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In New Orleans, Business Faces Headwinds

In New Orleans, Business Faces Headwinds

Rebecca Ruiz09.02.08, 7:25 PM ET

NEW ORLEANS – Michael Hecht’s phone started ringing Friday.

Several members of his board wanted to talk. Hecht is president and CEO of Greater New Orleans Inc., an economic development company whose board members include executives from AT&T Louisiana, Chase Bank and Shell Exploration & Production. The concern: If Gustav struck with the force first predicted, it would become even harder to pitch the Big Easy as a destination for company headquarters or major offices.

Their worst fears were not realized. What Hecht, who was riding out the storm in Natchez, La., and other business leaders expressed today was relief.

“Without question, we came out of this battle tested,” he said. “That’s the general consensus I’m picking up on.” Nevertheless, the central worry remains. In the wake of Hurricane Katrina three years ago, many companies reevaluated whether they should have large bases in the flood-prone city.

Some, like Shell, made huge reinvestments in the community, even buying homes for employees in nearby towns as a way of luring them back to work in the area. Others, especially small businesses, went under and never returned. Some 7,900 businesses died in the wake of Katrina. Gustav is a reminder.

“There are two sides of the story,” he said. “We’ve proved our mettle. On the flip side, we still have to creatively engage the perceived and real issues.”

A report by the non-partisan Political and Economic Research Council found more than two out of three small-business owners in areas affected by the 2005 hurricanes reported revenue losses as a direct result of storms, and as of August 2007, more than one in four small-business owners who were still in business were bringing in less than half of their pre-Katrina total revenues.

Another problem: Labor is in short supply. In August the area had a 4.1% unemployment rate, the lowest in the U.S.

But the study also found optimism: Nearly two in three believed their short-term business prospects were either “good” or “very good,” and more than two in three perceived their long-term business prospects to be promising as tourism rebounds to near pre-Katrina levels and the city continues to benefit from billions in government reconstructing funding.

Still, the stops-and-starts of hurricane season drive companies away. As an effort to lure them to the city, Greater New Orleans Inc. is considering offering business disruption insurance as part of an incentive package. Hecht said he’s yet to see another city provide a similar option, but the company is in the initial stages of developing the idea.

What’s more encouraging to Hecht is the arrival of technology companies and creative professional firms that value lower labor costs and possess mostly intellectual capital. About a dozen of these companies have established headquarters or a major office in the city, including Iseatz, Turbo Squid and the New Orleans Exchange.

Still, the lifeblood of the city’s economy comes from industries like trade, energy, banking and real estate, which require sophisticated emergency preparedness planning. Once stalled, they can have a significant financial impact on the city’s livelihood.

One legislative priority for the company is restoring the coastal wetlands, which many argue would shore up the city’s chances of resisting another Katrina-sized hurricane. Hecht sees this as particularly important for keeping the Port of Louisiana competitive against a widening Panama Canal and traffic at Los Angeles’ ports.

It’s a lot to do. Post-Gustav cleanup may be quick; other kinds of damage will take longer.

http://www.forbes.com/business/2008/09/02/new-orleans-gustav-biz-cx_rr_0902nola-business.html

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