Revenue soars from state land

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Aerial view of the Section 36 school trust land that has grown into one of Kalispell’s busiest commercial areas in north Kalispell. The land is currently home to Costco, McDonald’s, Lowe’s, Holiday Inn Express and others.

A bumper crop of restaurants and box stores is taking root in former farm land the state of Montana owns in north Kalispell.

And over the past 10 years, the square mile of Section 36 school trust land has grown into one of Kalispell’s busiest commercial areas and one of the most lucrative chunks of land of its kind in the state.

In the 1990s, Section 36 was generating $4,000 to $7,500 annually for the state’s school trust coffers. The final tally varied based on how many of its then-undeveloped 640 acres could be leased for grazing.

Those days are gone.

Lowe’s, Costco, McDonald’s, Applebee’s, Wells Fargo Bank, Starbucks, Famous Dave’s BBQ, MedNorth Urgent Care and a Holiday Inn Express all have been built on the southeast quarter of the school trust land.

Cabela’s plans to open a store next year. And many still are hoping to hear the long-expected word of a Kohl’s going in.

Section 36 is bounded by U.S. 93 on the east, Stillwater Road on the west, West Reserve Drive to the north and Four Mile Drive on the south.

The section’s five leaseholders generated $401,000 for school trust coffers last year. That compares to a statewide average of $10,240 per section of school trust land in 2009, state officials said.

The growth has meant more money for Montana’s public schools, a bigger tax base for Kalispell and a slew of new shopping opportunities.

But it’s also why Kalispell and the nonprofit Kidsports face a hefty $2.3 million price tag if they still want a long-sought permanent easement for the youth sports fields the city and Kidsports developed on the school trust land starting in 1996.

That $2.3 million is the discount “buy it now” price Montana is offering.

If Kidsports takes all five years the state is allowing to raise money and buy the permanent easement, fees and lease payments would add several hundred thousand dollars to the final cost.

It’s a big amount to raise, but it’s the new cost of doing business on school trust land in Kalispell.

When entering into the lease and working with the state to create a development and annexation plan for the school trust land, Kalispell did not expect its sports fields to ever be reappraised as anything other than public-use park land.

“The state has taken the position that it’s developable land and appraised it at market rate,” Kalispell Planning Director Tom Jentz said. “That has gotten expensive. The state has benefited and that’s great, but we’re carrying a lot of freight right now because of that.”

Kalispell, Kidsports and the state have spent five years trying to reach an agreeable solution.  

Most recently, Kidsports agreed to release 13 of its most valuable road-front acres for the state to repackage in a proposed “Victory Commons” development. That’s meant to reduce the easement cost and spur more commercial development to benefit school trust coffers. In exchange, Kidsports gets a one-time payment from the selected developer — Goldberg Properties — to help pay for the easement.

“It’s a very nice contribution, but doesn’t close the door by any means,” Kidsports Director Dan Johns has said.

As a member of the State Land Board that approved the easement terms in mid-October, Gov. Brian Schweitzer said the arrangement demonstrates how effective the state has been at raising money from trust lands under his watch. “You look in the mirror and you see Donald Trump staring back at you,” he joked at one point.

IT’S NOWHERE near a “sweetheart deal,” Kalispell officials and Johns said of the state’s terms. But Kalispell and Kidsports both are heavily invested at the site, and after years of negotiating with the state it might be the best deal available.

When Kidsports and Kalispell entered their 40-year lease for school trust land, it was the longest term Montana allowed at the time and there was nothing around the site but alfalfa fields.

The state later decided to offer 99-year leases to help attract developers and national chains to school trust lands, plus permanent easements available only for public entities.

School District 5 paid $600,000 for a 60-acre easement for Glacier High School at the northwest corner of Section 36 in 2005.

As north Kalispell boomed, real estate prices rose to never-imagined levels. Johns remembers the horror he felt when land just west of Kidsports sold for $75,000 an acre for the now-defunct Bloomstone housing subdivision.

The economic downturn has been a bittersweet godsend, Johns said. But land appraised at $7,000 an acre when Kidsports and Kalispell entered their lease still appraises at $18,500 an acre and more now.

And those kinds of land values threaten to make the $43,000 annual lease payment unaffordable, “tripling it or worse,” when the state completes a mandatory mid-lease reappraisal in 2016.

Johns said he hopes Kalispell will approve the easement terms the state is offering.

The Kalispell City Council takes that question up on Monday. He is optimistic Kidsports has proven itself and that the money can be raised whether or not Kalispell helps cover some or even all of the easement’s cost as city officials have proposed in recent weeks.

“I think [the terms] should be accepted and we should move forward with closing the deal for the easement. Whether we can do that this year with the city’s help or somewhere between now and 2018, I think we should proceed,” Johns said.

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.

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