Corruption, crime, insurance choking off economic growth
03:39 PM CDT on Wednesday, August 29, 2007
Alan Sayre / Associated Press
Alan Sayre / Associated Press
Two years after Hurricane Katrina almost nothing seems the same in New Orleans, but one thing has not changed — a cool regard by business for what was once a major Southern commercial center.The recovery is creeping along. As population increases but employment growth slows, no one is certain where the jobs will come to sustain the city’s rebound. It isn’t that corporate America doesn’t recognize New Orleans’ plight. A new report by TheFoundation Center, which tracks hurricane recovery donations, shows 30 major companies poured more than $300,000,000 into charity in Louisiana and Mississippi after Katrina.But permanent new investment and jobs are scarce. Companies, it appears, aren’t convinced New Orleans will be a safer, politically stable, attractive place in which to live and do business.Mayor Ray Nagin, who’s pleaded the case with Wall Street investors, acknowledges crime and corruption have hampered the city’s ability to attract significant new business.So an odd dichotomy has taken shape. Oil giant Royal Dutch Shell PLC, which has cut New Orleans jobs in recent years, put its money into sponsoring the New Orleans Jazz & Heritage Festival. Zurich Financial Services Group, which has no major employment here, is sponsoring the city’s professional golf tour stop.
On the other hand, two major oil employers have moved or are preparing to leave. Mining giant Freeport-McMoRan Copper & Gold Inc. moved to Phoenix after its buyout of Phelps Dodge Corp. Chevron Corp. is moving 500 jobs from downtown 40 miles north to St. Tammany Parish.
Though city officials are happy the tourism business is recovering, there have been no major additions to white-collar employment since Katrina. Even tourism employment is far below pre-storm levels.
Why are corporations hesitant to invest in a city that desperately needs long-term commitment? Some reasons, Nagin says, are rooted in pre-Katrina problems that worsened after the storm.Among them, a crime wave that has New Orleans on track to lead the nation in per-capita murders for a second year, a shortage of housing, corruption scandals and skyrocketing insurance costs.“New Orleans has a long row to hoe,” said venture capitalist Gary Solomon, head of New Orleans-based Crescent City Bank & Trust. “We’ve got to get people’s confidence that we’re going to do it right. I don’t see that. I really don’t.”According to state Labor Department figures, metro New Orleans area had 113,300 fewer non-farm jobs in June 2007 than in June 2005, two months before the hurricane struck on Aug. 29, 2005.The biggest drops were in government jobs, with 29,000, and the tourism sector, down 24,500 jobs. The big gainer, not surprisingly, was construction with 2,500 jobs.Even more disturbing is the sudden slowdown in the job recovery rate.From November 2005 to June 2006, the area added 7,400 jobs a month, then slowed by December 2006 to 2,000 monthly. In June 2007, the gain was only 300.“The suggestion in the data is clear,” said demographer Elliott Stonecipher. “We apparently are at a place where the post-storm employment recovery is peaking. It may have peaked.”Economist Loren Scott said a multitude of factors likely are playing into the slowdown. First, Katrina wrecked 182,000 homes, but only 41,000 housing recovery checks have been issued to homeowners by the federally funded, state administered Road Home program. Some victims of Hurricane Rita are included in that total.Scott said those who want to rebuild face sharply higher insurance costs, higher utility rates and the city’s crime problem.“All of those things together are pretty darn discouraging,” Scott said.And they are disincentives to companies and prospective employees.As a result, Solomon said, the city probably has permanently lost a great chunk of its pre-Katrina population of 455,000. The latest estimates put the count at 274,000.Many families that moved to other locations have settled in, and are increasingly unlikely to return, he said. “They got comfortable in their new place and said ‘What are we going back for?”‘ Solomon said.Then, there are individuals and companies like Chevron that returned and were disappointed with the recovery. “They’re leaving now, one at a time,” Solomon said.Nagin believes continued population growth, estimated at anywhere from 4,000 and 7,000 people a month, will turn the economic tide.He said the recent announcement that the federal government wants to put a new Veterans Affairs hospital downtown could launch a multihospital health care district.The hospital would be a plus, but finding employees for it could be tough. Many local hospitals, not yet operating at pre-Katrina capacity, report difficulty in finding professionals to fill openings. Health care was a booming sector before Katrina. But 23,400 jobs in the sector disappeared after Katrina.For now, the city remains dependent on tourism and entertainment, which are improving. Along with infrastructure improvements and a revived health care system, “that, hopefully, will send signals to the oil and gas industry that, no matter what you have planned, this is going to be a vibrant community and you need to be part of that,” Nagin said.Twelve conventions expected to each attract at least 3,000 participants are booked through December. The Superdome will host the Sugar Bowl football game and the national college football championship in January 2008.Before Katrina, tourism was the city’s chief economic driver, pushing $9.6 billion annually into the economy. But wages typically are low.Scott said construction jobs should be the “big dog” over the next few years. Beyond that, he said, predicting how other economic sectors will do is difficult.In the meantime, a specter of political corruption continues to haunt the recovery.U.S. Attorney Jim Letten, who has spearheaded scores of corruption prosecutions in New Orleans, said businesses have to be convinced that the “Louisiana way of doing business” — with demands for bribes, secret partners and ghost employees — is not something to be feared should they decide to come to the city.“Corruption has bled New Orleans,” he said.With all the problems, New Orleans has a tough road ahead in convincing big companies that the city’s outlook is improving.Stonecipher suggests many in government expect too much too soon. He thinks city leaders should see the crisis for what it is and not paint too rosy a picture of New Orleans’ prospects.Only then can they develop a serious job-growth strategy.“I believe we are at a good place now to see what really happened,” Stonecipher said. “A lot of people want to say `how fast are we coming back?’ We don’t know. We’re just now getting a handle on how bad it was. Those categorical drops in jobs paint a picture of a devastated economy and we need to stop acting like that didn’t happen.”(Copyright 2007 by The Associated Press. All Rights Reserved.)