Harvard and the City of Cambridge don't agree on much these days, but this week they did reach a settlement on an important issue that had been under negotiation for several months.

The University signed an agreement with the City that will raise its voluntary payments in lieu of taxes about 175 per cent in two years--from $283,095 in 1971 to $410,000 in 1972, and approximately $500,000 this year.

Harvard's two negotiators--Charles U. Daly. vice president for Government and Community Affairs, and Donald C. Moulton, assistant vice president in that office, stressed the fact that the settlement was not based on any specific formula.

They had rejected a bill for $385,000 submitted by the City in October because it was based on the square footage of Harvard's tax exempt property.

But if Daly, Moulton and City Manager John H. Corcoran were satisfied, the City assessors were not, which in turn irritated several members of the City Council, Rudolph R. Russo of the City's Board of Assessors accused Harvard of fattening the 1972 figure by including three married-student dorms which were actually taxable last year.

This was enough to arouse the Council, which exacted its pound of flesh by denying Harvard permission to place chilled water lines under certain streets. Moulton said yesterday that the payments for the married-student housing were voluntary in the sense that Harvard had simply not yet made the property tax-exempt.