State reaches settlement over failed building project in Helena

The state governmen has agreed to pay $3 million to a Billings-based developer for a failed building project. Over 300 state employees from several agencies would have moved into the proposed building in Helena’s Nob Hill Subdivision. But the state legislature failed to fund the project, and the structure was never built.

The $3 million settlement ends a $14 million dollar lawsuit filed by the developer. That case was set to begin this week.

The building in Helena’s Nob Hills Subdivision would have held employees from the state departments of Public Health, Corrections, and the State Board of Crime control. Those agencies agreed to lease with developer SBC Archway in 2007. Original plans were to have the building built and ready to move into by the beginning of 2009. Then state officials requested several redesigns–adding more time and money to SBC’s efforts. SBC asked for a higher lease rate and in mid-2008 the state agreed, provided the increases were approved by the 2009 Legislature.

But soon after, Governor Brian Schweitzer’s Budget Director at the time, David Ewer, asked to delay the project for a year. SBC says Ewer said the Schweitzer administration wanted to avoid the Nob Hill project becoming a hot-button issue for the 2008 re-election campaign. The Governor’s office denies those claims and says Ewer and several other administration officials swore under oath that was not the reason for the delay. Schweitzer’s office says the delay was actually intended to deal with political issues on the local level. Whatever the reason, SBC agreed to the delay but increased the leasing price again.

Meanwhile, the recession started setting in and the 2009 legislature denies funding for the building. So SBC sued for breach of contract. $14 million–about $4 million for lost costs and about $10 million for lost profits and damages.

Governor Schweitzer says SBC Archway didn’t have much of a case.

“We included the funding for leasing a new building in our budget, the legislature decided they wanted to go a different direction. It was in the contract that if it was not approved by the legislature than the contract was null and void,” Schweitzer said.

Representatives for SBC were not available for comment.

Hearings before District Judge Jeffrey Sherlock would have started this week, but SBC reached the $3 million dollar settlement with the state over the weekend. Governor Schweitzer says even though his legal counsel was 75 percent sure of a win for the state, the settlement just makes more sense.

“Legal counsel says you’ve got a fiduciary responsibility to the people of Montana to be cognizant of the fact that when a jury trial, even though we’ve got a great case, you could lose $14 million dollars. So when they offered to settle for just 20 percent of what they had proposed, it was probably the right deal to take,” Schweitzer said.

The $3 million dollar settlement also has to be approved by the next Legislature.

The settlement contract says anything not paid off by May first of next year will start to accrue interest.


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