On July 2, 1996, about 1350 eastern daylight time, a Piper PA-23-150, N3061P, privately registered and operated by the Knoxville Flight Training Center, Inc., was substantially damaged during an aborted takeoff from the Knoxville Downtown Island Airport, Knoxville, Tennessee. Visual meteorological conditions prevailed at the time and no flight plan was filed for the 14 CFR Part 91 checkride flight. The commercial-rated pilot-in-command and FAA designee were not injured. The flight was originating at the time of the accident. The designee stated that there was no unusual engine vibration from the left engine while taxiing or during the left engine run-up before takeoff. After rotation about 50-75 feet above the ground with the applicant manipulating the controls, he first heard a loud sound then felt a vibration from the left engine. He then took the controls and landed the airplane on grass adjacent to the runway which collapsed the nose landing gear. The airplane slid to a stop with the nose section of the airplane down an embankment of a river on the airport property. Visual examination of the left propeller revealed 1 blade and clamp separated. Examination of the propeller revealed that the blade No. 1 separated with the clamp secured around the blade. The blade retention lip of the propeller hub was observed to be fractured. Metallurgical examination of the fracture surface of the retention lip revealed that it failed due to fatigue. Corrosion was not observed on the fracture surface. Review of the left propeller maintenance records revealed that it was last overhauled on October 18, 1985. The propeller had accumulated about 963.2 hours since overhaul and 2, 979.7 hours since manufacture at the time of the failure. According to FAA records, the airplane had not previously been involved in an accident or incident. According to a Hartzell Service Letter 61S (non-mandatory compliance), dated December 10, 1993, indicates that the accident model propeller is to be overhauled every 1,000 hours or 60 calendar months. The non-retained propeller components were released to Mr. John McConkey, President of the Knoxville Flight Training Center, on July 10, 1996. The retained propeller components were released to Mr. Randy Duncan, Flight Instructor/Manager of the Knoxville Flight Training Center, on March 11, 1997.