Posted on: January 18 2011
Sunday, January 16, 2011
The city of New Orleans and neighboring parishes are experiencing an economic boom in the wake of last spring's Gulf oil spill.
View full sizeEliot Kamenitz, The Times-Picayune archiveA line forms outside Cafe du Monde in August. New Orleans saw a boost in tourism-related saxes tax revenue in the months after the Gulf oil spill.
Hotel occupancy and sales tax revenues are way up in the New Orleans area, and local leaders have been placed in the awkward position of acknowledging that they have BP to thank for increasing tourism profits.
"Between the remediation effort and the payout from the claims fund and all the other related activity, you've definitely seen a mini-boom," said Michael Hecht, executive director of Greater New Orleans Inc.
Across the Gulf Coast, counties and parishes are experiencing a mix of economic effects from the spill. The main cities closest to the path of the oil spill, New Orleans and Mobile, benefited from a flurry of activity during the 100 days of intense national focus on capping BP's gushing well and on cleaning the spilled crude.
But right across Mobile Bay, in Baldwin County's popular Orange Beach and Gulf Shores resorts, there were huge tourism losses. Orange Beach hotel and condominium occupancy was cut in half from 2009. Lodging revenues countywide were off by $58 million, according to Alabama's Coastal Recovery Commission.
"Tourism numbers on the beach were down 41 percent," said Bob Higgins, chairman of another group called the Coastal Resiliency Commission. "That's the worst decline of any counties east or west of us. But we also have Mobile, and that was the headquarters of the (BP-Coast Guard) unified command, so Mobile County and the parts of Baldwin (County) that are adjacent to Mobile experienced an uptick."
In Escambia County, Fla., where Pensacola is, and in Bay County, Fla., home to Panama City, sales tax revenues stayed flat or decreased, while already high unemployment rates went up.
Meanwhile, the southeast Louisiana parishes hit hardest by fishing closures and the drilling moratorium -- Plaquemines, Jefferson, Lafourche, Terrebonne and St. Mary -- managed a bit of positive news despite the idling of fishing boats and oil field workers. They were able to earn desperately needed cash from a crush of BP executives, Coast Guard responders and cleanup contractors filling their hotel rooms and patronizing their shops and restaurants.
New Orleans reaps benefits
But the city of New Orleans appears to be the biggest economic winner so far, and the one with the most capacity to keep the winning streak going. Its minimal coastline was hardly touched by oil. It is less directly reliant on fishing and drilling than its coastal brethren. One negative was that its average unemployment rate for the six months after the spill was up nearly a point compared with the same period in 2009, even as the national unemployment rate fell slightly. But Orleans Parish's unemployment increase wasn't out of line with other urban areas along the coast.
Worldwide media poured into the city. So, too, did legions of lawyers and oil industry experts, both to investigate the cause of the blowout and to wage legal battles over the effects of the spill and the federal government's deepwater drilling moratorium. Major environmental and legal groups chose to hold their annual conferences in New Orleans so they could be in the big city closest to the spill's epicenter 50 miles off Venice.
All federal litigation related to the oil spill has been consolidated to the federal courthouse on Poydras Street. Steps away, in the Regions Bank Building, the Justice Department has taken over a full floor for visiting lawyers from Washington and elsewhere and, according to a report last week by Environment & Energy Daily, prosecutors are seeking more attorneys to come to town to help with depositions and other preparatory work.
Hecht said office space in downtown New Orleans is 85 percent occupied, near historic highs, and the influx of lawyers is at least partially responsible.
The lion's share of claims
And to top it off, the Gulf Coast Claims Facility, Kenneth Feinberg's $20 billion operation for compensating spill victims, has paid more individual and business damage claims in Orleans Parish than in any other parish or county along the Gulf Coast. Feinberg has paid more than 23,000 emergency claims for losses suffered in New Orleans.
View full sizeDinah Rogers, Times-Picayune archiveMembers of Joe Simon's Jazz trio entertain the crowd during brunch at Commander's Palace.
Most New Orleans restaurantskept busy in the months after the oil spill.
Those claimants received a total of $245 million to cover the first six months of losses, with more money likely coming their way from final payments in the future.
Nearly 100,000 Orleans Parish residents or businesses filed claims, and the quarter who got paid got about $10,000 on average. Some, like day-care workers and waitresses, got checks even though they seemed far removed from the spill's effects.
Earl Bernhardt, the owner of Orleans Grapevine, a restaurant in the French Quarter, said one of his cooks up and quit when he got $15,000 from Feinberg. One of his waitresses got $12,000 but kept her job, he said.
Bernhardt said he had to absorb some higher costs when he couldn't get Louisiana seafood, but he never cut workers' hours. Business dropped slightly for a short time, then returned to normal, he said. He wasn't sure what losses his employees were claiming.
"I guess they could say their tips weren't as big," he said.
'A really spectacular performance'
Only Baldwin County has gotten more money than New Orleans out of the initial emergency claims process -- $280 million. But, unlike Alabama's coastal tourist center, New Orleans experienced a spike in hotel occupancy. Tourism-related sales tax revenues collected in the Crescent City were up by more than a third compared with the summer of 2009.
"We had the strongest period ... in the 100 days after the spill -- what we all thought would be the dark 100 days -- since '03 in two of the months and since '04 in another," said Stephen Perry, executive director of the New Orleans Metropolitan Convention and Visitors Bureau. "It was a really spectacular performance for our tourism economy in the face of a potentially brand-killing situation."
Perry attributes the success to tourism promotion aid from BP. The company gave Louisiana $15 million in the summer to address the threats to its seafood and tourism brand; $5 million went to New Orleans, $5 million stayed with the state and the other $5 million was shared among the coastal parishes. The $5 million for New Orleans immediately doubled the city's usual budget for promoting the tourism industry, Perry said.
"That BP money allowed us to reach the Chicago television market for the first time," Perry said. "We went on the 'Today Show' with chefs. We did television and radio to a degree we've never been able to do. We had online banner ads with The New York Times. We had such a tremendous response that we ended up seeing our largest year-over-year gains we've seen in a while."
Other parishes' gains more nebulous
Meanwhile, the tourism boost in Louisiana's coastal parishes -- the true ground zero of the spill's coastal intrusion and the real home base for fishers and offshore energy businesses -- appears much more tenuous.
Usually low unemployment rates in the key oil patch parishes of Terrebonne, Lafourche and St. Mary are on the rise, in spite of obvious benefits from BP and the Coast Guard setting up shop there.
The impact was more difficult to gauge in Jefferson Parish, where there's a coastal zone hit hard by the spill and the suburban New Orleans part that has far fewer ties to offshore activities. Generic parish sales tax revenues were up in the months after the spill, and the directly affected communities of Jean Lafitte and Grand Isle enjoyed gains of more than 20 percent. But taxing municipalities in Jefferson's northern section saw no growth.
St. Bernard Parish had a similar split personality: Only 17 percent of the people who filed for compensation from Feinberg were able to prove they suffered eligible losses, the lowest success rate of any affected county or parish. St. Bernard's finance director attributes an unexpected jump in sales tax receipts, meanwhile, to new shopping options that opened as part of the parish's more belated recovery from Hurricane Katrina, not anything related to the spill.
In Plaquemines, spill-response jobs caused unemployment to decline during the summer, and the rise in the parish's normally modest sales tax receipts was through the roof. But Plaquemines' unemployment rate began to climb again in the fall as the short-term work in the marshes and at BP's operations in Boothville and Venice began to wrap up.
People who claimed spill-related losses in Plaquemines received, on average, the biggest checks from Feinberg: more than $40,000 per emergency payment. That was four times larger than the average payment to Orleans Parish claimants. Feinberg has rejected about 70 percent of the claims he has received in Louisiana, citing a failure to show that the spill caused a loss. Plaquemines and Orleans both had a rejection rate of about 75 percent. But in Plaquemines, 4,000 of the 6,000 claims Feinberg denied came from families who say they lost their ability to subsist off the sea and weren't able to prove it.
Some businesses thrive while others languish
The complex relationship between the economic benefits and pitfalls of the oil spill were on full display in Terrebonne and Lafourche parishes. The negative effects of the disaster there were undeniable. In Terrebonne, many of Houma's small oil-field supply companies were virtually shut down by the drilling ban, with no access to the spill claims process. In Lafourche's Port Fourchon, the nerve center for oil rig support vessels, the boats have sat idle for months. Shipyard and vessel owners have found ways to keep their employees, biding their time for a return to drilling, but they've done so with the help of 30 percent reductions in rent at the port. The parish's regional port authority lost $1.5 million in the last six months and will probably lose the same amount in the first half of 2011 as long as the feds remain stingy about issuing drilling permits, said parish President Charlotte Randolph.
The two parishes' plentiful oyster beds were heavily damaged and their commercial fishing areas were closed for months.
But their limited hotel rooms were 100 percent occupied for six solid months. BP set up its Louisiana command center near Houma and its response operations center in Cocodrie. Coast Guard officers swarmed the Lafourche port authority building during the height of the crisis. Between BP's internal claims process and Feinberg's operation, the parishes' residents and seafood-based businesses have collected more than $150 million. Millions more have been paid on top of that to boat owners through BP's vessels of opportunity cleanup effort.
"One car dealer told us it was the best year he ever had, but, then again, it was because of the BP money people received, so to gauge anything right now is really, really difficult," Randolph said. "We thought the moratorium would lead to a huge loss of jobs, but admirably the companies kept their people on."
Terrebonne Parish President Michel Claudet said the BP and Feinberg money was just compensation and not a windfall, but boat owners who were able to participate in the vessels of opportunity program got a significant amount of extra cash. But he, too, is worried about creating a false sense of security.
"The fact that drilling has stopped makes me feel we're in for a precipitous drop fairly quickly," Claudet said. "We just don't have the oil-field money coming in for the service industries. And when BP slows down or goes away, it's going to be bad."
Claudet is also worried that many of his citizens aren't planning for the taxes they'll have to pay on the claims checks they've received, and they're in for a rude awakening come April. They all got IRS Form 1099s with their emergency payments, meaning it's up to them to set aside whatever percentage they'll be taxed. Claudet fears many are not planning for that.
The long-term health of the coastal economy will depend on the robust return of drilling and fishing, Hecht said. Federal regulators have indicated that could happen in the second half of the year. Until then, the coastal parishes may be able to keep their governments afloat with more tourism promotion aid from BP. Lafourche and Terrebonne are each slated to get $2.1 million from a new allocation of $18 million, and Claudet said he thinks the sales-tax boom can last another six months.
For New Orleans, the recipe for riding out the national economic downturn and continuing the growth is simpler. The city is getting $6 million from the latest round of BP aid, and Perry hopes Mayor Mitch Landrieu puts that back into the Convention and Visitors Bureau's promotional effort.
"Never in New Orleans' tourism industry has there been a clearer correlation of having the dollars to get into the national marketplace and bringing in more visitors," Perry said. "So I'm hopeful the mayor will provide us the BP money again because then we'll be able to keep momentum. It's like a football game; momentum really matters."