PALMER, Alaska (Sept. 22, 2025) – The Matanuska-Susitna Borough is pressing the Federal Transit Administration to waive or sharply reduce the $5.8 million repayment it has been ordered to return to the federal government over a ferry project that never materialized. The vessel, M/V Susitna, was built nearly fifteen years ago but never entered service, and the debt demand from Washington has revived long-standing tensions between the borough, state and federal authorities.
In an Aug. 26 letter, the FTA recalculated the borough’s obligation, stating the $5,762,074 (roughly $5.8 million) comes from grants spent between 2002 and 2008 to build a ferry terminal and related infrastructure at Port MacKenzie — infrastructure that was never used because the ferry terminal in Anchorage was never built. Mat-Su Sentinel+2Mat-Su Sentinel+2
The borough’s appeal letter, submitted in mid-September (signed by attorney Dismas N. Locaria of Venable LLP), offers several alternative settlement proposals. At its lowest, the borough asks that the debt be reduced to about $1.5 million, the net proceeds from the 2015 sale of the vessel, or to amounts in the $3–4 million range after factoring in depreciation of unused infrastructure. The appeal also asserts that the borough did not willfully misuse funds but was prevented from delivering the project by factors outside its control, including the inability to secure a suitable landing in Anchorage. Mat-Su Sentinel+1
The Susitna project has long been mired in struggle: although the ferry was constructed and acquired through federal and Navy funds, the borough never completed a landing in Anchorage, a prerequisite for service. Berthing, storage, maintenance, permitting and dock planning consumed local funds multiples of millions, but no passenger or vehicle service ever commenced. The borough finally sold the vessel in 2015 to the Philippine Red Cross for about $1.8 million. Mat-Su Sentinel+2Alaska Public Media+2
If the borough does not resolve the debt demand, the FTA has warned it may withhold future federal transit funds and assess penalties, including interest, or refer the matter to the U.S. Department of Justice or Treasury for collection. Mat-Su Sentinel
Borough officials say they are exploring all options. “We believe all costs, other than the net proceeds from the sale of the ferry, should be permitted and forgiven since they were properly incurred during the term of the grants and not the result of willful misuse,” the appeal letter reads. Mat-Su Sentinel
Meanwhile, state planners continue to consider alternatives to improve mobility between Anchorage and the Mat-Su Valley, including a new tunnel or bridge study, which is slated to be completed by December 2025. The fate of the Susitna debt case may influence how much public appetite and budget remain for new infrastructure.
What’s Next
- The FTA is expected to respond to the borough’s appeal but has not publicly set a deadline.
- Borough budget decisions and public hearings are likely in coming weeks, especially if the decision to repay (in part or whole) is firm.
- Political pressure is growing from multiple directions: local residents, state legislators, and media.
Impact
For the Mat-Su Borough, a repayment of the full $5.8 million would create a budget strain, especially given other infrastructure needs. Forgiveness or a favorable compromise would relieve that immediate burden, but past costs remain a cautionary tale about grant agreements and project readiness.
Timeline (key milestones)
Here’s a chronological summary of major events in the Susitna / Knik Arm ferry project repayment / appeal saga:
| Year | Event |
|---|---|
| 2002-2008 | Federal grants issued (~$12.3M) to Mat-Su Borough for ferry infrastructure (terminal at Port MacKenzie, design, studies). Mat-Su Sentinel+2Mat-Su Sentinel+2 |
| 2010 | The M/V Susitna was delivered / acquired via federal and Navy funding; intended ferry service planned. Wikipedia+2Mat-Su Sentinel+2 |
| 2011 | Ferry terminal plan in Anchorage stalled; no landing built; political/funding difficulties emerge. Mat-Su Sentinel+1 |
| 2012-2015 | Borough continues incurring storage, maintenance costs; continues trying to sell or find public entity to take the vessel. Alaska Public Media+2Mat-Su Sentinel+2 |
| 2015 | Susitna sold to Philippine Red Cross for about $1.8M; borough reports net sale proceeds. Mat-Su Sentinel+1 |
| 2014-2017 | Early FTA demands: in 2014, FTA asked for repayment of ~$12.3M; borough appealed; in 2017, FTA recalculated and required a lesser repayment (~$9.3M) after adjustments. Mat-Su Sentinel+1 |
| August 2025 | FTA issues a new debt letter reducing the required repayment to $5,762,074. Borough is given until “late this month” to respond, appeal, or repay. Mat-Su Sentinel+1 |
| September 2025 | Borough submits formal appeal proposing settlement options (as low as $1.5 million or mid-range amounts after depreciation). Mat-Su Sentinel |
👉🏿 Call to Action
Have thoughts on whether the Mat-Su Borough should be forgiven the debt or forced to pay it back? You don’t have to wait: check the Assembly Regular Meeting Calendar or the Mat-Su Borough Public Meetings & Agendas pageto find upcoming meeting dates. Attend in person or virtually, write to your Assembly members, and submit public comments. Your voice can help shape the decision.
