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press clipping
Post-storm New Orleans economy a huge question mark
3/28/2006, 2:46 p.m. CT
By ALAN SAYRE The Associated Press

NEW ORLEANS (AP) — Most of Big Oil has returned to New Orleans since Hurricane Katrina, Mardi Gras got the city back in the tourism business and the skilled construction trades can't get enough workers. The city's population — 455,000 before Katrina and almost zero after storm evacuations — is now near 190,000 and expected to climb.

But Tim and Renee Baldwin likely won't be part of any long-term recovery.

"It's hard to make a judgment about the future," said Tim Baldwin, a French Quarter bartender who lives in the city's Uptown section, which was largely spared from flooding. "It's a matter of day to day, a question of who's staying and who's leaving. We're probably leaving."

Meanwhile, for Ida Manheim, the owner of a French Quarter antique store that's been in her family for four decades, there's no question.

"I'm going to help rebuild New Orleans," Manheim said. "It's a wonderful city."

While economists and think tanks struggle to come up with a quantitative prediction of the city's future, there is a common theme: New Orleans will be a much smaller city with an economic growth that will be fragile for years to come. There are simply too many unknowns and no other modern disaster with which to compare Katrina, leaving residents and businesses acting largely on faith.

Shell Exploration & Production Co. surprised many by bringing its 1,000 employees back and sponsoring the New Orleans Jazz & Heritage festival, one of the city's major tourist draws. And ChevronTexaco returned 700 white-collar workers, helping to alleviate fears that Katrina had done away with New Orleans' remaining oil business.

With billions of dollars in reconstruction work facing the city and not enough skilled craftsmen to go around, the construction business will be "like gold mining in the gold rush days," said Loren Scott, a retired economics professor at Louisiana State University who tracks the state's employment picture.

On the down side, the state's only Fortune 500 company, utility holding firm Entergy Corp., says its New Orleans headquarters will be scaled down. And Hibernia National Bank, acquired last year by Capital One Financial Corp., is moving 350 to 400 jobs from its 3,100 pre-storm payroll to Dallas, citing the lack of housing.

Scores of small retail businesses and restaurants aren't sure how long they can remain viable with so few workers and a housing shortage that grows worse. Baldwin said the monthly rent on his family's home will jump from $900 to $1,550 in October.

The housing crunch has created a problem — and, for some, a big expense — for businesses too. Shell spent $33 million to acquire about 120 residential units in the New Orleans and Baton Rouge areas to lease back to their workers at cost.

The suburban commute for many now reaches as far away as Baton Rouge, 65 miles northwest of New Orleans.

Jason Williams, who's self-employed, drives at least an hour and 10 minutes in each direction on a work day that starts early in the morning. "On a bad day, it can take anywhere from two hours and up," he said.

Williams and his family plan to return to their rental house in New Orleans next month. They're lucky — their longtime landlord isn't hiking the rent.

Others will never return.

RAND Corp., a private think tank, projects the city's population will reach only 272,000 by September 2008, three years after Katrina. Greg Rigamer, head of GCR & Associates Inc., a New Orleans consulting firm, said RAND is too conservative. He projects a population of 250,000 to 275,000 by the end of 2006, followed by an extreme slowdown as housing fills up.

Renee Baldwin, who's home-schooling her 12-year-old daughter in addition to keeping a job in the petroleum support industry, said she believes the housing scenario could put the city's middle class in jeopardy.

"The area is going to be people with a lot of money or people without any money," she said. "They're pushing the middle class out. Not everyone can afford to pay $1,500 a month for rent."

Mike Pendley, who works in the oilfield service business in New Orleans, chose to live in Baton Rouge and commute when he transferred from Houston three years ago. He believes many New Orleans workers will decide to become permanent Baton Rouge residents.

"It will be the safety factor for the their families, the levee factor," Pendley said. "They won't have to worry about flooding. The schools are better, and the area is perhaps safer."

Scott, the retired economist, said more commuting workers bodes ill for New Orleans, which has faced a dwindling tax base since the school desegregation flight of the 1960s and 1970s, the oil price crash of the 1980s and corporate consolidation and crime fears in the 1990s.

"The tax base will shift more to where they have their residences, instead of where they work," Scott said. "That's where they will pay their property taxes, buy their groceries, buy their cars."

Scott said the recovery likely will speed up if New Orleans escapes a major storm this year — or could be stopped stone-cold by another.

"If it happens again, you're going to have people giving up on coming back, businesses giving up on coming back and taxpayers in the other 49 states questioning sending billions (of dollars) into the area," he said.

The uncertainty makes no difference to Manheim, who says more tourist-oriented advertising is needed to convince the rest of the country that New Orleans is ready to host them.

Indeed, the RAND study said businesses and industries that rely on their New Orleans roots — petroleum, shipbuilding and, of course, tourism — will recover the quickest.

"Without the help of tourism, it's going to take us a lot longer to get back," she said. "We need everyone in the United States to come visit us."