SEBASTOPOL - Palm Drive Hospital board President Dan Smith will forgive a $1 million loan he and his wife made to the hospital, according to a release sent last week.

The announcement was released on the heels of a contentious board meeting last Tuesday evening, where hospital Chief Executive Officer James Russell accused Mr. Smith of asking that he resign from the facility's top post. Mr. Smith denied the allegation and further comments that he dictates the board's decisions.

Legal documents concerning the loan were signed by the end of last week, according to the release. The contribution will bring the couple's total donation to Palm Drive to about $1.2 million.

"In light of recent difficulties in selling bonds to finance hospital operations and potential interest rates above 8 percent, we feel it is very important that the hospital not have to incur new, high-interest debt to replace our low-interest loan," Mr. Smith said on Wednesday.

"In addition, this action will make it easier for the hospital to exit bankruptcy and will greatly enhance the hospital's balance sheet, which is critical for obtaining future capital."

Palm Drive is currently attempting to sell about $2.2 million in bonds to pay off creditors and exit bankruptcy, and a lower than expected credit rating will mean higher interest rates.