Let the Good Times Roll Once Again

By Craig Guillot

As cities around the country strive for better economic diversification to weather downturns, New Orleans is setting its sights beyond the historic and entertainment attractions of the French Quarter and the economic stalwart that is oil and gas.

The city has faced economic struggles for most of its modern history, but many planners say Hurricane Katrina pushed the city into action to expand the economy and reduce overreliance on energy and tourism. Billions of dollars in recovery funds and investments, along with an influx of entrepreneurs and educated professionals, have certainly broken new ground. And over the past 12 years, rapidly growing sectors such as health care and tech have brought with them a multitude of new jobs and opportunities.

But while the city is heading in the right direction, local planners say there's much more work to be done, particularly when it comes to ensuring that everyone benefits from the city's economic growth.

Technicians work in a sterilization room in the University Medical Center in New Orleans in 2015. The broader 1,500-acre "biomedical corridor" has since grown to support numerous other medical companies and thousands of jobs. Photo by Edmund D. Fountain/The New York Times.

Mixing it up

The economic damage in the aftermath of Katrina created the will to act as economic diversification became a means for survival rather than just a goal for improvement, says Michael Hecht, CEO of GNO Inc., a public-private group promoting economic development for the 10-parish Greater New Orleans Region. According to a report by the Bureau of Labor Statistics, the city lost 100,000 jobs and nearly $3 billion in wages in the year following the storm.

'A strong economy has to be diverse, and it needs workers of varying levels of skill and pay.'
—Tim Jackson, AICP, Planning Administrator, New Orleans City Planning Commission

An influx of federal recovery dollars, insurance proceeds, and private investment gave the community an unprecedented cash infusion, and the arrival of volunteers, entrepreneurs, and investors planted seeds for new development. In recent years, analysts and economic development publications have recognized New Orleans for its improved business climate, attraction of talent, and cost-effectiveness for doing business.

For the first year after the storm, New Orleans was an economic frontier as entrepreneurs, migrant workers, volunteers, and new and old residents tried to carve out new opportunities. State and local efforts also sought to cultivate new industries and spark growth in others.

In 2008, GNO, Inc., adopted the Blue Ocean Strategy and modified it to fit for the local market. The city began targeting the tech sector with digital media incentives and place-based development, and establishing itself as an innovation hub. New opportunities and a low cost of living in a culturally unique city attracted droves of educated millennials.

"We figured we could be this low-cost, high-culture environment as the alternative for people who were tired of paying $3,000 per month for a 600-square-foot studio in San Francisco," says Hecht.

By most measures, the strategy has been working. The Urban Land Institute recently ranked New Orleans as the fifth best city for millennial in-migration, behind Virginia Beach-Norfolk and Richmond, Virginia; Riverside-San Bernardino-Ontario, California; and Memphis, Tennessee. The city has fostered several tech startups over the past decade and is home to Collision, the fastest-growing tech conference in the country. In April 2017, local startup Lucid closed on a $60 million funding round to grow its global footprint. A recent report by Software. org ranked Louisiana the fifth best state for growth in software employment from 2014 to 2016.

New Orleans has also made significant progress in developing a robust health care sector. In 2015, two of the largest hospitals in the South, the University Medical Center and the Southeast Louisiana Veterans Health Care System, opened just outside of the central business district. The two facilities were constructed on 70 acres of land, which required the city to move or demolish more than 100 homes. The broader 1,500-acre "biomedical corridor" has since grown to support numerous other medical companies and thousands of jobs. Hecht draws parallels to how Cleveland and Houston have transformed into health-care destinations and believes New Orleans could ultimately be a leader in neurodegenerative disease research.

Water management is another industry with strong growth potential. Sitting below sea level, and faced with erosion, land subsistence, and flooding, Louisiana has cultivated water management technologies and strategies that are now being used around the globe. This includes things like levee and flood wall construction, marsh restoration, shoreline fortification, and pump station design. (Read more about the city's relationship with water on page 22.)

GNO, Inc. reports that the sector employs 30,000 people in the region and is projected to grow by 23 percent in the next decade. Hecht says most are well-paid jobs ranging from sales reps and IT techs to carpenters and welders, and that half only require "middle skills."

"If we are recognized as leaders in this, and basically become the Dutch of North America, then we can do what they've done in Holland, which is where they are driving about four percent of their GDP by selling water management technology," Hecht says.

In 2014, the New Orleans Regional Planning Commission released the Comprehensive Economic Development Strategy, which conducted a SWOT analysis and set forth a plan of action to make greater New Orleans a "thriving, resilient, sustainable, prosperous and equitable region."

Not there yet

While New Orleans has certainly broadened its horizons post-Katrina, debate remains about the quality and pace of that diversification. Tim Jackson, AICP, planning administrator at the New Orleans City Planning Commission, says the city's master plan, which was adopted in 2010, has a strong focus on economic resilience.

"A strong economy has to be diverse, and it needs workers of varying levels of skill and pay," Jackson says.

Quentin Messer Jr., president and CEO of the New Orleans Business Alliance, says diversification is a subjective term. In one example, he says the tech sector has been a success in terms of investment, but hasn't produced the number or diversity of jobs one might expect. SmartAsset recently reported that the number of tech jobs has grown by 35 percent since 2012, but many of these jobs require four-year degrees. GNO, Inc. data reveals that between 2001 and 2016, the biggest declines in jobs as a percentage of the labor market were in government, manufacturing, energy, wholesale trade, finance, and insurance. The biggest job gains, as a percentage of the total workforce, were in health care, hotel and food service, professional services, and educational services.

Marc Morial, president of the National Urban League, served as mayor of New Orleans from 1994 to 2002 and says the city needs more quality jobs, and a diverse array of them. "You need a stronger effort to help people [who are] waiters, bartenders, working in entry-level positions to move up," Morial says. "Everyone hasn't come back [from Katrina] at the same rate."

Morial, who wrote a public letter in October to candidates in last fall's election, says city government will also need to take a closer look at where its public funds are going and how they're providing that economic diversification on a community level. He says there have been limited opportunities for the working poor and believes there needs to be a public-private effort to promote "fair and equitable" growth.

Bethany Stich, PhD, chair and associate professor at the Department of Planning and Urban Studies at the University of New Orleans, says the city could recapitalize on the strength of its manufacturing and transportation assets. Stich says the city has had a surprising dearth of manufacturing operations given its position as a top importer of many materials and its rail, ocean, and interstate access.

One challenge New Orleans faces is that much of the city is already built out, and many adjacent areas in New Orleans East are federally protected wetlands not zoned for commercial use.

New Orleans East is home to NASA's Michoud Assembly Facility, one of the world's largest manufacturing plants, and companies such as Textron Marine & Land, Dynamic Industries, Inc., and Blade Dynamics, but the area also carries a heightened risk of flooding and is still recovering from Katrina. According to GCR, Inc. there are nearly 7,000 vacant houses in the area, and community leaders have recently been discussing the idea of seceding from the city. They say not enough money has been invested in the area while more tax dollars are being spent in places like Uptown and the French Quarter.

GNO, Inc.'s data reveals that manufacturing jobs represented around five percent of the total New Orleans labor market in 2016, compared to about eight percent nationwide. Manufacturing is growing in neighboring parishes, but New Orleans's current workforce has limited mobility and the parishes aren't served by public transportation.

Socioeconomic challenges

New Orleans may be mixing up its economy, but it is still working toward a level of diversification that works for everyone. There's growing concern that many citizens aren't benefiting from economic upturns.

A report by the Brookings Institute noted while the portion of New Orleans residents living in "extreme poverty" dipped from 39 percent to 30 percent between 2000 and 2013, the overall poverty rate remains unchanged. An analysis of Census information by the Louisiana Association of United Ways found that more than half of New Orleans's 152,700 households are "struggling to get by."

Stich says rising rents have become a "serious problem" for many workers, and crime rates have once again risen to some of the highest in the nation. The Housing Authority of New Orleans released a plan last year to combat growing gentrification in the city, and noted that some communities are becoming more segregated, with mostly black areas having less access to investment and prosperity.

Economic developers say the city's diversifying economy has to be viewed with the long-term perspective that such transitions require. Hecht points to cities like Miami, New York, and Raleigh and says such major urban economic turnarounds can be "30-plus-year projects."

"The issues of generational poverty and inequality didn't arise over a decade; it arose over centuries. There is progress, but it's going to take a generation to fully see the fruits of our efforts, in terms of a real change in generational wealth and growth of the middle class, which is ultimately what we're seeking," Hecht says.

Craig Guillot is a business journalist based in New Orleans.