Federal officials have overruled the Bozeman City Commission’s vote to split a National Park Service grant and have decided that most of the money should go to the Rialto Theater.

The City Commission had voted in September to recommend dividing a $150,000 Save America’s Treasures grant among three local preservation projects: restoring the Rialto, replacing windows at the Emerson Cultural Center and saving three historic streetlights downtown.

Commissioners had wanted to allocate $70,000 to the Rialto, $70,000 to the Emerson and $10,000 to the streetlights. They had supported dividing the money as well as setting performance standards in light of concerns about whether the owners of the Rialto had the financial ability to complete the work.

The owners of the Rialto and SRO Live, Bozeman couple Mary Kay Duffie and Stephen Michael Rangel, are raising money to meet the grant’s matching requirement. Last month, a Butte couple filed a lawsuit against them for fraud concerning the project, allegations that Duffie and Rangel dispute. Bozeman city staff say grant contracts are being drawn up and the project appears to be moving ahead as planned. Recipients are reimbursed for money spent.

However, grant administrators for the NPS said in a recent email that while they appreciate the City Commission’s input, only the Rialto and streetlights fit with the guidelines of the grant program. The Rialto is expected to receive $140,000 and the streetlights $10,000.

“The earmark was directed at the Main Street Historic District and the (Emerson) Cultural Center lies outside of the district,” NPS program coordinator Megan Brown wrote to city staff. “If no properties within the district had applied, we could have requested an amendment to that language from the congressional staff but choosing the theater and the lights satisfies the intent of the original legislation.”

With help from Montana’s U.S. senators, the grant was originally awarded to the city on the heels of the 2009 natural-gas explosion downtown. The grant was intended to restore historic buildings that were damaged by the blast.

City officials tried for three years to find potential recipients, but some applicants declined the money due to a grant requirement that the building being restored be placed under a 50-year, historic preservation easement.

Brown said in her email that in addition to guidelines calling for the grant money to go to a project within the Main Street Historic District, the NPS doesn’t make a practice of dividing the grants into such small amounts and the threat to the Rialto and streetlights appears greater than that at the Emerson.

If no progress is made on the Rialto or streetlight projects within six months of the grant agreement, the money will revert back to the federal government.

Amanda Ricker can be reached at aricker@dailychronicle.com or 582-2628.

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