LACK OF PRIVATE MONEY SLOWS NEW ORLEANS RECOVERY PLANS

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LACK OF PRIVATE MONEY SLOWS NEW ORLEANS RECOVERY PLANS
June 30, 2009
By ALAN SAYRE
The Herald

NEW ORLEANS — A deal approved this week to fill an empty skyscraper and keep the city's pro football team raises the bill of taxpayer-funded redevelopment projects in downtown New Orleans to $300 million.

And those projects are almost the sole source of rebuilding in the city that was devastated four years ago by Hurricane Katrina. Most of the big private investment plans have stalled since the nation sank into a recession. Among the casualties: Donald Trump's proposed $400 million hotel and condominium high-rise and another developer's $60 million condominium project in the riverfront Warehouse District.

The evaporation of private development is troubling in a city where good-paying jobs tied to white-collar professions are too few. Commercial investment was tough to come by even before Katrina, and now it's clear the post-storm recovery will likely take years longer than once thought.

The unemployment rate in the New Orleans metropolitan area rose to 6 percent in May, up from 3.4 percent the year before following the loss of 3,800 jobs over the year.

"The recovery rate has been slowing down, rather than picking up," said Loren Scott, an economist at Louisiana State University.

Without construction jobs aimed at $14 billion worth of levee repairs and improvements and two major bridge projects — the widening of the Huey P. Long Bridge over the Mississippi River and the rebuilding of the Twin Spans bridge over Lake Pontchartrain — the
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city's economy would be moving even slower.

"It's worrisome," Scott said.

One private project is the revival of the once-flooded Fairmont Hotel, which opens in July following a $135 million renovation by a Louisiana-based company, First Class Hotels LLC. Taking back its previous name, The Roosevelt, the 505-room hotel is being managed by Hilton Hotels Corp. under its Waldorf-Astoria brand.

But taxpayers are funding the rest of the major projects in downtown New Orleans.

The Louisiana Legislature, for example, approved a complicated deal to buy the empty 36-story Dominion Tower. The building would then be renovated at a cost of $90 million by New Orleans Saints owner Tom Benson, who would, in turn, lease about 320,000 square feet of office space to the state for up to 20 years.

As part of the same deal, the state also will spend about $85 million to upgrade the Superdome with expanded field-level seating and new exclusive lounges, along with additional suites and more concession stands. The NFL team would agree to remain in the city through 2025. Benson would get a parking garage and an abandoned 555,000-square-foot shopping mall that could be turned into an entertainment zone. Both are connected to the Dominion Tower.

The plan already has convinced the NFL to award the 2013 Super Bowl to New Orleans.

In a separate deal, the 1,184-room Hyatt Regency New Orleans Hotel near the Superdome, which has been closed since Katrina, is in line for a renovation using $225 million in tax-exempt bonds issued through the federal Gulf Opportunity Zone Act. So far, though, the bonds have not found a market because of the national credit meltdown.

The city, meanwhile, has agreed to pay $8 million for another Katrina-damaged high-rise — the Chevron Building — for a new City Hall. Chevron last year moved its regional operations to St. Tammany Parish, out of the hurricane storm danger zone. It's not yet known what the city would need to spend on renovations for government offices. That deal still needs City Council approval.

Before Katrina hit in August 2005, there was just under 9.3 million square feet of top-grade office space in New Orleans' Central Business District. Today, about 510,000 square feet of that space is out of commission — about half of which is in the Dominion Tower, according to Bruce Sossaman, leasing director for Equity Office Properties.

The area also has about 2.3 million square feet of second-class space, but about 60 percent of that remains out of service. Sossaman said that because of the cost of renovating those buildings and meeting new building codes, much of the space likely will be redeveloped as apartments and hotels — if the economy improves enough to justify it.

The business district still has an air of the mineral-based economy that has largely left the city.

Poydras Street, the main corridor, is dotted with buildings formerly named for the oil companies that dominated the economy until the oil bust of the 1980s — Texaco, Amoco and ExxonMobil.

ExxonMobil has one employee, handling environmental matters, remaining in the leased 467,000-square-foot tower it once filled with 300 workers handling offshore drilling in the Gulf of Mexico. The building is about full today — occupied mostly by the Internal Revenue Service, the Louisiana Department of Revenue and the Veterans Administration.