San Juan Island’s hospital district commission won’t be asking voters for a property tax hike after all.

In a 4-1 decision, the commission on July 20 voted against seeking a two-year, temporary increase in the district’s property tax levy as a possible solution for eliminating the debt and financial obligations that must be cleared from the Inter Island Medical Center’s books before the clinic closes its doors.

“I think we can spare this community from having to wrestle with this,” said Commissioner J. Michael Edwards, who noted a recent improvement in the medical center’s financial condition and projections in arguing against placing a property-tax measure on the November election ballot.

The hospital district, as part of its contract with PeaceHealth, must free the medical center of any debt and also finance a one-time insurance payment of roughly $300,000 to cover future liability from past patient care at IIMC before the two entities join forces in providing health care services at PeaceHealth’s new critical access hospital, which is expected to be open for business by December 2012.

The district will pass onto PeaceHealth the property tax revenue it collects each year — about $1.2 million — to subsidize health care at the new Peace Island Medical Center facility, which is under construction on San Juan Valley Road, near Friday Harbor Airport.

The medical center, which relies on a line of credit to cover expenses when revenue is lean, has roughly $500,000 of debt to eliminate from that line of credit over the next 17 months, according to IIMC Director Beth Geiger Williams. On the plus side, Geiger Williams said business at the medical center has been steady and that the recent decision by Physician Assistant Pat Davis to remain on staff, as one of the clinic’s practitioners, should help boost the bottom line as well.

Still, she noted the commission would be in a position to free the medical center of all its financial obligations and would not have to gamble on projections panning out if voters were to approve a temporary property tax increase.

“It’s a sure thing if it passes,” she said. “Without it, it leaves us with projections.”

Previously, the commission contemplated asking voters to approve a two-year property tax hike, the amount of which remained unsettled, as a means of raising additional revenue and clearing the medical center of its debt and financial obligations. The district would have enough untapped capacity under the ceiling of its property tax levy to raise as much as $1.2 million over that two-year period, Geiger Williams said.

— Scott Rasmussen