Cambridge business leaders and the Ordinance Committee of the City Council in a public hearing last night appeared to reach a compromise on a proposed ordinance that would ban billboards and flashing signs and would restrict all other types of street signs in Cambridge.

The City Council will consider the ordinance at its next regular meeting on October 20.

The original ordinance--proposed by Councilor David Wylie in June 1974--met strong opposition from businessmen in a hearing last June over the lack of protection for existing on-premises signs.

Attorneys representing the Electronic Corporation of America, Cambridge Electric Company, Carters Ink Corporation, the Hotel Sonesta, Lechmere Sales and Warehouse Liquors argued last night that the ordinance would violate the Massachusetts State Zoning Enabling Act.

An attorney for the Massachusetts Sign Contractors Association, said before the meeting that he thinks the ordinance is a clear violation of the first, fifth and fourteenth amendments, because it constitutes "taking property without just compensation."

David Vickery and Charlotte Burrage of the City Planning Department, who drafted the measure, said the ordinance is a just application of local police power for the safety of the community. Their position was upheld in a statement released last night by City Solicitor Edward D. McCarthy.

Taking a compromise position, Robert Jones, president of the Cambridge Chamber of Commerce, praised the ordinance as "an ordinance for progress in Cambridge." Jones endosed strong regulations for residential areas and on new businesses, but urged the council to protect existing signs.

Proposed amendments to the ordinance concern protection of existing signs and sign-licensing regulations. The amendments would not affect the proposed ban on billboards, roof signs or flashing signs.