HELENA - Montana's Land Board struck an unpopular compromise this morning on the issue of how much rent to charge lease holders of state-owned, lakefront cabin sites.

Fees on many of the sites, particularly those in western Montana where recreational real estate had enjoyed an ex-tended boom, were expected to go up - in some cases dramatically.

The five-member board, comprised of Montana's top statewide elected officials, opted to raise the rates, but also extend the terms of the leases to allow holders to get conventional bank financing for building homes on the lots.

They also voted to peg some of the cost of leases on the national consumer price index, so lease fees would reflect current economic conditions, as well as surrounding land values.

"Is this a perfect answer?" said Mary Sexton, state lands commissioner. "I can honestly say I don't think there's a perfect answer out there."

At issue are cabin sites owned by the state and held in trust to benefit Montana schools and, in this case, the state veteran's home. The leases are for 15 years and rents are set at 5 percent of the appraised value of the land, according to the state Department of Revenue's statewide figures.

The last time such leases were appraised was 2003. This year, land values for some of the leases spiked and many lease holders complained that the 2009 values do not reflect the reality of the real estate market in this hobbled econ-omy.

Others complained that they are retirees living on fixed incomes and could not afford the new rent.

In response, the Department of Natural Resources and Conservation decided to revisit the way the state sets the leases.

It came up with several ideas and came up with Monday's proposal more recently after representatives on both sides of the issue said their original ideas were inadequate.

The compromise, which drew criticism both from lease holders Monday, as well as representatives of the state's public schools and universities, which depend on revenue from the cabin sites, would increase lease costs an average of 43 percent statewide, Sexton said in an interview with the Gazette State Bureau. It would set the new base value of the leases using the real estate appreciation rate over the last several decades: 6.5 percent.

So the new 2009 base value of the leases would be the 2003 appraised value of the lease, plus 6.5 percent for the past six years. That, Sexton said, would "catch up" the base cost. Going forward, she said, rates would go up every year using a new formula: the real estate appreciation index averaged with the consumer price index.