The Big Questions About the Big Easy

How to resurrect ravaged New Orleans? Is Houston the model, or post-9/11 New York, or even Venice? Given its crime, corruption, and the likely cost, is it even worth trying?

By Peter Coy

It may seem premature to talk about rebuilding New Orleans so soon after Hurricane Katrina, with much of the city underwater, families grieving for their dead, and police ordering remaining residents out of their homes under threat of arrest. In fact, it's not too soon at all.

New York City showed the importance of moving on after September 11, when determined New Yorkers restarted the stock exchange and Broadway shows while the wreckage of the Twin Towers was still smoldering. Like the shocked New Yorkers of four years ago, the survivors of Katrina are hungry for the vision of a better future. And businesspeople who are deciding whether to leave New Orleans forever need a good reason to put their departure plans in abeyance.


  Fortunately, the conversation about the future of New Orleans is already beginning. It's bubbling up in talks between New Orleans business leaders, among urban planners, and economists in the U.S. and abroad -- and undoubtedly among the bedraggled refugees who are bedding down on spare beds and shelter cots across the U.S.

Business leaders in the French Quarter say they hope to get it reopened within 90 days -- a seemingly ambitious target. Local banks recently vowed to reopen branches as soon as possible. "We needed that," says Mark Drennen, president of Greater New Orleans Inc., the local business council. "It helps in getting the message out that New Orleans isn't shut down forever."

At least three visions for a new New Orleans are emerging, each with its pros and cons. In one, New Orleans builds on its cultural heritage -- food, music, joie de vivre -- to become a kind of multicultural Venice on the Mississippi that attracts newcomers who build new, creative industries, from the arts and advertising to education and research. A leading supporter of this view is Richard Florida, a professor of regional economic development at Carnegie Mellon University, who has advises cities how to spruce themselves up to attract what he calls the "creative class."


  A second vision suggests that jazz and jambalaya aren't enough to jump-start a major economy. Instead, New Orleans must invest heavily in the basics -- from education to safety to cleanliness -- like its plainer but more successful rival to the west, Houston. With an excellent new infrastructure, the city might become a hub of the Caribbean for commerce, learning, and medicine, say believers in this vision like Joel Kotkin, a futurist who is senior fellow at the New America Foundation.

A third vision is almost an antivision. It says that the best plan is to make no big plans and instead to allow New Orleans to shrink, perhaps drastically, to a sustainable core consisting mainly of its successful tourism business, its essential port, and educational institutions like Tulane University, Xavier University, and the University of New Orleans.

Harvard University economist Edward Glaeser, who leans in this direction, points out that New Orleans has been shrinking in relative national importance since 1840, when it was the third most important city in the U.S. Says Glaeser: "There should always continue to be some form of city there, but it's hard to see that it is really going to be a metropolis."


  One point of agreement among all the experts is the unsentimental observation that New Orleans can't be a charity case forever. It must have an economic reason for being. To be blunt, it needs jobs -- preferably high-paying ones. Even before Katrina, New Orleans' population was too big in relation to the size of its economic engine, which is why unemployment was high and incomes low, especially among the black majority.

Katrina has worsened that problem because some employers that were forced out of the city by the storm may never come back. Bruce Rutherford, who heads the emergency response team in Houston for the real estate firm of Jones Lang LaSalle, says he has heard that hundreds of jobs in oil companies are being permanently transferred from New Orleans to Houston. Those jobs are tough to lose because they pay far more than the average job in tourism or the port.

So what can be New Orleans' economic raison d'etre? The first thought is to infuse a new New Orleans with the energy from its restaurant-filled French Quarter and other tourist attractions like the genteel Garden District and hip Warehouse District. Those amenities, it's hoped, will pull in people who aren't inspired by, say, Orlando.


  San Francisco, one of the highest-income cities in the U.S., is a role model for this vision, with its Fisherman's Wharf, Haight-Ashbury, and other funky attractions. Or, further afield, there's Venice. Pres Kabacoff, CEO of New Orleans-based HRI Properties, says, "I think of New Orleans sort of like Venice, which has a real water problem, yet is a national treasure in Italy. They're preserving it, protecting it."

The biggest problem with building New Orleans' future on its historic charm is that that approach has been tried -- and it has failed. The city has steadily shrunk in population since the 1960s, even as the French Quarter has thrived. Richard Florida's creative class might be intrigued by the Big Easy's bawdiness, but most of them aren't willing to move themselves and their families into a city with bad public schools and a high murder rate.

That's why Kotkin and others are pushing the second vision, which sees the city using the massive infusion of federal money to build a sound infrastructure upon which the private sector could build. He says that considering the size of its port, New Orleans has relatively few warehousing jobs, making that a natural candidate for expansion. And he says the city may still have a chance to become a medical center for patients from throughout the Caribbean, based on Tulane University Hospital and other medical facilities.


  New Orleans has too often allowed its opportunities to slip away to Houston, says Kotkin. Perhaps, he says, the battle to recover from Hurricane Katrina could end the culture of complacency and poor political leadership that has held the city back. Says Kotkin: "New Orleans needs some classic progressivism. You would really need very decisive, incorruptible, aggressive kinds of people, like Rudy Giuliani in New York, Bob Lanier in Houston, Richard Riordan in Los Angeles."

It's an inspiring vision, but it has drawbacks. The bigger the project and the more parties involved, the more likely it is to become mired in bickering, as New York has discovered in its failure to fill the hole at Ground Zero. And a rain of money is unlikely to make New Orleans politics any cleaner.

That's why some experts -- call them the anti-visionaries -- say that New Orleans may never again have an economy big enough to sustain the 1.3 million people who lived in the metro area before Katrina. Ron Utt, who was President Reagan's privatization czar and now works as an analyst for the conservative Heritage Foundation in Washington, asks, "Should we think about a New Orleans that shrinks back to its original and more viable core?"


  If New Orleans retreated to its historical high ground it would be easier to defend with new levees. The low-lying land where most of the houses were destroyed could be cleaned up and made into parkland, as has been done farther north on the Mississippi, near St. Louis. That would be far cheaper than trying to rebuild houses, schools, and other infrastructure in the contaminated and still-vulnerable area.

Obviously, New Orleans would still need some replacement housing stock, but that could be built by the private sector as needed. To help the poor, there could be generous assistance through programs such as HUD's Section 8 to cover the difference between market rents and low-income residents' ability to pay.

Instead of asking how to rebuild New Orleans, some planners say that the right question is how to rebuild the lives of New Orleanians -- wherever they end up living. Many, perhaps even most, will return to New Orleans. But they shouldn't have to come back to their old city to get long-term help. In fact, it would be better for many of them -- and for the economy -- if they were provided relocation assistance, education grants, worker training, and other assistance in their new communities.


  The urge to rebuild New Orleans bigger than ever will be powerful. Many of its people have lived there for generations. "There is a tremendous magnetic pull with the usually very large families there," says Mike Aldridge, chief financial officer for Lafayette (La.)-based Petroquest Energy (PQUE ), an exploration and production company. Drennen, the business council chief, imagines a new New Orleans with mixed-income housing developments in place of the old projects, a light-rail system, new schools and hospitals.

In the long run, though, no matter how much federal assistance is provided, a city can't be any bigger than the economy that sustains it. Cities with vital energy can grow rapidly after a disaster, as Chicago did after the Great Fire of 1871. But New Orleans was shrinking even before Katrina hit. "Katrina accelerated migration trends that were already in place," says Rutherford, the Jones Lang LaSalle executive. New Orleans will unquestionably survive. But the best bet for the Big Easy might be to downsize. How does the Small Easy sound?


Coy is Economics editor for BusinessWeek in New York.

with Brian Hindo in Baton Rouge

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