PROVIDENCE — The state Supreme Court has ruled that 5 acres of waterfront land must be sold to Promet shipyard, and not to the city, in a decision that some say could have broad implications for city policy and for the future of the waterfront.

The property sits next to the main Promet Marine Services’ facility on Allens Avenue. Promet’s success in retaining the land could harm the city’s goal of seeing mixed-use development along that stretch of the waterfront. At the same time, said City Councilman Luis Aponte, the way Supreme Court Justice Francis X. Flaherty’s decision is written, it threatens the city’s ability to use the Providence Redevelopment Agency to purchase surplus land.

The dispute over the land dates to 2004, when the state decided to sell the parcel and requested bids. Promet bid under a business entity called Tidewater LLC and won the property for $1 million. But the city, after initially demurring, later exercised its right of refusal on the property and stepped in to override Promet’s bid and buy the land itself.

The state deeded the land to Providence’s real estate arm, the Providence Redevelopment Authority. Promet sued to contest the sale, arguing that the right of first refusal was accorded to the City of Providence, not a separate, empowered city agency like the Redevelopment Authority. It also stated that the redevelopment authority was exceeding its authority by seeking to take the land and that the city had abdicated its right of refusal when it didn’t initially jump at the sale of the property.

The case went to Superior Court in 2006, and Promet’s case was dismissed. But the shipyard appealed to the state Supreme Court, and in a decision issued last week, the Supreme Court ruled in Promet’s favor. Providence expects to ask for a reconsideration next week, Aponte said.

The court ruled first that the city had not waived its right to the property and could purchase it despite its initial decision to decline.

But in a decision that Aponte said could have broad implications, the court then ruled that the redevelopment agency exceeded its authority in purchasing the land.

Because the redevelopment agency did not have the authority under state law to purchase the property, the conveyance of the property to it was a breach of Tidewater’s purchase and sales agreement by the state, Flaherty wrote. “In our opinion, because the state neither conveyed the Shipyard to the city nor to Tidewater within the time prescribed in the agreement, it breached its obligation to Tidewater,” Flaherty wrote.

The redevelopment authority takes blighted or substandard land for redevelopment. But under this standard, the land is neither blighted nor substandard, and the city never made that argument in seeking it.

Flaherty wrote that he understands this was a purchase and not an outright land taking, but he wrote that what is important is that the redevelopment authority follows its own regulations.

“We think that the vehicle of acquisition is less significant than the importance of the PRA following its prescribed statutory requirements and procedures before it exercises its broad powers, whether that is the power to condemn or purchase,” Flaherty wrote.

The land is now to be conveyed to Promet under the original sale terms arranged with the state.

At the City Council meeting last night, Aponte, a member of the redevelopment authority, brought up the Promet victory and outlined the threat he thought it poses to Providence’s land acquisition strategies. In each future land purchase enacted through the authority, the city would have to explicitly prove blight, which it currently must do only when condemning property.

“When you think about all the things we’ve been able to do, this decision blows that all up,” he said, listing purchases that he said would not have been possible under such a decision, such as the acquisition of the Civic Center and the sales of the Fogarty Building and the LaSalle Square site of the former police and fire station.

At the recommendation of the city’s legal advisers on the case, Aponte called for the council last night to reaffirm the 1996 ordinance designating eligible redevelopment areas throughout the city where the redevelopment authority can purchase land — roughly 80 percent of Providence.

The council approved the resolution on a voice vote last night.

Aponte said that could help in the planned request for reconsideration, expected Thursday when the Supreme Court meets.

The Rhode Island League of Cities and Towns, he said, is also preparing a legal brief to aid Providence in the suit.

Aponte also said that if needed, Providence could prove that, as a longtime industrial site, the 5-acre plot meets the environmental standard for blight.

The Promet victory also factors into another long-running city fight: the proposed zoning changes along the waterfront to allow for mixed-use development. Promet, which sits next to land owned by developer Patrick T. Conley, is leading the fight against the zoning changes, arguing that they would mean the end of the industrial businesses on upper Allens Avenue. If the zoning changes go through, Conley wants to build a large mixed-use development at his Conley’s Wharf property.

The city could have used that land in its efforts to recast the waterfront, Aponte said, but Promet will clearly keep it industrial, and that, Aponte feels, damages Providence.

“It really harms the city in its efforts to expand the tax base,” Aponte said.

Promet owner Joel Cohen declined to comment last night on the legal victory or the council’s action last night, but Promet issued a statement on the court victory.

“With this decision in Promet’s favor, Promet now looks forward to completing its purchase of the leased land so it can continue to grow its business,” the statement read.

dbarbari@projo.com