Gov. Schweitzer says rents reduced on dozens of state leases, saving more than $3.4 million

Montana negotiates lower rent on dozens of leases

HELENA, Mont. — Montana has renegotiated dozens of leases with landlords across the state, reducing the rent agencies pay by more than $3.4 million over the life of those leases, Gov. Brian Schweitzer said Thursday.

The state rents thousands of square feet of office space in cities and towns across the state. Schweitzer said his administration looked at those rents, and many of them seemed to be higher what they should in this real estate market, he said.

“In our quest to continue to save money, we’re challenging every expense,” Schweitzer said.

That goal has already led to some $40 million in budget cuts by state agencies.

The Schweitzer administration earlier this year sent letters to landlords holding 104 leases that were due to expire soon. In 66 cases, the landlords agreed to not raise or to reduce the rent they were charging the state agencies, according to the governor.

The rent reductions ranged from 1 percent to 38 percent and the savings are spread out over leases that run from one to 10 years, according to a spreadsheet provided by the governor’s office.

Butte landlord Don Ueland agreed to cut the annual rent from $14.28 per square foot to $10.50 per square foot for the 6,400-square-foot space he leases to the state public defender’s office. It would have been hard to find a replacement tenant if the state left, he said.

“It definitely hurts but we are able to absorb it,” Ueland said. “A full building is better than a half-full building or an empty building.”

In a couple of cases, the rent is staying the same but is still counted by the governor’s office as a reduction. That is because those new leases do not include the standard 3 percent increase that is added when the state renews a lease, said Eric Stern, the administration official who headed the negotiations.

Another 22 leases are still being negotiated, and 16 more are on hold while agencies decide whether they want to stay at those locations, Stern said.

Schweitzer said an impasse was reached in negotiations in at least two cases, and maybe more, but he believes negotiation is still possible in those cases before those agencies have to move.

Not all of the savings will be going back into the state general fund. Eight of the renegotiated leases — representing some $206,627 in savings — involve the Department of Military Affairs, where rent is paid with federal money.

And there may be some disputes with the landlords who are cited as already agreeing to the reductions. Billings landlord Vic Reichenbach is leasing more than 18,000 square feet in a former furniture store to the state for some $2.3 million over 10 years. He said he agreed to reduce the rent for a couple of smaller properties, but the rent was to remain the same for that large property.

But when the new 10-year lease arrived in the mail for him to sign Wednesday, the rent appeared to be less than what he had agreed to, he said.

“I’m going to look at it a little closer and then I’m going to call the fellow who does the leasing,” Reichenbach said.

Stern said the state did not increase Reichenbach’s rent in the new lease and that he would be in touch with Reichenbach to clarify the matter.