LEDC Funds and the Hospital

LEDC Funds and the Hospital: A Timeline of Decisions Made Largely Out of Public View - Part 3

By Steve Duncan / Llano Enquirer

Over the past year and a half, the City of Llano, through its Economic Development Corporation (LEDC), has directed substantial sales-tax dollars from its reserves to support operations at the county-owned hospital. Those same reserves could have been available for eligible city projects. The need for local support of a rural hospital is real and widely acknowledged. What follows is a timeline of the public decisions and the information available to residents at each step.

This timeline is drawn exclusively from publicly available City Council and LEDC agendas, approved minutes, and transcriptions of those public meetings. The documents are available for anyone to review.

July–August 2024 The LEDC’s proposed FY 2024-25 Projects & Budget included $268,497.60 under the line item “Business Retention & Development.” No specific project was named. On July 15, 2024, City Council deferred action on the budget. On August 5, 2024, Council approved the FY 24-25 LEDC projects and budget, including the generic $268,497.60 Business Retention allocation. The 60-day right-to-petition period followed. Public documents at the time did not identify the hospital as the intended recipient.

October 22, 2024 At a special called LEDC meeting, the board convened into executive session under Texas Government Code §551.087 for deliberation regarding economic development negotiations. After returning to open session, Pat McDowell moved to transfer $400,000 from the LEDC Fund Balance into the FY 24-25 “Business Retention and Development” line item, bringing that balance to $668,497.60. The motion was seconded by Don Comedy and approved unanimously, with Hatch Smith abstaining. The open-session minutes contain no mention of the hospital.

October–November 2024 City Council Closed Sessions City Council held multiple closed sessions under Texas Government Code §551.087 (Deliberations regarding Economic Development Negotiations) during this period:

• October 7, 2024 – Closed session under §551.087. No open-session action recorded on the economic development item.

• October 21, 2024 – §551.087 item was on the agenda; the executive session was cancelled.

• November 4, 2024 – Closed session under §551.087 (5:32–5:56 p.m.). No action was taken on the closed-session item. Later the same evening, in open session, Council approved the amended FY 24-25 LEDC projects and budget (Regular Agenda Item 6). The motion carried unanimously.

• November 18, 2024 – Another closed session that included §551.087. No action was taken on the economic development item after returning to open session.

None of the open-session minutes from these meetings identify the hospital as the purpose of the funds.

December 9, 2024 LEDC again convened into executive session under §551.087. No formal action was taken after returning to open session. The open minutes contain no reference to the hospital.

February 10, 2025 LEDC considered expenditure of funds to the Llano County Hospital Authority under the Business Retention and Development Project. The board noted that only the $268,497.60 already in the line item could be acted on that night; the public hearing on the full amount was still scheduled for February 13. Pat McDowell stated the money was being used “to save the hospital.” A motion by Don Comedy, seconded by Pat McDowell, to expend the $268,497.60 to the Hospital Authority for operating costs was approved, with Hatch Smith abstaining.

February 13, 2025 LEDC held the formal public hearing on a Business Retention and Development Project to the Llano County Hospital Authority in an amount up to $400,000. Pat McDowell spoke on behalf of both the LEDC and the Hospital Authority, stating the groups declined to send money into a “black hole,” that funds would stay local, and that Hatch Smith had worked full time without pay for months.

During discussion of the accumulated reserves, McDowell stated: “We didn’t spend that because we didn’t feel like we had anything that was worthy of spending it on. So we put it back. We held it back. Nothing more saving it for something. Nothing worth something like this.”

Immediately afterward, in a special called open meeting, Pat McDowell moved to expend $400,000 to the Hospital Authority. The motion was seconded by Don Comedy and approved, with Hatch Smith abstaining.

June 9, 2025 LEDC approved a budget amendment drawing $678,809.25 from reserve accounts for the Llano County Hospital Authority under the Business Retention and Development Project. Allen Hopson noted that the board had been very conservative with spending tax-revenue dollars, which had produced the large balance in the reserve accounts now being requested. The motion passed unanimously. The same night, LEDC also approved its FY 25-26 proposed projects and budget for presentation to City Council.

June 16, 2025 City Council, in open session, approved the amended FY 24-25 LEDC budget to increase funding to the previously approved Business Retention and Development Project (the $678,809.25). Council also approved the FY 25-26 LEDC projects and budget.

June 30, 2025 Both LEDC and City Council considered a change in the use of the previously approved $678,809.25. LEDC amended the project to reflect that the funds would cover broader hospital overhead expenses rather than the originally anticipated Intergovernmental Transfer amount. City Council took no action on the change-of-use item that day.

Hatch Smith’s Status During the Funding Period In December 2024 Mid Coast Health System furloughed 12 hospital employees, including CEO Hatch Smith. Smith continued working full time without pay during the transition. After Llano County assumed control of the hospital in March 2025, the Hospital Authority Board returned him as CEO of the newly independent Llano Regional Hospital. He resigned that position in mid-April 2025.

Overlapping Roles Throughout the period of the major transfers, Pat McDowell served as Vice President of the LEDC while also serving as President of the Llano County Hospital Authority Board. Hatch Smith served on the LEDC board and held the top administrative position at the hospital both before and after the primary funding decisions; he abstained from the formal votes on the hospital expenditures while participating in the related discussions.

What the Record Shows The hospital faced genuine financial pressure, and local governments across rural Texas have provided support to keep critical facilities open. Texas law allows economic development corporations to fund certain business-retention and job-related projects. Closed sessions are permitted under the Texas Open Meetings Act for specific purposes.

At the same time, the public record shows that a large amount of city sales-tax money moved to the county hospital through a series of decisions in which the specific destination of the funds was not stated in early public documents. Broad budget categories, repeated closed-session discussions on both the LEDC and City Council sides, and the accumulation of reserves that board members themselves described as the product of conservative spending and the absence of projects they considered worthy form a clear public sequence. Those same reserves could have been available for eligible city projects.

The LEDC’s stated purpose is to invest city sales-tax receipts in economic development projects for the benefit of Llano. Board members themselves stated that substantial reserves were held back because they did not consider other projects worthy of expenditure, and that conservative spending produced the large balances later directed to the hospital. Those funds were therefore not deployed for the economic development purposes for which the sales tax was collected until the hospital transfers occurred.

Should substantial LEDC reserves be considered first for transparent city projects that free up general-fund capacity before being committed elsewhere?

That question is the subject of the next Llano Enquirer article, which will examine how LEDC funds can be used for eligible city projects in ways that strengthen local infrastructure and free up general-fund money for other needs.

The LEDC exists to invest city sales-tax receipts in economic development for the benefit of the City of Llano. How those funds are described, discussed, and directed will continue to shape public trust in the process.