Three Years Later: December 2008

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Progress Undeniable
Grappling with Insurance
Lessons Learned
Population Drop
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Construction worker

After the devastation of Katrina, Gulf-state lawmakers are optimistic but sobered by the work that remains.

By Garry Boulard

John Alario is an optimist.

Surrounded by large swaths of the New Orleans metro area that remain abandoned, garbage-strewn and scarred by boarded up and crumbling houses, the Louisiana senator is convinced life has gotten significantly better in the three years since Hurricane Katrina.

“You have to think about where we were in the immediate aftermath of that storm,” says Alario, whose Westwego district, just across the Mississippi River from New Orleans, was largely under water in Katrina’s wake.

“Essentially we were confronted with the challenge of rebuilding New Orleans—and a large part of the state of Louisiana—practically from the ground up,” he says. “Katrina’s impact on our infrastructure was nearly complete—roads, drainage, sewer and water systems and even school buildings were virtually wiped out in some communities. Everything had to be rebuilt.”

New Orleans just missed another direct hit from a hurricane in late summer. Despite that lucky break, Louisiana, Mississippi and Alabama still have much work to do before they can put the devastation of Katrina—and, to a lesser extent, Rita and Wilma—behind them. Although lawmakers across these three Gulf states are upbeat about the progress that has been made—everything from casinos to new homes to strengthened levees in the New Orleans area—they acknowledge the recovery is far from complete.

In all, Louisiana suffered nearly $100 billion in damages from a storm that also killed more than 1,000 people. It was the worst natural disaster in the state’s history. Next door, in Mississippi, more than 200 people died and property damages exceeded $125 billion. In Alabama, Katrina killed two dozen people and caused more than $50 billion in property damages.

The devastation left by the storm presented lawmakers in the three states with the challenge of rebuilding. The task was made easier in Alabama because it suffered the least damage and more efficient in Mississippi because of an early decision to rally around a core set of recovery goals. Louisiana lawmakers faced extensive damage to the state’s infrastructure and an immediate population loss of roughly half a million people.

Not all the changes wrought by the hurricanes along the Gulf coast are visible. The population in New Orleans and areas of Mississippi and Alabama may never return to pre-storm levels as residents deal with problems from insurance to employment. There also is the matter of what might have been. Lawmakers have put initiatives and projects on the back burner as they’ve grappled with the core issues of recovery.

Progress Undeniable

“It is almost impossible to describe how much had been taken away by Katrina in New Orleans, and then Hurricane Rita, which came right after it and really hit hard in the southern part of the state,” says Louisiana Representative Neil Abramson.

With a district that includes parts of wealthy uptown New Orleans that suffered sporadic flooding, he says that “at some point it seemed like the only thing left standing after these storms was the resiliency of our people. There was just a general feeling that, even though everyone felt overwhelmed by what had happened, their goal was still to rebuild and return to a pre-Katrina life as quickly as possible.”

Three years later in many parts of New Orleans and southern Louisiana that goal remains elusive. Yet progress, maintains Tulane University President Scott Cowan, has undeniably taken place.

“We are really getting some traction on recovery,” Cowan says. He points to the Army Corps of Engineers’ repairs to the flood-protection infrastructure of New Orleans and to a comprehensive overhaul of the state’s health care system since Katrina.

“I am cautiously optimistic that the pace of recovery and the content of recovery, if you will, is encouraging.”

In Mississippi, a similar sense of subdued optimism prevails. “Progress has been made here,” says Mississippi Representative Mark Baker. His district in the center of the state hosted thousands of residents who fled coastal areas in the weeks after Katrina.

“We were lucky in that we came together right after the storm and took a look at the things that needed to be done, and then agreed to do them,” says Baker.

Baker credits Mississippi’s Legislature for supporting the efforts of Governor Haley Barbour. He administered a series of grants and low-interest loans to hundreds of damaged and destroyed businesses and homes through the federal Gulf Opportunity Zone program.

“Basically, we just got out of his way,” says Baker. “We didn’t try to usurp his authority. We monitored what he was doing and had regular discussions about things. As long as the money was coming in, and you could see rebuilding going on almost immediately after the storm, we just decided as a body not to meddle.”

But Ray Scurfield, director of the Katrina Recovery Center at the University of Southern Mississippi, says Mississippi lawmakers were, in reality, much more extensively involved in the rebuilding of the state after Katrina.

“When they realized they needed to do something about the casinos that operated on boats and barges along the Gulf Coast, they did so immediately,” says Scurfield. “As a legislative body they responded, I think, very efficiently and have acted on a number of other issues in the same way.”

Less than a month after the main force of Katrina pushed past the Mississippi Gulf Coast, almost entirely wiping out the towns of Pass Christian, Waveland and Bay St. Louis, legislators changed the state’s gaming laws to allow casinos to operate on land within 800 feet of the shore.

That move, notes Scurfield, helped salvage a multi-billion dollar industry that had been providing the state about $500,000 in revenue daily. Most of the major casinos vowed to rebuild, ushering in a construction boom that contributed to a significant boost in employment.

Grappling with Insurance

Mississippi lawmakers also passed uniform building code legislation designed to eliminate substandard construction. In 2007, they increased funding for the state’s Windstorm Underwriting Association, popularly known as the insurance wind pool, which provides insurance for at-risk properties along the Gulf Coast.

“We have tried to look at just about every challenge that came out of Katrina to see what, if anything, we could do about it,” says Mississippi Representative Dirk Dedeaux. His district along the Louisiana state line was one of the hardest hit by Katrina.

“Inevitably, we kept coming back to the insurance issue, which continues to play such an overwhelming role in whether we are ever going to be able to totally rebuild,” says Dedeaux. “It stands to reason that if people can’t afford the kind of insurance they need for houses in the Gulf Coast area, it’s going to have a negative effect on rebuilding.”

In Alabama, lawmakers also have addressed the same insurance issues, although reluctantly. “This is not an area that we really wanted to get into,” says Alabama Representative Locy “Sonny” Baker, whose southeastern district suffered indirect wind and water damage from Katrina.

“Our goal was to make sure we didn’t go the Florida route,” says Baker, referring to legislation passed in that state in 2007 creating the Citizens Property Insurance Corporation that was designed to offer insurance at competitive rates.

Although backers of the Florida legislation argue it will cut insurance costs to homeowners by at least 20 percent, the insurance industry has characterized the legislation as counterproductive.

“Since that legislation in Florida, insurers have been denied rate increases that they have applied for, they have been threatened, targeted and made the victims of lawsuits by the state,” says Robert Hartwig, president of the Insurance Information Institute.

“The net result,” he says, “is that private insurers have to charge a greater risk-appropriate premium. If they can’t do that, they basically just reduce their exposure to the state. That’s Economics 101.”

This spring Alabama lawmakers went a different route. They allowed what are known as “captive insurance companies”—closely held insurance companies that might be organized around a particular city or condominium development—to do business along the Gulf Coast. These companies will “create competition in a part of the state where a lot of insurers have been cutting back,” says Alabama’s Baker.

In Louisiana, lawmakers last year voted to disband the state’s Insurance Rating Commission, which had the power to determine any insurer rate change of more than 10 percent.

Supporters of the commission worried that rates in an already pressurized marketplace would only increase without its steadying hand. But critics noted that state government—in this case the governor, who had the power to appoint members to the commission—was determining insurance rates, not the marketplace.

“It was a matter of looking to the very distant future and finally deciding that if we let the free market do its business, more insurance companies would come into Louisiana. Over time that would cause the rates to go down,” says Alario.

Louisiana lawmakers were reluctant to do away with the state-run Citizens Property Insurance Corporation, which serves as an “insurer of last resort” for homeowners unable to get insurance anywhere else. Auditors for Citizens said the growing demand for policies may make the system falter if another storm of Katrina dimensions results in a wave of claims. The corporation has streamlined its offerings, reducing its scope and range of coverage in an effort to remain sound.

Lessons Learned

If state lawmakers think they’ve learned from experience during the past three years, they also think that applies to the federal government. Watching federal officials help the state prepare for Hurricane Gustav shows “we’ve learned a lot since Katrina,” says Louisiana Representative Richard T. Burford.

“There was a lot of frustration with the federal government” after Katrina, Burford says. That was especially true of the Federal Emergency Management Administration.

In sharp contrast, he says, FEMA officials worked well with state officials to evacuate the New Orleans area this summer when Gustav appeared headed straight for the city. “It shows that everybody—the state and the federal government—has taken the lessons of Katrina and its aftermath and moved on. There is a more efficient coordination now that wasn’t there before.”

Population Drop

Katrina caused a combined evacuation of more than 1 million people from Louisiana, Mississippi and Alabama. Three years later, according to U.S. Census figures, some 68 percent of the evacuees in Louisiana have returned. In Mississippi, 83 percent are back, while 94 percent of Alabama’s evacuees have returned.

New Orleans’ pre-Katrina population of 484,000 dropped to 223,000 in the months after the storm because large pockets of the city were uninhabitable.

Today the city’s population is about 255,000, an important achievement, says Tulane’s Cowan. “People are coming back, businesses are back, tourism continues to be strong and the higher education sector is strong. The recovery is underway.”

But several miles from Tulane’s tree-lined 19th century campus are blocks of dilapidated housing left vacant by Katrina. And what’s left of the city’s available housing stock is expensive. Apartment rental costs have more than tripled since the storm. Home prices have seen the same dizzying increase.

“We just don’t have enough affordable housing, which obviously makes it much more difficult for people to repopulate the city,” says Cowan.

Along the Mississippi Gulf Coast, Dedeaux has noticed the same trend.

“When you drive along the beach you don’t see a lot of the apartments and houses and restaurants that used to be there. There are great empty spaces now where there used to be buildings, and because of the insurance situation and the high cost of construction, I don’t think this is going to change any time soon.”

In New Orleans and southwest Louisiana, Abrahamson notes, tens of thousands of former residents have decided not to return.

“At the end of the day, we are not going to make a total comeback until we get more people here.”

Garry Boulard is a free-lance writer in New Mexico who is a regular contributor to State Legislatures.