PALMER -- Valley Hospital is getting clear title to its land, and the city of Palmer is getting $120,000. But the Palmer City Council still seems concerned about what the town could lose in the end.

After weeks of haggling with the council, Valley Hospital Association CEO George Larson walked away from last Tuesday's meeting with what he had wanted all along -- a covenant-free title to the five acres the city donated to the hospital in 1983.

According to the original agreement, the five acres could only be used for a hospital or similar public purpose, but Larson has maintained that such restrictions on the land could jeopardize a merger between VHA and Texas-based Triad Hospitals. "All the real estate has to be debt-free and deed-restriction free," Larson told the council, "... we have to provide this real estate and if we don't, then we have a problem." Larson also said the council should make its decision soon, indicating that Oct. 1 wasn't exactly a drop-dead deadline but an "important date" in terms of the hospital merger.

Such a threat appeared to be a deciding factor Tuesday, as Mayor Jim Cooper broke an unusual tie on the council with his vote in favor of selling the land for roughly its assessed value. Council members John Combs, Steve Carrington and Kathrine Vanover also voted in favor, while members Brad Hanson, Tony Pippel and Brian Fish were opposed.

"This is bigger than $100,000 ... it's the potential of the community losing a great deal," Cooper said. He said it is his understanding that if VHA's financial interest in the partnership falls below 20 percent, it loses some of its representation on the board and, after a year, Triad has the right to buy out VHA. That 20 percent interest apparently relies heavily on the value of Valley Hospital's facility in Palmer and the land it sits on.

But some on the council felt the decision to sell or donate the land should be considered as part of the overall, changing relationship between the hospital and the town that has been its home for the past 60-some years.

"We donated the property to participate in something we believed in," Councilman Hanson said. In addition to emotional ties between the hospital and community, he said there are also significant financial considerations.

"I think it's a fiduciary responsibility," Hanson said. "We're running a business, too."

Both he and Councilman Pippel said they wanted to hold off on the land deal until the hospital chooses the water and sewer provider for its new facility, slated to be built near the junction of the Parks and Glenn highways. Both Palmer and Wasilla are vying for the job, but no decision has been reached.

While Hanson and Pippel admitted the two issues weren't directly tied, they said they did speak to the overall "friendliness" between the city and hospital. Pippel reiterated his offer to lift the covenant if the hospital went with Palmer for the water and sewer service.

"I'd rather donate it to a partner than sell it to an ex-partner," Pippel said of the land.

Hanson agreed and said if the hospital didn't opt to remain a partner with Palmer, then he would have liked the price on the land be closer to fair-market value. What that number would have been is unclear, but some council members speculated it could have been $200,000 or more.

Even those who voted in favor of the land sale didn't seem entirely comfortable with the arrangement. Combs indicated that he still would like some guarantee that the land continue to be used for what it was originally intended -- a public purpose. Larson has said he is exploring plans to turn the old hospital into a psychiatric or drug-treatment facility, which would fall under the city's guideline.

However, legally the land can now be used for anything allowed under its current zoning, which includes office buildings, restaurants, stores and dry cleaners, to name a few of the permitted uses.

According to the resolution the council passed Tuesday, in exchange for a "quitclaim deed" to the land the city of Palmer will receive $120,000. However, the resolution also states that the deal depends on the state of Alaska releasing Palmer from its liability as part of past grants that it administered for the hospital.