BIZ: Getting Businesses Back

Entrepreneurs, by nature, are a tenacious lot. That is fortunate for New Orleans because starting and growing a business in the current economic environment requires a special brand of moxie. Anyone who launches a business takes a certain leap of faith that it will succeed but many enterprising folks in the local area must overcome high hurdles these days even to get to that jumping-off point.

Judging by a number of factors, businesses in the New Orleans area did an admirable job of getting themselves back on track after  Katrina knocked them off their feet. In addition, interest in start-ups appears strong. Data from the Louisiana Secretary of State’s office show that new business incorporations and LLCs (limited liability companies) in Orleans, Jefferson and St. Tammany parishes were 18 percent higher in the 12 months following Katrina than in the year leading up to the disaster. Through the end of 2006, entrepreneurs in those parishes completed more than 15,000 post-Katrina new-business filings.

However, big issues continue to hamper the progress of local economic growth and business development and business and political leaders are struggling to find a fix.
In the realm of small businesses – which comprise the majority of enterprises that operate in and around New Orleans – recovery has been spotty, according to sources that have tracked it. Richard Campanella, who has surveyed business recovery for Tulane University’s Center for Bioenvironmental Research, says he has seen significant progress in selected areas.

Last May, Campanella began documenting the progress of a comeback along three commercial corridors in the city – Magazine Street, Carrollton Avenue and a portion of St. Claude Avenue. He says his latest findings clearly show some entrepreneurs’ resilience.

“To the extent that business re-openings are an indicator, New Orleans is slowly but steadily coming back,” he says. Not only did most of the businesses located in unflooded areas open their doors once again, but new enterprises have sprung up in those areas as well. Recovery in the seriously flooded areas, of course, has been slower.

Campanella says almost half of all the businesses that operated along the three corridors pre-Katrina had re-opened as of December 2006. He counts 52 businesses that are brand new to those areas since the flood.

The researchers caution that just because entrepreneurs have opened their doors, it doesn’t necessarily mean they’re prospering. Indeed, he has documented about 20 stores that resumed operation after Katrina and later shut down, apparently for good.

Overwhelmingly, Campanella says, the businesses that have managed a comeback are those that serve a predominantly middle-class clientele who have withstood the rigors of the post-Katrina environment better than residents of poorer neighborhoods.

While business recovery has proceeded at a halting pace within Orleans Parish, which took the worst damage in the flood, activity has been brisk nearby. Neighboring Jefferson Parish not only has seen a hefty rate of business re-openings but also bustling new activity.

The Jefferson Parish Economic Development Commission (JEDCO) reports that based on filings for occupational licenses, close to 4,000 businesses have opened within the parish since August 2005. During that period, fewer than 500 businesses failed to renew their licenses.

Jerry Bologna, JEDCO’s director of economic development services, says interest in doing business has been strong both from companies that did not operate in the region before Katrina and from owners in other parishes who are looking to move or expand into Jefferson.

Not surprisingly, the construction sector is a source of many of the business inquiries JEDCO receives. Bologna says, however, only about a quarter of the new businesses formed since Katrina are construction-related and the rest represent a diverse range of products and services. “We’re seeing a wide variety of new businesses moving in or starting up,” he says.

The mixed progress of economic recovery to date makes it hard to evaluate prospects for the future. But observers say the picture won’t be rosy if the state can’t resolve a couple of fundamental problems that loom large.

“We’re being held back tremendously by the cost of doing business, primarily insurance costs,” says Mark Drennen, president of the economic development organization Greater New Orleans, Inc.

Noting that developers and investors have proposed a substantial number of projects – ranging from downtown condominiums and mixed-use redevelopment proposals to massive apartment renovations in eastern New Orleans – he says, “Virtually all are on hold because of insurance concerns.”

Fears that big insurers will abandon Louisiana have reached crisis proportions among business and homeowners alike and the state’s political leaders are scrambling for solutions at both the state and federal levels.

At the same time, many local businesses are struggling with labor shortages that stem in part from a lack of affordable housing. Despite offering good wages and other benefits, big employers such as Northrop Grumman Corp. and Bollinger Shipyards Inc. are having difficulty finding the skilled workers they need, Drenned says.

He says the state’s business leadership may need to step up soon to try to make the economic environment more welcoming. This may involve lobbying for new business incentives to augment the Gulf Opportunity Zone programs enacted after the hurricane and other tax breaks the state has offered for many years.

“If existing incentives aren’t enough to overcome the additional costs of doing business from labor and insurance, then we may have to be at the state [Legislature] to try to get more,” Drennen says.

In the meantime, the business group will attack the labor issue from the training side. Greater New Orleans, Inc. is administering a local program of training enhancement funded with $8 million in federal grants. The money targets potential workers for the health care and shipbuilding sectors. Recalling the days before Katrina, Drennen says, “I think we’ve got to concentrate on the industries that got us where we were before.”

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