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The city of Anderson’s agreement to pay $1 million in a lawsuit settlement with Walter Goudy, whose murder conviction was overturned, is a major hit to local taxpayers and a cautionary tale for police and the prosecutor’s office.

While city attorney Paul Podlejski said in a press release, “the settlement does not represent ... an admission of liability as to the merits of the case,” the $1 million agreement would indicate city officials believed they were in an unwinnable position.

Contacted Thursday, Podlejski declined to comment on whether the city had insurance to cover the settlement. If it does not, taxpayers are on the hook. If the city does have insurance, its rate is apt to go up, which would hit taxpayers, too.

Another problem: Meting out such payments to resolve lawsuits reinforces a precedent that the city is willing to pay large sums to make suits go away, rendering the municipality a tantalizing target for future litigation in other cases.

Goudy was convicted in 1995 in a Madison County court of the 1993 murder of Marvin McCloud and was sent off to serve a 115-year prison sentence. Fifteen years later, the U.S. Court of Appeals for the 7th Circuit reversed Goudy’s conviction, ruling that police reports pointed to a different suspect and that key information was never turned over to Goudy’s defense team.

Goudy was released on bail in September 2010, and less than two years later a special prosecutor dismissed the charges.

Shortly thereafter, Goudy filed a lawsuit in the U.S. Court for the Southern District of Indiana, naming the state of Indiana, the city of Anderson, Madison County Prosecutor Rodney Cummings, who was an Anderson police detective at the time of Goudy’s arrest, and fellow APD detective Steve Napier.

That lawsuit led to Goudy’s settlement. In addition to the $1 million from the city, the 51-year-old Indianapolis man will get $400,000 from the state.

Cummings, who had helped investigate McCloud’s murder and later, as county prosecutor, led the case against Goudy, has said that he provided all of the prosecution’s evidence but the court record failed to note that he had done so.

Whether it was the fault of police, the prosecutor’s office or the court, the people of Anderson will pay for this mistake.

Goudy paid a great price, too, spending 15 years behind bars before his conviction was overturned. If he was, in fact, wrongly convicted, $1.4 million for all that time in prison doesn’t seem quite so outrageous.

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