Like many things, the city struggles to maintain a balance Re: lawsuits against it.
If you pay too many plaintiffs suing you for False Arrest, they tend to breed. In addition, some members of the public leap to the conclusion that the city has a growing false arrest problem.
If the city doesn't pay lots of plaintiffs, and (instead) takes most of the cases to trial, it runs the risk of large settlements, lots of legals costs, and/or clogging an already overburdened court system.
This article seems to argue that the cost of paying off plaintiffs now outweighs going to trial, and the city is acting accordingly: