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Business leaders foresee economic boom rising from the ruins of Katrina

Will Hurricane Katrina be an economic disaster for state?

Where do you even start when discussing the economic impacts of Hurricane Katrina? Sources quoted by the Associated Press said as many as a million people have been put out of work by Hurricane Katrina. On the Mississippi Gulf Coast, up to 30,000 people in casino-related employment alone are out of work, and the Coast’s major industries employing tens of thousands more could take weeks or months to rebuild before all the workers are called back.

The Observer in the United Kingdom wrote recently: “Hurricane Katrina has already been called America’s worst natural disaster — will it also be an economic one?”

While there is no doubt that an unprecedented number of people have lost homes, businesses and their jobs, Coast business leaders are looking forward. Hancock Bank president and CEO George Schloegel was quoted on WLOX television’s continuing live coverage in the aftermath of the hurricane as saying that rebuilding after Hurricane Camille in 1967 created one of the largest economic booms ever seen on the Coast. Schloegel expressed confidence that the same thing would happen post Katrina.

Marianne Hill, senior economist, Institutions of Higher Learning, said there is no denying that the loss of Gulf casino gaming revenues that provide more than $100 million to the state general fund annually, along with losses of sales and income taxes, is a blow to the state budget.

“However, billions of dollars will be flowing into the Coast for reconstruction,” Hill said. “The Coast economy is bigger than gaming, and the reconstruction effort offers a tremendous opportunity to dream, to correct earlier errors, to improve the use of land, and to provide the framework for a lovely, thriving coastal community that will prosper for generations to come.

“Prosperity comes in many shapes and sizes. But there is only one way prosperity will come, through the efforts of the community. The coastal community should be the primary voice heard when the future of casinos is discussed.”

Some Coast business leaders are looking forward to opportunity instead of mourning what has been lost. They are saying there is actually an exciting opportunity to rebuild learning from the past. There is talk about relocating the railroad tracks from parallel to U.S. 90 to north of Interstate 10. That proposal languished earlier because of the huge cost of relocating the railroad. But with the destruction of the railroad’s bridges, including those between Ocean Springs and Biloxi, and between Pass Christian and Bay St. Louis, now may be the time to move the railroad.

Jerry St. Pé, chairman of the Mississippi Gaming Commission and of the Jackson County Economic Development Foundation, said the Coast is a major driver of the state’s economy. And the hurricane destruction will have a major impact on the state’s economy.

“There is no question it is catastrophic at the moment,” St. Pé said. “First and foremost, here on the Mississippi Gulf Coast as many as 30,000 employees worked in the casino industry. Then, of course, you have the economic factor associated with tax revenues to the state and local community. That said, I am confident that in time the same aspects of the Mississippi Gulf Coast that attracted the casino industry to the state 12 years ago will still be a major influence in their decision to rebuild.”

Many of the casino barges ended up tearing lose from their moorings and floated up with the storm surge to the north side of U.S. 90 — in some cases damaging or destroying buildings in their path. St. Pé said there is no doubt that there must be legislation allowing changes that would allow the casinos to rebuild on land.

“We were successful in getting legislation passed in the last session which allowed the industry to put gaming facilities above water on permanent pilings,” St. Pé said. “The next step is clearly to allow them to be built on land.

Since people don’t want a major proliferation of land-based casinos all over Mississippi, perhaps we could say that casinos can be built on lands adjacent to the waters where they are currently allowed.

“We have to make sure as we move forward that we do it in a way that will protect this industry as much as possible. When this industry starts rebuilding, the state must work with the industry so it has higher confidence in the future survivability of their investment. I think we can and should do that.”

St. Pé said the changes probably should have been allowed earlier. But sometimes it takes unfortunate experiences such as the destruction of this industry from Katrina to provide the impetus for quick change.

Of the Coast casinos in Harrison County, it appears from aerial views that the Beau Rivage is in the best shape (for online photographs of Biloxi before and after the hurricane, see http://coastal.er.usgs.gov/hurricanes/katrina/). Its casino barge is mounted on pilings. It appears the Beau could be repaired, and reportedly the Imperial Palace on Back Bay also fared better than most. The Imperial Palace announced to the media that employees would continue to be paid for a month.

But even if the casinos were able to open immediately, they must have infrastructure.

“If the Beau was up and running today, who is coming?” St. Pé asked. “How will they get here? These are not insurmountable challenges, but it will take time to repair the infrastructure. The gaming commission will probably be meeting here in the next couple of weeks to start planning in partnership with this industry about rebuilding the casinos. For now, the focus is where it needs to be on the human aspect of this.”

St. Pé, a major investor with the shipbuilding company, Signal International, said that while the Pascagoula yard was damaged, it should be back in operation once power is restored. Signal employs about 1,000 people.

The state’s largest single employer, Northrop Grumman Ship Systems (formerly Ingall Shipbuilding) reported that most major shipyard assets, such as cranes and most fabrication facilities at all the Ship Systems sector facilities, appear to have survived the hurricane, and are being brought back to an operational status. A week after the storm, 700 workers were on the job working to clean up and make repairs.

Another of the Coast’s largest employers is the Chevron Pascagoula refinery, which processes about 13.6 million gallons of crude oil a day. Chevron built a 20-foot-high dike after suffering major damage from Hurricane Georges in 1998 that the company said helped protect the refinery. Aerial photos showed the refinery flooded. Information wasn’t available at press time about the extent of the damage, or estimates about when the refinery would reopen.

The eastern portion of the Gulf Coast received far less damage than the west part of the Coast. DuPont DeLisle, which employs about 1,000 people including contract workers, reported suffering extensive damage from high winds and flooding.

“We are continuing to assess the full scope of the damage,” said DuPont spokesman James Foster. “Repairs and cleanup are underway. We are asking that all DuPont employees come back to work on a limited basis, but only if it is safe for them to do so. Taking care of their families is most important right now.”

DuPont declared a “force majeure” for both DuPont DeLisle and DuPont’s First Chemical aniline plant in Pascagoula.

According to Yale University, a force majeure literally means “greater force.” These clauses excuse a party from liability if some unforseen event beyond the control of that party prevents it from performing its obligations under the contract.

A week after Katrina, the focus was still more on taking care of immediate human needs rather than jobs and economic concerns.

“The focus for the next few days has to be on the human carnage here,” St. Pé said. “Then we have to look at the economy. People need the income. They need to support their families. They also need to get back into their normal lives as much as they can. Work represents one third of our days. If you are out there working, it is emotionally therapeutic.”

Many thousands of people have been left homeless by Katrina. And major Coast employers like Chevron and BellSouth have been taking care of their own by opening up tent cities for employees and their families left homeless by the hurricane. Lisa Hawthorne, spokeswoman for BellSouth, said BellSouth has established tent cities in Gulfport, Hattiesburg and Jackson for displaced employees.

Chevron Corp. also opened a tent city to house employees and their families whose homes were destroyed or severely damaged by the hurricane.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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