By Ariella Cohen, The Lens
As Louisiana wraps its Gulf Opportunity Zone lending program, only 3 percent of the $7.8 billion went to projects in New Orleans, a review of state records show.
Though the program was intended to generate recovery and jobs in the areas most affected by the storm, analysis of Louisiana lending shows that the prime beneficiaries are far from the primary disaster areas.
Last week, Louisiana officials used the last of the state's tax-free, post-Katrina, low-interest bonds, setting aside the final $261 million for a gasification facility in Lake Charles and a medical complex in Slidell. Though all the bonds have been allocated, their holders have until Dec. 31, 2011 to finish the promised projects.
The GO Zone program was President George W. Bush's answer to communities struggling to lure commerce back to flooded shopping centers and boarded downtowns. By granting businesses access to specially issued bonds alluring to banks -- because any interest they earn is not taxed -- the federal government aimed to jumpstart Gulf Coast projects that may otherwise have trouble attracting investors.
Bush announced the program in a flood-lit Jackson Square.
"Within this zone, we should provide immediate incentives for job-creating investment: tax relief for small businesses, incentives to companies that create jobs, and loans and loan guarantees for small businesses, including minority-owned enterprises, to get them up and running again," he said.
Instead, more than half went to oil, gas and chemical companies, some nowhere close to New Orleans.
Unlike other recovery programs or grants, taxpayers are in no way responsible if a business approved for the borrowing fails to make the necessary repayments.
Made with little fanfare last Tuesday at the State Bond Commission's regular monthly meeting, these last allocations to the Lake Charles gasification facility, which had previously received $1 billion in bonds, and a St. Tammany real estate project reflect patterns that have defined the program since President George W. Bush signed it into law in September 2005.
The Lake Charles gas production facility, for instance, received more than quadruple the bond financing of all of the New Orleans projects combined, yet only 19 percent of storm-damaged housing in Lake Charles was severely damaged, compared to 56.5 percent in New Orleans, according to state data.
Similarly, in the year after Katrina, New Orleans lost 33 percent of its jobs while Lake Charles saw a 1.74 percent bump in employment.
The Lake Charles facility will produce a substitute natural gas for use by the energy industry. By program's end last week, $4.1 billion of the bonds issued went to such oil, gas or chemical projects, according to bond commission records obtained through a public records request. With the bulk of the program's largesse going to this sector, it's not surprising that the parishes to benefit the most from the tax-free debt issuance are Calcasieu, home to Lake Charles, and East Baton Rouge, where ExxonMobil operates a refinery that received $312 million in bonds.
The $312 million tax-free loan will create four permanent jobs and help retain 17 existing jobs, according to analysis submitted to the commission by attorneys for the corporation.
In New Orleans, 15 projects shared the city's $254 million total takeaway.
These projects include:
* $96 million for a rental car facility at Louis Armstrong International Airport;
* $30 million for improvements to the Tulane University campus;
* $25 million for Sewerage and Water Board infrastructure;
* $22.5 million for a hydrogen pipeline connecting New Orleans to Norco;
* $15 million for a Drury Inn and Suites hotel in the Central Business District;
* $11 million for a Borders Bookstore on St. Charles Avenue at Louisiana;
* $7 million for two Robert Fresh Market grocery stores, one in Lakeview and the other in Carrollton;
* $7 million for a warehouse and distribution facility at the Port of New Orleans, west of the Industrial Canal;
* $5.5 million for a new residential facility and headquarters for Bridge House, a substance abuse clinic and homeless shelter;
* $8.5 million for a boutique hotel in the Warehouse District; and
* $4 million for a New Orleans-based company, Southern Theatres, to renovate the 12,000-square-foot Canal Place cinema, along with a 50,000-square-foot theater in Kenner.
The GO Zone bond program's limited success in New Orleans is largely a function of market forces, state officials from outside of the city say. Before the national economy tanked and the credit market dried up, banks could make a healthy return on the tax-free bonds. Even then, however, the businesses that qualified for the bonds must meet the bank's investment standards, something tough for companies attempting a project in high-risk New Orleans.
"If you didn't have the money you couldn't qualify to get the money," State Bond Commission Director Whitman J. Kling said in an interview last Wednesday.
But while Kling maintains the state fulfilled the federal legislation's mandate by using the money on projects that will generate jobs for years to come, New Orleans lawmakers say more should have been done to send investment to areas such as eastern New Orleans or the Lower Ninth Ward that still haven't rebounded from the storm.
"It was a complete and total cluster," said New Orleans Rep. J.P. Morrell, a Democrat. "At first, people made noise and projects were started but in the end, it was one of those programs that started with a bang and went out with a whimper."
At last Tuesday's bond commission meeting, Sen. Ed Murray, D-New Orleans, was the only official to raise questions about finishing out the program with so little bond money set aside for the Crescent City. His comments were ignored, much as they were throughout the program's five-year run.