Former Gov. Bill Sheffield will retire as director of the Port of Anchorage as of Jan. 15, but will get a $60,000-a-year consulting contract from the city, Mayor Dan Sullivan said Thursday.

The 83-year-old Sheffield has been port director since 2001. He has been at the center of controversy recently because of serious construction problems and escalating costs for expansion and renovations of the port.

In his new role, Sheffield will serve as the city's liaison with federal agencies on the port project, the mayor said. The $60,000 will come out of contracts the city already has with government relations consultants in Washington, D.C., Sullivan said at a press conference.

The city will solicit applications for a new port director, he said. In the meantime, deputy director Steve Ribuffo will be in charge, Sullivan said.

The cost of the port expansion project, as envisioned by Sheffield, has jumped from $360 million in 2005 to about $1 billion. Sullivan has proposed a less ambitious project. The city late this year asked the Legislature for $350 million to continue port construction work.

"The project has faced challenges but we have worked hard over the last two years to get the management and construction back on the correct course," Sheffield said in a written statement.

Sheffield's detractors, including Anchorage Assemblyman and mayoral candidate Paul Honeman, say Sheffield should be held accountable for the troubled port expansion. In November, Honeman called on Sullivan to fire Sheffield. This week, Honeman criticized Sullivan for letting Sheffield host a re-election campaign fundraiser for him. The fundraiser was Wednesday night at Sheffield's Turnagain house. Sheffield announced his resignation at the event.

Sheffield supporters say the port construction problems were largely beyond his control, and that a federal agency and a contractor are responsible for quality assurance, not the port director. Former Assemblyman Dan Coffey, whom Sullivan has hired to lobby the Legislature for additional port funds, says he thinks Sheffield "is the face of a mess not of his making."

Sullivan has also backed Sheffield. He has said the expansion project has been managed by the federal government under the direction of the Maritime Administration, not the port director, and that it was Sheffield's job to run the port.

The mayor said when he came into office in 2009, he asked Sheffield to stay on as port director "because I wanted to get this port project back on track. I felt he was critical to getting us there. And now we are there."

The project is stalled, but Sullivan said the city will take over management and be directly responsible when the current agreement that put the Maritime Administration in charge expires in May.

Sullivan said he wants Sheffield to stay on as a consultant because "he's established outstanding relationships with our federal leadership, the Department of Defense, the Department of Transportation, leading congressional folks from all over the country."

Assemblyman Patrick Flynn says there's been a push for new port management. Flynn said in his blog this week that when Sullivan recently asked for $350 million from the Legislature, "decision-makers across the political spectrum reacted with the same sentiment -- that request could not pass the red-face test unless there were changes to the Port's management team."

But Sullivan said the legislative request didn't have anything to do with Sheffield's decision to leave the job.

Sen. Bert Stedman, R-Sitka, and Rep. Bill Stoltze, R-Birchwood, co-chairs of the finance committees in each house, both said Sheffield's leaving won't affect how the Legislature views the city's funding request.

"The port stands on its own," said Stedman.

Gov. Sean Parnell has included in his budget a proposal for a bond proposition with $200 million for Anchorage's port and $110 million to extend a railway to the Point MacKenzie port in the Matanuska-Susitna Borough.

For the Anchorage project, Stedman said, "We need to look beyond the $200 million at the entire scope, whether that's $350 million or $400 million or whatever."

There are questions to be answered about both projects, he said.

Stoltze said he supports both, but also has concerns about the scope and handling of the Anchorage port construction.

Both said there will be debate on whether to make direct state appropriations for these projects, or put a bond proposition before voters.

Sheffield's position as port director capped a series of careers.

He founded and owned a hotel chain, which he sold in 1987. He was governor of Alaska from 1982 to 1986, but failed to win re-election. He was president of the state-owned Alaska Railroad from 1997 to 2001.

While governor, in 1985, a grand jury recommended that Sheffield be impeached for allegedly trying to steer a $9 million state contract to political supporters. However, the state Senate voted against sending the charges to the House for trial.

At the railroad, many credited Sheffield with saving it by helping to get federal money "to rehabilitate infrastructure on the verge of collapse," said Flynn, who also used to work at the railroad.

The fact that Sheffield planned to resign as port director in mid-January was a closely held secret until his announcement. Neither Sullivan nor Sheffield returned repeated calls from the Daily News on Wednesday. Frequent Sullivan allies on the Assembly, including Jennifer Johnston, who chairs an Assembly committee that monitors the port, said they didn't know about it.

Sheffield did talk about his plans Wednesday night at Sullivan's fundraiser.

Alaska Republican Party chairman Randy Ruedrich was there, and said Sheffield said what a great experience it was working for Sullivan. Sheffield sounded like "a grateful individual stepping down from his fourth career," Ruedrich said. "It was kind of special."

Sheffield said in the written statement Thursday that he plans to enjoy more time with friends and invest in philanthropic causes.

Reach Rosemary Shinohara at rshinohara@adn.com or 257-4340.