Life After Katrina
Any sense of normal in New Orleans lasts all of about three steps. That's all it takes to set foot in a nearly empty terminal at Louis Armstrong International. About the only other people there apparently just got off your plane, too. Walking down a wide-open concourse, it's what you don't hear that you notice next. No “CNN Headline News” blaring from TV screens. No boarding announcements mashed together with gate changes and cell phone conversations.
Even time evidently doesn't follow the same routine. The first clock we saw read 10:30, even though we arrived at 11:45 a.m. Another clock at baggage claim read 12:20.
“If you can call this 'normal,' then you can say we're back to normal - normal chaos,” says Jim Finley, owner of C.N. Finley, New Orleans, one of the area contractors we interviewed in May about getting back to business after Hurricane Katrina.
Our visit was nine months after Katrina made landfall in Buras-Triumph, La., at 6:10 a.m., Monday, Aug. 29, 2005, causing an estimated $81.2 billion in damages, largely in New Orleans and the Mississippi Gulf Coast. Our tour included the hardest hit parts of the Crescent City and a ride across Highway 90 that runs along the Gulf of Mexico between Gulfport and Biloxi, Miss.
What we heard from contractors was plenty of initial work, but anxiety over the pace of reconstruction of a “new” New Orleans, all set against a backdrop of moldy sheetrock, trash-filled streets, FEMA trailers, closed schools, boarded-up shopping malls, abandoned cars and boats in front yards. Where fast-food joints offer signing bonuses to attract workers, and $35 will buy you a three-hour Gray Line bus tour of ravaged neighborhoods.
From the looks of most of New Orleans' neighborhoods, you'd think Katrina had hit the week before.
Point your car in most any direction, and you'll get used to seeing a yellow-black line that marks the height of the flood. Block after block of neighborhoods, some 160,000 homes and apartments, were either damaged or destroyed by wind, water and fire. While TV reports showed the devastated Ninth Ward where most homes were destroyed outright, what you didn't see on TV were thousands of middle- to upper-middle-class homes left uninhabitable.
Many homes look like they weathered the storm well enough on the outside. But a look inside some shows gutted homes stripped down to the studs with the studs painted with a substance to stave off mold. And that's if the homeowners are even doing anything, since so many are still arguing with insurance companies over wind and water damage and awaiting any clear direction from city officials on whether they can rebuild.
The Great EscapeFinley, a licensed pilot who served in the Air Force in the 1960s, flew his plane to his in-laws in Beaumont, Texas. Residents who left town basically weren't allowed back into town for four weeks. However, Finley was able to fly over his shop four days after Katrina.
“We weren't allowed to fly below 7,000 ft., so it was hard to tell if we had any water damage from that height,” he says. “But it didn't seem so.” Finley's company was started in 1934 by his father and had been at the same location since 1936. In fact, Finley, who will become the vice president of the the Plumbing-Heating-Cooling Contractors-National Association later this month at its convention in Chicago, grew up in the home that now serves as the company's offices.
Finley's location is in the city's Garden District on somewhat higher ground than most of New Orleans - the great deluge occurred just a few blocks away. When he was finally able to see his business after about four weeks, he considered himself lucky since the site didn't suffer any wind or water damage. The adjoining warehouse had lost power, which it still lacked nine months later. Four service trucks were OK, too, with a few just siphoned of all their gas.
“Whoever did it left us the gas can and the pliers used to break through the fence,” Finley says. “Maybe he was run off, but I'd like to think it was payment for the gas.”
One of the service trucks was lost; one of his techs, Monroe Stewart, took the vehicle home with him before catching a bus to visit relatives in Mississippi a few days before Katrina. In other words, Stewart might be the only person in New Orleans who left town because he wanted to, not because he had to.
When Stewart did return, he spent a week sleeping on a couch in Finley's office before the Federal Emergency Management Agency sent him one of their now-familiar white trailers. Finley was able to wedge it into the yard of his shop, and it was Stewart's home from last November to the time we met last spring. (He has since retired, after working for Finley since 1965.)
A couple of other Finley employees we met also had stories to tell.
“Be glad you weren't here,” says tech Pete Hensley, “because your blood pressure would have gone up a few bars.”
Hensley and his family were planning on staying and riding it out before the mandatory evacuation order came for their parish. “I was a kid when Hurricane Betsy struck in 1965, but I still remember it,” he adds. “But nothing in your imagination would prepare you for what Katrina turned out to be.”
Ironically, Betsy caused flooding in New Orleans and the Army Corps of Engineers built new levees for the city tough enough to resist the conditions of another Betsy-sized hurricane, which failed to do the job 40 years later when one finally did show up.
“I've lived here my whole life and it's the first time I've ever evacuated,” says Denny Healy, vice president and general manager.“Saturday was a beautiful day.” He left the next day and ended up sharing his handicapped brother's one-bedroom apartment with a total of 11 people. He eventually found another place to stay for about a month before returning.
His house didn't do too badly, but cleaning up sounds as if it would have been better if the flood had just washed everything away.
“People were taking their refrigerators and just putting them out in the street,” he says. “You just didn't even want to open those things.” If you had to, Healy found that packing your nostrils with Vick's Vaporub helped kill the smell.
Replacing his roof took five months. “You'd call a roofer and they'd say, 'You're No. 500,' ” Denny adds. A roof replacement that used to cost $50 a sq. ft. jumped up to $200 a sq. ft.
Back To Work?Finley opened for business after being closed for six weeks. Of course, when there aren't any banks open and mail delivery is suspended, everybody has a serious cash flow problem to contend with. Before returning, he was able to use his own personal accounts to pay his crew week by week. The PHCC-NA also gave any of its members affected by the crisis $2,000 in cash, and waived any national dues for the next two years.
Most all of Finley's work is in service and repair work. As luck would have it, most of his customers were spared major flooding - although in this case, 2 ft. of water is considered minor damage. Much of the immediate need was replacing water heaters and floor furnaces. Natural gas lines needed to be cleaned and pass an inspection, since water had entered them.
Getting to those customers wasn't easy, since few, if any, of the traffic lights were working in the early days of recovering from Katrina.
“Everyone was courteous for about a month,” Finley says, “and then reverted to their old selves again.” When we visited, the company had a backlog of a week and a half, down from a few weeks. “Our terrritory may not have been affected, but a lot of our customers still haven't come back,” he notes. “And we lost a lot plumbers, so as a result, our guys are busier than they've ever been with our customers demanding more from us.”
We met Finley weeks before he was going to close out his fiscal year, May 31. Afterward, he told us there was a 4 percent increase in business, even with only about 10 and a half months worth of work booked in that time. “Twice I've found myself looking for last September's invoice book,” he adds.
Residential service and repair is the lifeblood of Finley's business. We write so often about contractors like Finley that we take that fact for granted. But a catastrophe like Katrina throws that fact so far out of whack, and shows how crucial a service call to one home can be. Simply put, no homes, no people, no jobs, no businesses.
The Brookings Institution, a well-known Washington, D.C., think tank, may not have put it as eloquently as that, but one the most recent, comprehensive reports on New Orleans came to that not-so-startling conclusion.
“So much of the recovery of this region's economy - from the strength of the local tax base to the number of jobs in the city to the scale of business starts and retention - are dependent upon factors related to housing and infrastructure, which affect market confidence about the region,” the Brookings report says. “Are there homes for workers to live in? Is the region safe and well-protected from future hurricanes, both for businesses and families? Is there a neighborhood for residents to return to? Are there good schools, decent services and safe streets to attract and retain families?”
In a special edition of its monthly “Katrina Index,” the institution finally identified a number of bright spots in the New Orleans housing market that, “after six months of near stagnation, is finally churning” with signs of rehabilitation and demolition activity, and even home buying and selling.
The fact that homes in flood-ravaged parts of New Orleans can sell at all is an amazing development. A New York Times article last July identified one couple's story as typical. The couple had lived in the Gentilly neighborhood in a 1950s, 2,600-sq.-ft. home they bought nine years ago for $108,000. It had been appraised at nearly $240,000 before Katrina. Levees broke in this part of town and the home was under water for weeks. But it sold after just two weeks on the market for $110,000, even though it had been gutted and lacked walls, floors and appliances. The buyer was a firefighter who said he had admired the home for years and planned to fix it up and live in it.
“If the quality of services remains uneven and unreliable for much longer, families, even with housing assistance in hand, may vote with their feet,” the report concludes. “The quality of basic service matters greatly to the city's pace of recovery.”
As for the job market, the labor force in the New Orleans region is 30 percent less than it was a year ago. The number of workers has increased lately, but so has the unemployment rate. The 7.2 percent rate is higher than the state's and the country overall. The New Orleans area lost 190,000 workers over the past year, with most of the losses coming from the health and education sectors. Meanwhile, the Department of Labor estimates that there are 278,000 workers displaced by Katrina, with 23 percent of the people unemployed.
Jobs to fill are one thing, but affordable housing to keep workers in place adds to this town's woes. Rent prices have increased dramatically in the past year, as the housing market tightens up. For example, a one-bedroom apartment that rented for $578 now goes for more than $800.
The report sums up that one year isn't much time to turn around the city, considering that the first three months were spent drying it out for any rebuilding to possibly take place. Most of the $100 billion in federal aid was spent on short-term emergency needs of individuals rather than any long-term recovery of the city.
But one year is a long time for families and businesses “anxious to make decisions about their futures, based on signs they see around them marking the strengths and likelihood of economic recovery,” the report adds. “And displaced residents, wishing to make a return home, are looking for similar signals.”
If so, the signal reads yellow. On one hand, the housing market shows progress and tourism is approaching its pre-Katrina levels, but on the other hand, basic city services are erratic, affordable housing seems out of reach and unemployment remains too high.
“In short, much more work is needed in the coming months and years to boost market confidence in New Orleans and move the region's economy affirmatively forward,” says the report.
Mechanical TrendsThat lack of confidence in the market is what worries mechanical contractors we talked to, such as David Gallo, president of Gallo Mechanical Contractors Inc., New Orleans.
“I used to be able to look out over the next two years to plan for business, but now it's more like two months,” he says. “After Katrina, we received a lot of emergency work. Major jobs, major square footage, but all of it relatively of short duration. Now a lot of that emergency work is ending and there's little work after this summer.”
Gallo had the pleasure of seeing his New Orleans warehouse under water on CNN the day after Katrina. “I could tell from the white roof,” he adds. “Sixty-one years' worth of tools spent 17 days in corrosive water.” The company ultimately lost an entire fab shop with 28 welding machines. The business also lost 5,500 sq. ft. of office space, 12 service trucks and the 90 percent-completed new warehouse was left 100 percent stripped of its metal skin.
By the time he was watching CNN, he'd met up with family members in a hotel in Mississippi. The company also operated a satellite office in hard-hit Gulfport, Miss. By Thursday, just three days after Katrina, Gallo and other family members decided to open up a temporary office in Baton Rouge, La. (Not surprisingly, many nearby towns like Baton Rouge and Hammond received a lot of new residents. Hammond, for example, has doubled in size since Katrina.)
“We have customers throughout the Gulf Coast, so we got a lot of business right away from nonflooded customers who needed emergency work,” Gallo says. By that Thursday, he says, six employees out of 128 were back to work. By the following week, it was around 50, and by the end of September, all but a few were back.
“There was peace for everybody coming back to work as quickly as we did,” he says, adding that his own house had almost 9 ft. of water and remains boarded up. “With all that happened, it must be worse when you don't have a job to come back to.”
By October, they had moved the temporary office to Hammond, and decided not to reopen the damaged Gulfport site. By Dec. 1, they returned to the New Orleans location, making use of second-floor office space in one of the older buildings, and putting in trailers for both office space and living quarters for some employees on the slab of what would have been the brand-new warehouse.
They had no phone service or power when they re-opened the New Orleans office, and didn't get power until two weeks later. “We still don't have phone service or Internet service here,” he adds.
In other emergency work, Gallo's company has been involved in renovating the Super Dome, undoubtedly the biggest symbol of New Orlean's potential renewal. The structure is getting $130 million in repairs, plus another $56 million in upgrades. We took a tour of the facility and can say that basically every square inch of the place is new. (The Saints will play their first home game this season Sept. 25 on “Monday Night Football.”) Other major jobs for the company include renovating three Catholic high schools, expanding the New Orleans Convention Center and completing the replacement of mechanical systems inside the Hancock Bank building, Gulfport, Miss. Jobs like these have doubled Gallo's year-to-date revenues.
While the pace of emergency work seems to be weakening, Gallo adds that part of the problem of rebuilding New Orleans is the lack of clear direction from local, state or federal officials about how to start over.
“We had been awarded some substantial jobs before Katrina, but those are either on hold or cancelled,” Gallo says. “We are certainly talking to a lot of people about those projects and others. And who knows? We could end up with more business in the next six months than we've ever had. That's the problem. You just don't know.”
There are plenty of opportunities, he says. In recent years, New Orleans has become a major point of departure for luxury cruises. A terminal, much like what you'd expect to find at an airport, for these cruises was about 25 percent built before Katrina wiped out the work. In the public sector, hospitals are crucial. And in Mississippi, casinos can be built on land now after many of the mammoth barges floating in the Gulf of Mexico ended up on top of the Holiday Inn across the highway. (See sidebar on page 68 for more on Mississippi.)
“There's been a lot of rebuilding since Katrina, but very little new construction,” Gallo adds.
Gallo does have complete confidence in at least one new construction project that he is looking forward to: “We won't be going back to our old office in Gulfport,” he says. “We bought six acres of land in Hammond and we're building there. It's 43 feet above sea level!”
Mississippi: A Whole Other Story
We didn't spend as much time in Mississippi as we did in New Orleans. But it doesn't take long to see big differences between the two areas. If New Orleans looks like Katrina hit just the week before, the Mississippi Gulf Coast looks like what you'd expect all these months after Katrina really did its damage.
While we didn't see much residential rebuilding, the slabs on which homes stood across the Gulf have long been cleared of debris. And as for commercial construction, we saw plenty of activity surrounding the casinos that line the water.
A recent USA Today story painted a good picture of how the state has coped with Katrina:
Why the difference? Political leadership and less governmental infighting certainly helped. (It doesn't hurt either when the governor is the former national chairman of the Republican National Committee). Mississippi also experienced much less damage overall than New Orleans. More than three times as many homes were rendered uninhabitable in Louisiana than in Mississippi. Also, if you can call it a benefit, Katrina washed a storm surge over the immediate coastline, but then the water receded almost as quickly as it came. Counter that with the month-long soup bowl created by New Orleans' failed levee system.
Also, it's a sure bet that casinos will pump money into the area, an unlikely savior in this Bible Belt state. Gambling has been legal in the state since 1990, but the casinos had to be offshore, either riverboats on the Mississippi River, or on barges docked along the Gulf Coast. Many of the big names you'd associate with Las Vegas all had operations between Biloxi and Gulfport. The Hard Rock Hotel & Casino, for example, was just two days away from opening before Katrina hit.
No surprise that Katrina heavily damaged most gambling barges and their neighboring hotels. The state legislature, however, lifted the offshore ban, giving casino operators room to grow. Even now, gamblers wagered $375 million at the three casinos that had opened earlier this year - a 70 percent increase of what was put on the line last year at nine casinos.
Since the ban was lifted, Harrah's was set to open a new casino last month and has plans for building a $1 billion resort. MGM Mirage is spending $500 million to renovate and expand its operation.
In addition, casino operators are taking advantage of tax credits passed by the state legislature to spur construction. In fiscal year 2005, casinos contributed $334 million to state and local coffers. In 2006, it was down to $273 million.
Rebuilding just the homes alone affected by Hurricane Katrina is a Herculean task. We read a statistic from the American Red Cross that put the immense task in perspective. The organization estimated that more than 850,000 homes were destroyed, damaged or otherwise left inaccessible by Katrina.
That number is equal to 17 percent of the whole country's annual new home construction, which has been running at about 2 million.
While we don't mean to discount the insurance battles currently going on, one piece of the Katrina recovery efforts was approved this summer when the U.S. Department of Housing and Urban Development started sending checks to homeowners. The grants can be up to $150,000 each, part of a $10 billion federal package to those in Mississippi and Louisiana who saw their homes damaged or destroyed.
In Mississippi, 16,500 have applied for part of the state's $3 billion share of grants. And in Louisiana, 90,000 residents have applied for their state's $7.5 billion share. In Louisiana, the grants will go to banks. Funds will be distributed to homeowners as repairs are made. The Mississippi grants will go directly to homeowners after they agree to guidelines on flood insurance and rebuilding to design homes to better withstand strong winds and high water.