A project to sewer the Island Grove subdivison will be delayed for a lack of funding, Edgartown wastewater facilities manager Joseph Alosso confirmed yesterday.

Meanwhile the wastewater department is seeking $3.4 million in federal grants for a larger sewering project in the Edgartown Great Pond watershed area, which would include the subdivision.

The project was originally expected to be voted on at next month’s annual town meeting after voters approved $70,000 to design the sewer lines at a special town meeting last December.

Costs for the subdivision sewer lines are expected to run between $800,000 and $850,000.

Yesterday Mr. Alosso said the intention was to pay for the bulk of the project with money left over from the Edgartown Meadows project, which came in $760,000 under budget.

However, said Mr. Alosso, in January it was discovered that the leftover money was actually a bank loan which had to be returned. The article was pulled from the town meeting warrant.

At a Monday selectmen’s meeting, Mr. Alosso said it is unlikley that voters would approve outright funding for the project.

“I’m not sure in these times if it’s prudent to ask for that money,” he said.

A Massachusetts Estuaries Study report released in December found that most of the 890-acre Edgartown Great Pond is moderately or significantly impaired by high levels of nitrogen.

Mr. Alosso applied in January for infrastructure development money to sewer a large area of the watershed. In addition to the 149-lot subdivision, he proposed lines for around 150 to 200 additional lots in an area including parts of Meshacket Road, Llewelyn Way and possibly the Sweetened Water subdivision.

Mr. Alosso said a second wave of federal money focused solely on water and wastewater projects is expected in April or May.

“We should know by April what their intention is about this project,” he said. “If we don’t get the money I would support putting it on the warrant in the fall for the annual town meeting in 2010.”

The proposal states that project designs will be complete by April 1.

Town administrator Pamela M. Dolby said that the town should seek a meeting with the Cape and Islands liaison for Rep. William Delahunt, Mark Forrest, to get more details.

“He said wastewater would be the number one thing and this is the only shovel-ready project,” she said., “Let’s invite him down. The squeaky wheel gets the grease.”