One of the most controversial transit debates in Toronto is heating up again with a new plan to radically revamp the $3.5-billion Scarborough subway heading to city council.

The plan by city staff, which is expected to be released Thursday morning, involves cutting short the subway and using the extra money to add a 12-kilometre extension of the Eglinton Crosstown light rail line, taking it to the University of Toronto campus in Scarborough.

Mayor John Tory was refusing to comment on the specifics of the report, a copy of which was obtained Wednesday by The Globe and Mail, other than to say that a plan that would better serve the east end of the city was coming. But some councillors who had fought tooth and nail over whether the original project should be subway or LRT were lining up to praise the new proposal.

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"It actually builds peace in the land," said Councillor Joe Mihevc. "I was a firm opponent of the Scarborough subway, as it was envisioned. This puts it within the realm of the acceptable."

Scarborough Councillor Glenn De Baeremaeker, among the strongest advocates of building a subway in his area, said cutting it short and building light rail as well was a good compromise that should stop councillors from "throwing grenades at each other."

"The people who have been saying LRT, LRT, LRT are getting their LRT," he said. "The people who have been saying subway, subway, subway are going to get a subway."

The confidential draft report said changing circumstances, such as the emergence of Mr. Tory's SmartTrack plan and the provincial government's plans for more frequent GO rail service, "present new opportunities to achieve enhanced connectivity and accessibility as part of an emerging, comprehensive transit network for Scarborough."

Under this proposal, the subway would run directly from Kennedy station to Scarborough Town Centre and then stop there. This subway extension, which was approved by city council instead of a provincially funded LRT, was originally intended to have three stations.

A one-station subway is sufficient, according to the report. One of the three stations proposed in the earlier plan, at Lawrence Avenue East, would only slow the connection from Kennedy to Scarborough Town Centre. The other, at Sheppard Avenue East, "seems premature" given uncertainty over when an LRT on Sheppard would be built.

The report noted that running a subway from its current eastern terminus at Kennedy station north to the Scarborough Town Centre would help build up the "key activity node," around the mall identified by planners as a site for concentrated future development.

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The proposed light rail line, on the other hand, would help build up avenues such as Eglinton Avenue East and Kingston Road while serving poorer Scarborough neighbourhoods. Combined with other changes related to Mr. Tory's SmartTrack plan, the idea offers the prospect of an LRT eventually running from Pearson International Airport in the west to the U of T Scarborough campus in the east.

The report from the city planning department, led by Jennifer Keesmaat, is a big plus for backers of the subway. Ms. Keesmaat had complained that when city staff put together an analysis in 2013, the process was rushed and "chaotic."

"I'm very pleased to see how Mayor Tory is willing to recognize that the initial subway plan needed work," said Councillor Josh Matlow, long one of the most persistent voices in favour of revisiting the subway project in Scarborough. "He's trying to bring councillors together to put dishonest and divisive debate behind us, so that we can move forward with working on a plan that can provide transit to Scarborough in a way that they need. But there's work to do on this plan."

The endorsement by Ms. Keesmaat's department makes it harder for critics to argue that the new project, with an LRT thrown in, does not serve the city's transit and development needs.

The new Liberal government in Ottawa, for its part, has said it is not its job to draw lines on maps. It says it will help with funding and leave local governments to decide how to deploy the money. On Wednesday, a spokesman for provincial Minister of Transportation Steven Del Duca said that the government doesn't "comment on speculation."

The controversial subway extension prompted some of the most rancorous debates at council in recent years, with issues of regional alienation and talk of secession unless Scarborough got its "fair share."

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During the last term, council voted to switch from a provincially funded‎ light-rail project in Scarborough to a subway paid for by all three levels of government. Supporters initially said that this would cost the city only $500-million, though the bill has kept rising.

Various routes that have been studied for the subway put the overall cost as high as $3.5-billion. Of that, the province was expecting to pay about $1.5-billion‎ and Ottawa another $660-million, leaving Toronto to assume the remainder, including any cost overruns.

The draft report Wednesday said that "initial estimates indicate" it should be possible to build both the subway and the LRT "for a similar cost and in a similar timeframe" as the originally proposed three-stop subway.