The state is seeking takers for Alaska’s oldest ferry.

The Matanuska began serving Southeast communities in 1963. In 2022, a planned maintenance overhaul revealed extensive rusted steel and other issues. Since 2023, the ferry has served as a floating hotel, providing housing to Ketchikan-based ferry workers.

Alaska Marine Highway System officials said last year that the ferry needed an investment of at least $45 million to make it seaworthy.

The ship would need almost 125,000 pounds of new steel throughout the vessel to replace the plates and sections damaged or weakened by extensive rust, according to last year’s inspection and contractor’s report.

Leaders of the Alaska transportation department said earlier this month that disposing of the Matanuska would save the state roughly $800,000 in monthly operating expenses. Once it is disposed of, they said another unused ferry could be used as a hotel ship in Ketchikan.

Transportation Commissioner Ryan Anderson told lawmakers that the department is looking to dispose of the Matanuska to save on operating expenses, because of the delay in a federal grant that has left a $78 million hole in the marine highway operating budget.

Lawmakers last year approved a ferry budget predicated on the receipt of a grant from a ferry funding program overseen by the Federal Transit Administration, which was created under a Biden-era bipartisan infrastructure bill. Since President Donald Trump came into office, the program has not accepted new grant applications, despite two years’ worth of funding remaining.

Anderson and other members of the Gov. Mike Dunleavy administration traveled to Washington, D.C., last month to lobby for the grant program. Transportation department officials told lawmakers earlier this month that the Federal Transit Administration would begin soliciting applications by the end of March.

The Dunleavy administration’s recommendation to keep ferries operating this year, despite the missing federal grant, is to borrow from next year’s operating budget to cover the current year’s ferry operations, with the hope that the grant will be awarded by fall.

Members of the Dunleavy administration said disposing of the Matanuska was part of their plan for cutting spending, but the process for transferring ownership of the vessel could take months.

State officials gave would-be takers of the Matanuska until April 14 to submit their ideas to the state for the ship’s next chapter.

According to a request for information posted March 20, the state is “seeking information from interested parties regarding the opportunities to dispose of the vessel in a manner that honors its historic significance while allowing it to continue serving Alaska in new innovative ways.”

The request goes on to say that the state “invites thoughtful proposals for preservation, adaptive reuse or continued maritime service that respects the vessel’s legacy and provides ongoing public value. Potential concepts may include maritime training, tourism, community or cultural use, education programming, museum or heritage preservation, research platforms or other … purposes that reflect Alaska’s maritime heritage and the history of the Alaska Marine Highway System.”

“Letters of interest proposing scrapping, dismantling or scuttling the vessel may be submitted for informational purposes, but the state reserves the right to evaluate responses considering policy, historic preservation, operational and public interest considerations,” according to the notice.

The Matanuska is the lone vessel remaining in state possession among the three inaugural vessels of the Alaska Marine Highway System. Its sister ships — the Taku and the Malaspina — were sold in 2018 and 2022, respectively.

When the state posted the Taku for sale in 2017, it originally set the minimum sale price at $1.5 million, then lowered it to $700,000. The vessel eventually sold for $171,000 to a Dubai-based company. After sailing across the Pacific Ocean, it was scrapped in India.

The Malaspina was taken out of service in 2019 because the marine highway system lacked the $16 million needed for the vessel’s steel repairs. Dunleavy offered the ferry for free to the government of the Philippines in 2021, to no avail. Alaska businessmen John Binkley and David Spokely eventually bought it in 2022 for $128,250.

The businessmen initially indicated that they hoped to create a museum aboard the ferry to showcase the history of the marine highway system. The vessel was later turned into housing for employees at a cruise ship terminal the business partnership built in Ward Cove.