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Katrina boom? For Baton Rouge, the jury's out

With the massive influx of evacuees to Louisiana's capital city, Baton Rouge, has been described as a boomtown. But business leaders say the impact of Hurricane Katrina has been more negative than positive so far. By Kari Huus.
Baton Rouge Replaces New Orleans As Louisiana's Most Populous City
Traffic backs up on Interstate 10 in Baton Rouge, La., as tens of thousands of Katrina evacuees poured into the city. By one estimate, up to 50,000 could stay permanently.Chris Graythen / Getty Images file
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As evacuees and recovery workers flooded into Baton Rouge in the wake of Hurricane Katrina, the media dubbed Louisiana's capital the "accidental boomtown," "a booming haven" and "an overnight boomtown."

But don’t talk to Cathy Griffin about the boom. Despite the crush of about 235,000 more people in the city, business at her jewelry store plummeted in the weeks after the storm.

“People were in such a survival mode, and gas prices were so high, and traffic was so crowded," she says. “When you were going somewhere it was for essentials only."

Despite being on a busy thoroughfare in south Baton Rouge, sales at her store, The Silver Sun, dropped 30 percent in September. Griffin says it was only because she laid off a full-time employee and was able to defer rent and payments on her small-business loan that her store remains open.

"A small businesses survive on cash flow," says Griffin.

Her story is surprisingly common, even though parts of Baton Rouge's economy are roaring. Most notably, commercial and residential property are nearly 100 percent occupied. Hotels and restaurants are full and cars are flying off the lot as evacuees replace vehicles lost in the flooding. Food stores and lower-end retail outlets are bustling.

For some, a bust
But city business leaders say the overall economic picture is not of a boom.In a survey of businesses by the Baton Rouge Chamber of Commerce, 51 percent said the storm had a negative impact on their companies, while 33 percent said it had a positive impact.

Snarled traffic throughout the city has hurt retailers like Griffin who sell non-essentials and luxury items, says Stephen Moret, CEO of the Chamber of Commerce. Many people are avoiding outings that are not absolutely necessary.

Traffic has also clobbered companies that do service work, Moret says. That includes businesses ranging from electrical repair companies to home care providers. "If their travel time is doubled or tripled ... that cuts way down on billable hours," he says.

Companies that were closely linked to New Orleans have paid the heaviest toll.

"People who had any significant business connection, whether on the sales end or the supply end," have been hurt, says Rudy Gomez, a partner at SSA Consultants, a general management consulting firm based in Baton Rouge.

Many Baton Rouge companies relied heavily on New Orleans as a customer base, and lost all of them overnight. Others depended on getting materials like cement, or imported goods for retail sales through the port of New Orleans or distribution centers there. "All of the sudden, they don’t have product to sell or they have been cut off from suppliers," says Gomez.

Long term Renaissance?
In the longer term, Baton Rouge residents are more optimistic. In the Chamber of Commerce survey, 69 percent of respondents said they thought Katrina would be positive for their businesses over the next few years.

James Richardson, an economics professor at Louisiana State University, expects a permanent population increase of 25,000 to 50,000 in the greater Baton Rouge area, which had about 600,000 people in five parishes before the storm.

Professional companies like law and accounting firms will have a greater presence in Baton Route, Richardson says, partly because Katrina gave them a new appreciation of the cost of evacuation. "Before it was more theoretical … now it’s real," he notes.

Richardson says the overall increase in sales revenues in the city due to the population spike should help take the edge off a budget crunch from overloaded schools and services. City voters are almost sure to approve a transportation bond issue that comes to a vote this Saturday. If so, federal funds should follow.

Over time, says Moret, the growth will likely "accelerate Baton Rouge along the path to becoming the economic center of the state."

Baton Rouge's cultural life has been growing in recent years. The architecturally acclaimed Shaw Center for the Arts opened early this year as part of an effort to rejuvenate the city's downtown. And some of New Orleans' famous restaurants were already mulling opening new restaurants in Baton Rouge. Now, locals believe, they are just that much more likely to follow through.

"If everything works out well, we’ll pick some of the (cultural) elements from New Orleans, like the high-end restaurants," says Moret. "That will sort of add to the fabric and character here, without taking away anything from New Orleans."

Big question: federal aid
Locals are also watching carefully to see what kind of federal hurricane aid package emerges from Congress after the political wrangling is over.

"Our future is to a large extent linked to New Orleans," says Moret.

On Sept. 16, President Bush delivered a speech from Jackson Square, in New Orleans' French Quarter, promising to rebuild the city, and the region, to be better than before Katrina.

He proposed sweeping plans that included job training, education, housing and health care for the more than 1 million people on the Gulf Coast left homeless by Katrina. He also spoke of addressing the grinding poverty in the city and of incentives for people to return. At the time, Republicans estimated that Bush's vision would cost $200 billion.

But now, Moret notes, aid numbers kicking around Capitol Hill are shrinking, and some legislators want the disaster-stricken states to cough up matching funds for federal dollars. There is also concern that Louisiana's reputation for political corruption, which business leaders insist is no longer warranted, will make Washington less generous.

"The further we are getting from the event, the smaller the rebuilding package is," says Moret. "Our fear is that what the president laid out is not necessarily what Congress is prepared to do."

Changing climateIn any case, says Gomez, there will be a lot of economic activity in New Orleans, and with it Baton Rouge. But it will be a different world and one that for now will revolve more around  construction and cleanup than entertainment and tourism. "Those who adapt to the new reality will survive," he says.

For Cathy Griffin, it's been a rough patch, but she has already adapted, offering silver-cleaning services to evacuees who carried their valuables, including family silver sets, from their New Orleans homes. That's helping fill the gap as regular customers begin to trickle back in.

"So now we’re getting back to a regular flow of business," she says, "but it's different."