A Chevron refinery that was damaged by hurricane Katrina in Pascagoula, Mississippi.
It may not have generated much interest outside energy and investment circles, but a recent comment by Tidewater, Inc. president Dean Taylor sent tremors through the New Orleans business community. In June, Taylor told the Houston Chronicle that the international marine services company — the world's largest operator of ships serving the offshore oil industry — was seriously considering moving its headquarters, along with scores of administrative jobs, from the Crescent City to Houston. "We have a lot of sympathy for the city," Taylor said. "But our shareholders don't pay us to have sympathy. They pay us to have results for them."
It was the last thing the hurricane-scarred city needed to hear. Tidewater was founded here a little more than 50 years ago, and kept its main office in New Orleans throughout the oil bust of the 1980s and the following decades of industry consolidation, when dozens of energy firms all but abandoned New Orleans for greener pastures on the Texas coast. In the nearly two years since Hurricane Katrina ravaged the city, the pace of exodus has accelerated, complicating New Orleans' halting recovery; according to the local business weekly CityBusiness, the metropolitan area has lost 12 of the 23 publicly traded companies headquartered here, taking white-collar jobs, corporate community support and sorely needed taxpayers with them — and threatening to leave the city even more dependent on a tourism-based economy than it was before the storm.
Making matters worse, some observers say, is the city leadership's apparent indifference to the bloodletting. Just weeks after Hurricane Katrina in August 2005, Mayor Ray Nagin, then in the very early stages of a heated reelection bid, dismissed warnings that many companies, like displaced residents, might opt to relocate. Nagin said he hoped they would stay. "But if they don't," he said with typical glibness, "I'll send them a postcard."
The comment might have been written off as one of Nagin's many verbal missteps. But in the months that followed, the warnings turned out in many cases to be true, even as the city's rebuilding effort languished, infrastructure repairs limped along, the state reimbursement program for damaged homes faltered and the New Orleans' infamous crime rate made a sickening comeback.
New Orleans "wasn't considered a great city for doing business before the storm. People were always dribbling out," says Peter Ricchiuti, a professor of economics at Tulane University. While many of the companies that made it through the storm could stand to benefit from the city's recovery, he says, Katrina may have hastened the loss of high-paying energy jobs. "We're losing the white-collar jobs and keeping the blue-collar jobs," he says. "We're becoming much more of a blue-collar oil industry."
One of the latest examples is Chevron Corp., which is building new offices in the northern suburbs, 40 miles north of the city across Lake Pontchartrain, and plans to transfer 550 employees from New Orleans to Covington by the end of the year. That would take well-paid people out of downtown New Orleans, a move that will impact the central business district's economy. "We made the decision in May, 2006, when our employees were making important housing decisions," says Qi Wilson, a Chevron spokesperson. The company, like many employees, decided the north shore offered better security should another hurricane strike, along with fewer of the post-Katrina headaches that still plague the city. The move "will make it easier to retain the talent we have, and to attract new talent," Wilson says.
It will also leave in question the future of a 325,000-sq.-ft. office tower in downtown New Orleans, where many former office buildings have been converted to hotels and condominiums. But condos and hotels don't foster the sort of long-term, thriving business climate that encourages companies to put down roots. "Every time we lose a corporate headquarters, it makes it harder for us to get a new corporate headquarters," says Al Petrie, a New Orleans investor and media relations consultant who has extensive ties with the energy industry. Katrina's chaotic aftermath and slow recovery are "forcing people to make a decision right now," he says. "They're saying, 'okay, if the infrastructure of the city is not going to be there, what's the quality of life for my employees going to be?' That's the reason the Chevrons of the world are moving across the lake. They're not ready to leave the state, but if there's another storm, they don't want their employees to have to go through all this again."
City officials have done little to dissuade them, Petrie says. "We are doing nothing to try to retain business," he says. "We are too focused on getting help from the federal government, which I agree we need. But the business community has offered to work with the city and the state, and we're getting no response."
Donna Addkison, Nagin's chief economic advisor, disagrees. The administration "very actively pursues opportunities to attract, retain and grow businesses that are already located in Louisiana," she says. "There are over 16,000 businesses in the city, and I can tell you that this calendar year we have made 16,079 contacts with businesses. Sometimes our efforts may not be successful, because there are overwhelming business reasons that will lead them to make that decision [to leave]. But we do try very hard to make sure that businesses are aware of the federal, state and local incentives that are in place which may encourage them to stay in the area."
Those incentives, however, often do not outweigh the negatives, including a troubled school system, fewer flights in and out of the city and a reputation for official corruption — a lingering problem brought to the fore in recent weeks by the indictment of U.S. Rep. William Jefferson of New Orleans on bribery and corruption charges and the guilty plea of a former Orleans Parish School Board president, Ellenese Brooks-Simms, who admitted in June to taking more than $100,000 in bribes in exchange for her support of a multi-million dollar public school system contract.
But there are promising signs, including the long-delayed appointment of a city inspector general to act as a watchdog over public agencies, and ongoing investigations into corruption by past officials — an effort that Nagin, to his credit, spearheaded in his first term. New population statistics show that the city has regained more than half of its pre-Katrina population. Citizen-led reforms have consolidated the city's patchwork and inefficient network of property assessors and replaced the politician-dominated levee oversight system with a centralized office staffed largely by engineers and scientists. Enrollment at Tulane and Loyola University, New Orleans' prestigious private colleges, has rebounded. And the city's notoriously underperforming school system is showing signs of improvement, with charter schools stepping in to revamp many troubled schools.
Whether it will be sufficient — or happen quickly enough — to staunch the loss of high-paying jobs is a serious question. "As painful as all of this has been, you've had changes, really positive, powerful changes, that never in a million years would have happened without this disaster," Ricchiuti says. And despite lingering problems, there are many residents who are willing to tough it out, and hope businesses — and city officials — will follow their example.
"I don't want to live anywhere else," Petrie says. "I think there is going to be a lot of opportunity here. The city is not going to die. It's going to get rebuilt at some point. It's just very frustrating that we're not taking the actions that we could take, short-term, to accelerate that."