HELENA — Gov. Brian Schweitzer on Monday released $3.5 million in local government grants that had been on hold since late January.

The move ends a month-long political dispute over the money.

He also authorized the issuance $3.6 million in historical preservation grants that his administration had also put on hold.

Schweitzer said improving tax collections and the anticipated bonus bid of $86 million for the right to development state-owned coal tracts at Otter Creek made it possible to release these grants.

“Revenues have for the first time in nearly a year demonstrated an uptick for two months in a row,” he told a press conference.

“That’s good news. And, on that basis and the likelihood of having $86 million adding to our $202 million to bring our cash balance of $288 million, that gives us an opportunity to release these funds that are on hold.”

Schweitzer was asked if he had decided to release the grants because of criticism by newspaper editorials and some local officials and legislators over his freezing of the grants and several requests he made of officials during recent visits to a number of communities.

“Oh, no, not at all,” Schweitzer said, adding that the state’s improved financial picture is what convinced him to release the grants.

Over the past two weeks, Schweitzer had visited several communities seeking grants to discuss the projects as he was weighing which to release. He asked local government officials to write letters indicating they still supported grants for those projects.

He drew criticism for asking local officials to sign letters confirming that they “support the use of coal money for the completing of your project/project.” He told them that the potential revenue from the Otter Creek coal lease might enable their projects to be funded.

The Missoula County Commission balked at this requirement, telling Schweitzer in a letter that it “sets a perilous precedent which will ultimately corrupt the conduct of the people’s business.”

Furthermore, Schweitzer requested that House Republicans who had voted against two bills involving the receipt of federal stimulus money to write a letter supporting the use of one-time-only money for the grants.

Rep. Lee Randall, R-Broadus, said he wouldn’t send any such letter to the Democratic governor for a grant and, instead, would lead a private fund-raising effort, if necessary to pay for work to renovate the Broadus town hall.

As it turned out, Schweitzer authorized the release of all the local government grants without requiring these letters.

However, Schweitzer did say there was “some level of hypocrisy” on the part of House Republicans who voted against House Bill 645 but whose communities received grants.

Money for these grants came from HB645, passed in 2009, accepting federal stimulus money. It came from general fund money freed up because the stimulus money received was spent on state programs that otherwise would have been funded by general fund money.

The Schweitzer administration ordered the grants put on hold in late January when the state budget picture was looking increasingly grim because of flagging state tax collections.

It wasn’t widely known publicly until Sen. Dave Lewis, R-Helena, made inquiries in early March on behalf of officials in Golden Valley County, who sought a grant to help build a new firehouse in Ryegate to replace one that burned had burned down.

The old fire hall in Ryegate was destroyed nearly two years ago, and, since then, the volunteer department that serves Golden Valley County and surrounding areas has tried to cobble together funding to build another hall.

City and county officials thought they had lined up the $445,445 in funding and were ready to start soliciting construction bids for the Ryegate Fire Department when they learned that the state’s part of the funding has been frozen.

Golden Valley County Undersheriff Bob Pallas was relieved at Monday’s news that the money is flowing again.

“I’m glad he released the money. That way we can get going on our fire hall,” Pallas said.

Golden Valley Commissioner David Paugh said that the federal stimulus funds weren’t really the state’s money to begin with and that he’s happy they have been released. Despite the funding freeze, Ryegate officials put the fire hall project out for bids three weeks ago and got them back last week, Paugh said.

The three commissioners should award the winning bid to some contractor at today’s regularly scheduled commission meeting in Ryegate.

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Reaction to Schweitzer’s announcement releasing the grants was positive across the board.

“I’m glad to see the things funded,” Lewis said.

“I think it’s going to create some jobs out in the state, and jobs this summer are going to be really important. This is a good way to spend one-time money.”

Randall said he thinks Schweitzer “realized his errors and did what he should have.”

Missoula County Commissioner Michele Landquist said she and her fellow commissioners couldn’t be happier.

“We’re glad that the state’s in better shape, and we’re glad that the governor was able to release everyone’s project money,” she said.

“We’re just really glad that we can get our contract going and work on our safety project.”

Both Alec Hansen, executive director of the Montana League of Cities and Towns, and Harold Blattie, executive director of the Montana Association of Counties, said local officials are pleased by the news that grants are being released.

Hansen said local governments by law must finish these projects by Sept. 30 or the money goes back into the state treasury.

“I was a little concerned if this went on too long that we’re getting pretty close to that deadline,” he said.

Blattie said, “Hopefully, we can put this whole disagreement behind us, and cities and counties can move ahead and get these projects done by the Sept. 30 deadline.”

Billings Gazette reporter Jan Falstad contributed to this story.