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New Orleans: Five Years After Katrina

For decades, residents of the City That Care Forgot languished in impoverished communities with failing schools and high crime rates. All the while, people enjoyed a leisurely life in the Big Easy. In August 2005, Mother Nature attempted to destroy both. Now, only one of these cities can survive.

A Different Type of City

New Orleans: Third World and Proud of It. Those words, emblazoned on a bumper sticker that I saw while living in New Orleans before Katrina, distinguished that city from the rest of America.

Unlike those stuck in the rat race fought throughout the rest of the country, New Orleanians have historically been content with what they’ve had. They would prefer to enjoy a backyard crawfish boil full of friends, family and beer rather than use their time “more wisely” by working longer hours to get ahead.

Before Katrina, New Orleans had countless problems: roads were routinely impassible due to potholes the size of canyons; schools were crumbling both literally and figuratively; residents lived with the constant risk of being robbed, assaulted or murdered; and the city’s government was dysfunctional and corrupt.

Despite the city’s shortcomings, many, including me, love New Orleans for its remarkable people, food, music, architecture and culture. New Orleans has a stuck-in-time sort of charm, which nearly all of its residents and visitors eventually come to appreciate. However, New Orleanians’ adherence to tradition and distaste for change also allowed the city to fall into its pre-Katrina state of disrepair.

In 2005, some proclaimed that New Orleans, or at least certain neighborhoods, should cease to exist. The determination of the city’s inhabitants to rebuild put that debate to rest. New Orleans has made substantial progress since Katrina, but it still has a long way to go.

In the immediate aftermath of the hurricane, former Mayor Ray Nagin’s inability to manage the city added to the chaos and desperation. Despite this failure, the city re-elected Nagin in 2006, and he continued to lack the leadership skills necessary to jumpstart the recovery during his second term. A poll conducted in 2009 ranked Nagin third on a list of the biggest problems facing New Orleans.

In February 2010, the election of Mayor Mitch Landrieu reinvigorated the recovery effort after term limits prevented Mr. Nagin from being reelected.

The Current Conditions in New Orleans

In early July, Landrieu delivered a “State of the City” address, in which he described New Orleans as a city with “great potential, but one that is in peril.” He outlined several key challenges that continue to face the city. These issues include the city’s dire financial position; problems with the police department and public safety; an education system in need of improvement; a lack of jobs; a broken healthcare system; the need to build and restore affordable housing; and recently the Gulf oil spill.

The new administration found that the city has a $67 million deficit for 2010. This free-spending attitude has produced results that are far from stellar. Certain city employees are literally working out of closets, and City Hall shows the effects of years of neglect.

Mismanagement within the government is epidemic. The new administration found substantial savings by simply instructing departments to restructure employee shifts to minimize the amount of overtime paid. Examples of government waste, such as spending $50,000 to store $70,000 worth of unused furniture for a year, are rampant.

Curtailing these frivolous expenditures will only go so far, and the city will need to make cuts in the face of perennial problems which already hurt the quality of life there. New Orleans has the highest per capita murder rate in the country, more than ten times the national average. Mayor Landrieu attributes this to a “cycle of violence fueled by desperation and poverty.”

The city’s efforts to fight crime have been largely fruitless. Many have described the New Orleans Police Department as the worst in the country. In hopes of improving the department’s effectiveness, Mayor Landrieu appointed a new police chief and asked the U.S. Justice Department to examine the police department more thoroughly. Recently, 18 New Orleans police officers were formally charged with crimes that include fatally shooting unarmed citizens.

The awful New Orleans public schools are also partly to blame for the crime and poverty in the city. New Orleans has looked to charter schools, greater parental involvement, and programs like Teach for America to improve its education system. The state placed 112 schools in New Orleans into a special district dedicated to transforming underperforming schools. However 57 percent of the district’s students still fail to read, write, or do math at their grade level. Without a solid education, New Orleans’ children are at a disadvantage when they enter the workforce.

The New Orleans area had a 6% unemployment rate prior to the Gulf oil spill, which is significantly lower than the national unemployment rate. However, many of those jobs are low-paying and concentrated in the tourism industry. Entergy Corporation is the only Fortune 500 company headquartered in New Orleans. Recently local companies have announced job cuts in the well-paid transportation equipment sector. A military shipbuilding yard announced that it would be closing, and Lockheed Martin Corp. indicated it would be reducing headcount at a NASA facility in the area due to the end of the space shuttle program. New Orleans’ tourism, culinary, shipping, and petroleum industries will feel the impact of the gulf oil spill for years to come, threatening even more jobs.

Even though New Orleans lacks high-paying jobs, housing costs have increased since Katrina, due to the decrease in supply of habitable housing. Estimates indicate that 55,000 blighted properties remain vacant throughout the city. The sight of abandoned houses psychologically hurts neighbors trying to rebuild their own homes, and the unoccupied buildings can serve as breeding grounds for criminal activity. The mere existence of unrepaired homes could lead to an increase in overall crime rates according to the “broken windows” theory, which argues that failing to maintain a neighborhood can lead to more crime due to perceived apathy.

In addition to these ongoing problems, the Gulf region is in the midst of another hurricane season, and New Orleans still lacks full protection from severe storms. The U.S. Army Corps of Engineers has promised to complete the 350-mile Hurricane and Storm Damage Risk Reduction System for Southeast Louisiana by June 2011. This protection system, consisting of levees, floodwalls, gates and pumps, should protect the city from 100-year level storms, which would be better protection than has existed at any time in the region’s history. The Corps asserts that, in the face of a major storm this year, it would fill gaps in the system with sandbags and that the current level of protection is higher than the protection that existed before Katrina. Nonetheless, the city’s residents still face the continuous risk that all of their progress will be erased by one major storm.

A New Beginning

Sitting back and taking what comes is no longer an option for New Orleanians. While a life that prioritizes family, friends and leisure over work and money can be very rewarding, New Orleans is a case study on the consequences of this choice. Katrina was the catastrophe that made New Orleans residents, and the entire country, recognize that change was needed. Famed New Orleans jazz musician Allen Toussaint has referred to Katrina as a baptism for the city, its chance for a new beginning.

Signs of recovery proliferate through New Orleans, and the city continues to make strides in the right direction. The New Orleans Saints won the Super Bowl for the first time in franchise history this year, boosting the city’s morale. Travel + Leisure magazine ranked New Orleans as the top city for singles, cocktail hours, live music, and wild weekends. It also ranked the city as number two for friendliness and number three for diversity.

Mardi Gras and Jazz Fest continue uninterrupted. The historic streetcars are rolling, jazz bands are playing, gumbo is simmering, and the drinks are being poured. In a city famous for its food, more restaurants are open in New Orleans now than before Katrina. Tourists staying in the French Quarter find their stays now indistinguishable from their pre-Katrina visits.

Since the storm, Habitat for Humanity has provided homes to 300 New Orleans area families through the work of over 100,000 volunteers. Applications to Tulane University increased 135% from 2005 to 2010, and the university received more applications in 2010 than any other university in the country. As of June 2010, the number of active households in the city returned to approximately 83% of its June 2005 level, based on analysis by the Greater New Orleans Community Data Center.

To its visitors, New Orleans seems to have effectively recovered. However, residents still face the daily struggles that have persisted in the city for decades. Judging the extent of New Orleans’ recovery based on the number of people that return, the number of houses that are rebuilt, or the quality of life in the city provides an incomplete assessment of the situation. The state of affairs before Katrina already established New Orleans as one of America’s most troubled cities. But despite the city’s major problems, a poll taken shortly before Hurricane Katrina found that in New Orleans a higher percentage of residents reported being extremely satisfied with their lives than in any other American city.

Being the Big Easy is ingrained in the culture of New Orleans. That city and that lifestyle have the right to continue. However, New Orleans can no longer afford to be the City that Care Forgot. All Americans should continue to care about New Orleans and be proactive in facilitating its transformation into Mayor Landrieu’s vision for the future: “a city of opportunity, with safe neighborhoods, quality schools...and good-paying jobs.” For New Orleanians, the road to recovery and renewal may go on forever, but the party will never end.

Senior Client Service Manager Benjamin C. Sullivan, who is based in our Austin, Texas office, contributed several chapters to our firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55, including Chapter 13, “Federal Income Tax,” and Chapter 16, “Investment Psychology.” He was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.