Blue Cross Blue Shield of Montana officials announced Thursday that the company will lease nine acres owned by the Helena Regional Airport.

The company plans to build a 120,000-square-foot facility there to house its 551 Helena headquarters employees and move by March 2011.

The announcement came as a disappointment to officials at Downtown Helena Inc. and the Business Improvement District, who had worked to keep the company and its workers in the city's core.

Blue Cross Blue Shield officials said the site, located on about 35 acres of land south of Skyway Drive and east of Washington Street, was chosen over other parcels for a variety of reasons.

Company spokeswoman Linda McGillen said the cost of the land, the firm's ability to move there quickly, ample space for parking, and the challenges of building a high-rise building in downtown Helena all contributed to the decision.

"We believe this site will satisfy all our needs, but it was a difficult decision because each location we evaluated had some unique positive characteristics," company President Sherry Cladouhos said in a press release. "Our members will benefit because having all our employees in one location will greatly improve our efficiency and enhance productivity."

The company had considered about a dozen sites, including the concept of building a high-rise office building downtown.

McGillen said the company will retain ownership of its two buildings downtown and work to find tenants, with the hope of filling them to capacity. She pointed to the firm's renovation of its Last Chance Gulch facility, which soon will provide work space for more than 100 state Department of Revenue employees.

"We're taking a vacant building and adding 100 folks that weren't here," McGillen said. "I don't think you're going to see a loss of employees.

"It's to our benefit and to the benefit of the downtown business association to" find new tenants, she added.

Downtown Helena Inc. Board President Patricia Spencer was disappointed to hear of the company's decision but encouraged by the possibilities to fill its existing office space with other workers.

"I think it was obvious that a change was going to occur," she said. "I had hopes something could be done" to keep the company downtown, Spencer added.

From coffee shops to restaurants and from doctor's offices to retailers, downtown entrepreneurs have depended on the company's employees for business, she said.

"I think it will have a large impact on the businesses downtown, and I hope that Blue Cross can find a way to fill those buildings quickly," Spencer said.

Terry Cosgrove, the company's executive vice president, said Blue Cross Blue Shield has had some preliminary inquiries about those properties.

Jim McHugh, executive director of Downtown Helena and the Helena Parking Commission, said he wants to work to build another parking facility downtown in order to meet some of the challenges Blue Cross Blue Shield faced.

"Obviously we're disappointed," he said. "Our direction needs to change and we need to help them backfill with another big employer."

Cost was the biggest factor in the company's decision, McGillen said. She noted an obstacle to the proposal to build a high-rise office building downtown was the seismic concerns in the area, coupled with stricter building codes for constructing a taller building in an earthquake zone.

"That definitely had an impact on price, on the cost," McGillen said.

The company has operated in Helena for nearly 70 years, but has been forced to occupy multiple buildings downtown since the 1990s, she said. The situation led to operational headaches and inefficiencies.

"We've been growing," McGillen said. "We are seeing a lot of changes in our call center and our customer service area now. It's very inconvenient and unproductive because we have people in two different buildings."

The company has signed a 40-year lease agreement with the airport, with options to extend the agreement and secure up to three more acres of land. The firm has hired Dick Anderson Construction as the general contractor for its new facility. It hopes to break ground in March and move in 18 to 24 months later.

Airport Manager Ron Mercer said he hadn't actively pursued the deal, but the new development will fit in with the airport's concept of an open, campus-style commercial center in the area.

"To be honest, I was surprised to see this one rise to the top," Mercer said. He quickly added the site is a good piece of land, but noted a number of other offers were on the table and plenty of folks wanted to keep the company downtown. "We were just kind of staying away from it," he said.

Parrot Confectionery co-owner Dave Duensing, a past president and current board member of the Business Improvement District, said he hates to see the company leave.

"They've been a good neighbor down here," he said. "I wish they would have stayed, but that's their decision."

Duensing said he hopes the company has luck finding new tenants for its buildings downtown.

"I have no doubt that they will try very hard to do that," he said.

Reporter Larry Kline: 447-4075 or larry.kline@helenair.com