Palmer was founded in 1916 as a stop on the Alaska Railroad's branch line to the coalfields of Chickaloon, but it was not developed until 1935, when it was selected as the site for the Federal Emergency Relief Administration's Matanuska Colony project. The U.S. government transported 202 families from the upper Midwest to homesteads in the Matanuska Valley in an effort to develop the farmlands of Alaska and to provide the families with a viable living. Palmer was selected as the headquarters for the organization running the project, the Alaska Rural Rehabilitation Corporation (ARRC).
Palmer initially consisted of a tent city to house temporary laborers and colonists until their houses were built. Administration offices and housing, churches, schools, and other buildings that make a community were soon under way. Today, many of the farms have given way to subdivisions, and Wasilla has become the biggest city in the Matanuska Valley. But Palmer continues to be headquarters for the Matanuska-Susitna Borough (named after the area's two major rivers), home to school and government offices. On the west side of the tracks is a modest commercial area, while on the east side are the Alaska Rural Rehabilitation Corporation buildings.
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