PALMER -- The Matanuska-Susitna Borough just got some breathing room on an early November deadline to pay back more than $12 million in federal grant money for Cook Inlet ferry service that never docked.
The Federal Transit Administration last week granted the borough's request for an extension from Nov. 4 to Jan. 15. That was the borough's second request for more time. The original deadline was early September.
"During this latest extension I am requesting that you provide periodic progress reports to FTA on the status of your work so that it is likely that a response will be provided by January 15, 2015," states the Oct. 29 email granting the extension from FTA chief financial officer Robert J. Tuccillo.
Built at the Ketchikan shipyard, the 195-foot M/V Susitna was designed as a half-size prototype of a U.S. Navy double-hulled beach landing craft that can run through ice. It holds up to 129 passengers and 20 vehicles.
But without another $40 million officials say they needed to build landings on either side, the ferry never made the 2-mile run between Anchorage and Port MacKenzie.
In August, the FTA stepped in and demanded the borough repay grant money spent on the vessel.
The borough spent $6 million refurbishing the prototype for passenger service, $3.6 million on a passenger terminal at Port MacKenzie and $2 million to design landings at Anchorage and the Mat-Su port -- all of it FTA grant money.
That money came out of a total of $21 million the FTA awarded the borough in three grants between 2002 and 2009 to get ferry service going.
Borough Manager John Moosey said in an interview this week that the borough hopes to get the federal agency to reduce the total payment amount.
Moosey said the borough will leverage early promises from the Municipality of Anchorage to work on ferry landings and explain that "we've done everything under the sun to mitigate this" but that the project foundered without the political will or money to build landings.
"We don't expect this entire thing to be forgiven," he said.
Tuccillo, with the FTA, also addressed in his email the borough's request to review the files related to the agency's decision to send the Aug. 5 letter demanding repayment of the money. Tuccillo says he will contact the borough "shortly" when the information becomes available.
The borough got the Susitna mostly for free but has paid out roughly $1.4 million or more to berth it near Ketchikan since it was built. Every month, another roughly $30,000 to store the ferry at Ward Cove gets added to the bill.
Efforts to sell the ferry or give it to a government entity for free have proved fruitless. At one point, the borough nearly sold the ferry for $6 million, but that offer fell through. Much lower offers have also come in.
Officials from the Philippine Navy visited the Susitna in late August, but that trial run apparently came to nothing.
The latest, Moosey said: A group from Turkey that traveled to Ward Cove in late September. They want the ferry for personal use -- sort of like a yacht.
"I don't know the details or plans they actually have," he said.
Contact Zaz Hollander at zhollander@alaskadispatch.com.