said that the new mayor hasn’t yet had a chance make any decisions about the High Line, but promised he would get to the issue soon.