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The state Department of Transportation has backed out of an agreement with the city of Petersburg to convey the Scow Bay Turnaround property to the city in exchange for the city's construction of an airport sewer project.
"The deal was going through until they heard that Petersburg had received and accepted a matching grant from ADEC for $428,000. Upon hearing of the grant, they withdrew their offer," City Manager Bruce Jones told the council last week.
Mayor Ted Smith explained the project grant was federal money that passed through the state. "It's direct federal funding," Smith noted. "The state is trying to claim it's their money."
Jones said the state will probably try to negotiate more concessions from the city before they agree to the land conveyance. Jones hinted the state may add items to the deal or ask the city to accept ownership of state roadways such as main street, Sandy Beach Road and South Nordic Drive.
Jones was instructed by the city council to stand firm on the original deal even if it meant a delay in extending the sewer lines up Haugen Drive to the airport.
Jones noted that a change in administration in Juneau next year could benefit the city's negotiated position.
"We can wait and see if the new administration has a different view of this proposal and sees it through," Jones added.