If requested by a county legislative authority, the department of natural resources shall negotiate a lease for any requested portion of the state lands directly adjacent to buildings on the Northern State Hospital site that were transferred to the department under chapter 178, Laws of 1974 ex. sess., if not otherwise prohibited, to the county to use for the purpose of establishing county fairgrounds. However, the portion to be leased shall be contiguous and compact, of an area not to exceed two hundred fifty acres and shall be segregated in such a manner that the remaining portion of these state lands can be efficiently managed by the department. The lease shall be for as long as the county is actually using the land as the site of the county fairgrounds. Notwithstanding chapter 178, Laws of 1974 ex. sess., the department shall charge the county the sum of one thousand dollars per year for the lease of such lands and this sum may be periodically adjusted to compensate the department for any increased costs in administration of the lease. The lease shall contain provisions directing payment of all assessments and authorizing the county to place any improvements on the leased lands if the improvements are consistent with the purposes of county fairs.