Faced with losing $8.9 million in unspent federal money, the Minneapolis City Council is finally making a decision about how to link Lake Street and Interstate 35W for motorists, transit riders and cyclists.

A special council meeting Tuesday comes about a month after federal officials threatened to pull an earmark for the project left over from the days of U.S. Rep. Martin Sabo, the longtime Minneapolis congressman who retired in 2006.

Hennepin County Commissioner Peter McLaughlin on Monday blamed the city for the project's stagnation. But city officials say they are ready to move forward with what's been a hotly debated plan for more than a decade.

Estimated to cost about $114 million, the project would create several new links between south Minneapolis' busiest commercial corridor and one of its most important arteries.

Tuesday's City Council vote outlining the scope of the project is an important step forward for a proposal that has taken many forms over its long life. Minneapolis is one of several agencies involved in the effort, which is being led by Hennepin County.

The most visible component of the plan would be a massive new transit station in the middle of the highway, expediting bus service downtown and eliminating awkward bus shelters. The new station would be coupled with a "green crescent" trail connected to the Midtown Greenway, allowing bicyclists easy access to transit on 35W.

Other elements include adding one or two exit ramps, replacing four bridges and improving a stretch of the highway near Lake Street.

Much of the funding has yet to be secured. But federal officials announced in August that they would reclaim some unspent highway earmarks -- including one for the 35W project -- if the money was not obligated by Dec. 31. They also authorized state transportation departments to reallocate the money if necessary.

"We are clearly getting the message from the federal government ... that you need to move these projects along," said Minneapolis' public works director, Steve Kotke. "And we've discussed and had a lot of community involvement, but it's time now to make some decisions on what is exactly the project."

But McLaughlin says the city delayed joining with the county in engineering studies for almost four years, which also resulted in other lost federal funding because the project was not ready.

"It's a sad day when you lose money that your representatives in Washington have gone out and secured," McLaughlin said. "It's also a sad day when you have to do triple back flips in order to save money that you had already there -- and maybe you get it and maybe you don't."

Though McLaughlin and the mayor's office hope to obligate as much of the earmark as possible to 35W by the end of the year, it remains unclear whether it can all be spent. McLaughlin said he's determined to keep the unspent money in Minneapolis, perhaps using some to fund the Interchange, a transit hub already under construction downtown.

The plan council members will review Tuesday features a new southbound 35W exit to Lake Street and a more tentative northbound exit to 28th Street.

The project was originally slated to cost about $500 million, but several elements were eliminated. One of them was a northbound entrance to 35W from Lake Street that was expected to cost $37 million.

Kotke said the largest driver of the project is the need for a transit facility at 35W and Lake Street. But he also noted that getting to Lake Street from the north is currently "onerous."

Hennepin County engineer Jim Grube said officials hope to start the project as early as 2016, but no later than 2018. It is expected to take about two to three years to complete.

Eric Roper • 612-673-1732 Twitter: @StribRoper