District officials and a local development company have been negotiating for more than a year about how to accomplish the District's long-held dream of building -- at no expense to the city -- a downtown campus for the University of the District of Columbia.

City officials have generally accepted a plan proposed by a development team headed by the Milton Co. for the project that will include classroom space for UDC, private offices, a hotel and housing units on a four-block site bordered by Seventh and Ninth streets, Mount Vernon Place and M Street NW.

The plan calls for three office buildings and the hotel on the two blocks between Mount Vernon Place and L Street NW. The two classroom buildings would be along the north side of L Street; behind them, facing M Street, would be 200 to 300 apartments or condominiums.

But the city and the developer are still trying to work out the complex financial arrangements for the unusual deal.

The Milton Co. was the sole bidder in 1983 when the city tried for the second time to interest developers in a bold plan to get a private company to build the downtown campus.

In return, the developer would get the right to build on a site that city officials considered prime real estate because of its proximity to the Washington Convention Center and the then-booming downtown office building market. There were no bidders the first time.

According to Jeffrey Rappaport of the Office of Business and Economic Development, the main points still being negotiated include the length of a lease for the seven-acre site, the rent UDC will pay and how the city will regain possession of the land. How the project will be financed must also be worked out, he said.

He declined to speculate on when construction of the project might begin.

Construction, when it does begin, would proceed in two phases, with a UDC building included in each. The university will end up with about 300,000 square feet of space -- about one-third the space of UDC's 21-acre main campus at Connecticut Avenue and Van Ness Street NW.

While negotiations drag on, UDC administrators say they are in dire need of the new campus.

"We're bursting out of our financial seams," said Claude Ford, UDC vice president of administrative services. "We're paying $4.5 million for leasing facilities. We desperately need the downtown campus. We're educational nomads. . . . You cannot run a university in this fashion."

For example, Ford said, the university's College of Business and Public Management has moved three times since 1982 and is now housed in the former Riggs Bank building at 900 F St. NW.

The university rents space in four other downtown buildings. After construction, all of its classes would move into the Mount Vernon campus, Ford said.

Plans to build a Mount Vernon campus have been frustrated since 1968, after Congress refused to fund it, asserting that the school's enrollment projections did not justify the new facilities.

In 1981, the city announced an innovative plan for getting a private developer to build the campus in exchange for the right to redevelop the rest of the site.

But no developers responded. City officials went back to the drawing board, relaxed some of their earlier requirements and again asked developers to make an offer.

Only one did, Mount Vernon Square Associates, a partnership that included the Milton Co., Blake Construction Co. Inc. and Sterling Systems, a high technology company. During the long negotiations, Sterling Systems has been sold and the company has withdrawn from the partnership.

"We just thought we could put it together," said Peter Tamburello of the Milton Co., explaining why his organization bid on a project others shunned.

While the UDC project limps along, there are other developments in the area.

The Mount Vernon Square subway station is under construction at Seventh and M streets, the northeast corner of the UDC site. A block south of the site, Giuseppe Cecchi, one of the area's most successful developers, has proposed building Techworld, a high technology trade center, between Seventh and Ninth and K and I streets.

Planners look to the UDC project as yet another catalyst in the area's slow rejuvenation. "It's one of those things that's sure to happen," said John Fondersmith of the city's planning office, who is in charge of planning for downtown. "It's more the timing. It won't all happen right away."