When early settlers in the Hudson Valley wanted a place to develop a port, they traded trinkets to the Indians for rights to an island now known as Manhattan.

A few hundred years later, a tribe of Indians on the West Coast says its members are prepared to trade away their claims to land under the Port of Tacoma - if the port will throw in an island a third the size of Manhattan.The Puyallup Indians want McNeil Island, about seven square miles of land in Puget Sound southwest of Tacoma. McNeil, which once was a federal prison housing mobsters, later was handed over to Washington state, which still runs a state prison there.

The Puyallups maintain that they had a tribal village on part of the island's 4,400 acres decades before the prisons were established.

Negotiators for the port, the city of Tacoma, Pierce County and the state expect to meet repeatedly in the next two weeks to prepare a response to the Indian plan.

The port needs to settle Indian land claims so bankers will be willing to finance developments on the property involved. But after three years of frustrating negotiations, lawyers for non-Indian property owners have gone into federal court, seeking a summary judgment to clear title to the land.

Robert Earley, Tacoma port commission president, said the latest out-of- court proposal contains several major new features, and that the port has yet to evaluate how much the Indian package would really cost.

It could be a whole bunch more than the $188 million mentioned, he said. That's a fair assumption when you start thinking in terms of the Indians listing McNeil Island for $200,000 - it's (worth) more like $75 million.

Nonetheless, Port Commissioner John McCarthy said the new plan is very attractive to the Port of Tacoma because it would avoid the need to turn over land that could be developed into maritime terminals.

Mr. McCarthy said Washington Gov. Booth Gardner and state legislative leaders want to see the Indian land claims settled and may be willing to have the state contribute up to 20 percent of the cost.

If the tribe were to obtain land not in the port or the industrial heart of the city Tacoma, then obviously we would not have to worry about some of the jurisdictional problems, or the problems of putting land in trust for the tribe, he said. Whether the state has an equal interest (in giving up McNeil Island) is still evolving.

Up until this month, Puyallup tribal leaders had insisted that the port and other non-Indian parties make their settlement proposal first, but agreed to present the new plan to the port at the urging of Sen. Daniel Inouye, D- Hawaii.

Sen. Inouye, who sits on a key congressional committee that would have to pass on any federal funding of a settlement with the Puyallups, met separately with the Indians and non-Indians a few days ago and convinced the Puyallups to present their plan.

Port commissioners last Thursday agreed to chip in more money to keep the negotiations going during the next four months.

The port agreed to pay an additional $18,000, boosting its total contributions from $175,000 to $193,000. The $175,000 already is the largest single contribution to the $687,213 spent on negotiations so far. Three cities, Pierce County, Washington state and private parties also help fund the negotiations.

Recalling early assurances that negotiations would cost no more than $50,000, Commissioner Pat O'Malley predicted that negotiators will be back for more money this summer.

But Mr. Earley said that the port needs to be able to show that it made a good faith effort to settle the dispute.

I think it's money down the tube, too, the commission president said. But we need to make an honest effort to run with the ball on the fourth down instead of punting.

Non-Indian parties said the Puyallups appear to be one of the fastest- growing Indian tribes in North America, noting that the number of registered tribal members has grown from about 180 three years ago to several times that number today.