Dean Barber

Keeping Big Mo in the Big Easy

In Corporate Site Selection and Economic Development on March 27, 2016 at 12:05 pm

How an organization describes itself is often quite revealing and important.

This is how Greater New Orleans Inc. describes itself: “GNO Inc. is the regional economic development organization for Southeast Louisiana.  The GNO Inc. mission is to create jobs and wealth in the Greater New Orleans community.

“The GNO Inc. vision is for the Greater New Orleans region to fulfill its potential as one of the best places in the country to grow a company, and raise a family.”

There is a certain beauty and simplicity to this statement, one that I think every economic development organization in the country could learn from.

Think about it for a moment. The mission is to create jobs and wealth, a place to grow a company and raise a family. That is what economic development should be about. Period. End of statement.

Economic developers shouldn’t need special classes to figure that out.

Now getting to the Promised Land is much easier said than done, which is where the special classes can be of help. Getting there is typically a matter of policy and planning.

But sometimes things, big things, just happen, for better or for worse, creating a new playing field.

Before and After

Hurricane Katrina was the costliest natural disaster, as well as one of the five deadliest hurricanes, in the history of the United States. At least 1,245 people died and total property damage was estimated at $108 billion from the Aug. 29, 2005 storm.

There were numerous breaches to New Orleans’ levee system, and 80 percent of the city flooded, with the water lingering for weeks. All of the major studies have concluded that this was largely a  manmade disaster caused by the U.S. Army Corps of Engineers’  lack of planning and foresight.

(Don’t get me started on the Corps of Engineers, as I live not so far below a six-mile long earthen dam listed as one of the most dangerous in the country, and I believe the Corps is dragging its feet.)

In the annals of New Orleans, there will be before Katrina and after Katrina.

Before Katrina, you had a city on a downward spiral, marked by decay, a stagnant economy, horrible schools, corruption, and crime. And that’s the short list.

Along the way, there were a litany of missed opportunities. The city largely lost its international focus and hub status to Miami, which exploded. It lost the energy sector to Houston, which exploded.

Delta Airlines, first based in Monroe, La., picked its hub of operations at Atlanta, which exploded with Hartsfield International Airport. Walt Disney came knocking, was rebuked, and would later buy swamp land from a New Orleans family near Orlando, Fla., which, you got it, exploded.

The Old Louisiana

New Orleans was part of a bigger story of a dysfunctional Louisiana, which made its money largely through oil and gas.

“The old Louisiana, when it shot itself in the foot, it reloaded,” said Michael Hecht, president and CEO of GNO Inc.

“The old Louisiana suffered from the curse of riches. We were so blessed with the (Mississippi) river, and so blessed with oil, and so blessed with culture, all we had to do was just pull it out of the ground or pull it out of our people and sell it, without value adding, without having good institutions or good business practices, and we got rich. And that worked until it didn’t.”

New Lifeblood

The Mississippi River, oil and gas, and tourism still remain important to New Orleans’s economy and that of the state, but now there is a more value-added aspect on the scene, which gives a new lifeblood to the place.

Now the big story is a burgeoning industry in New Orleans that few could have predicted 10 years ago. From essentially a two-bit banana republic, New Orleans has become the nation’s hotspot for digital technology, software and digital media.

A turning point may have been GE Capital opening a tech center in April 2013. The center employs about 300 people in high-paying software development, engineering and project management jobs.

GE apparently looked at more than 50 U.S. locales but choose New Orleans because of low cost, high culture, a very attractive incentive plan, workforce training and a promise to develop a local pipeline of talent.

Other tech companies, particularly software gaming companies, have seen the same and have come. They include Gameloft, Turbosquid, High Voltage Software, Performance Software, 4th Source, inXile, and Smashing Boxes.

Low-Cost, High-Culture

The result: The fastest growing tech sector in the country, and the second fastest knowledge sector market in the country only behind Austin.

“We are a low-cost, high-culture alternative to New York and San Francisco but increasingly Austin as well. In many ways, I look at New Orleans as Austin 20 years ago,” said Hecht.

The accounting firm KPMG has ranked New Orleans as the most cost-friendly city for businesses among 13 U.S. metropolitan areas with populations between 1 million and 2 million people.

On a related note, it sure doesn’t hurt that Louisiana offers credits up to 25 percent on qualified in-state payroll expenses and up to 18 percent on certain in-state production costs for digital media and software development.

In terms of culture, Austin prides itself as being eclectic. For a city that is increasingly becoming more corporate, this is a prevalent theme or movement to “Keep Austin Weird,” largely to attract millennial talent.

The truth is that New Orleans was weird before weird was cool. I know this from personal experience, but everyone knows or suspects that.

Said Hecht: “Having a keep New Orleans weird campaign would be like having a keep water wet campaign.”

Startups and Talent Development

The key is that people live where they want to live, and millennials, who make up a large portion of the talent base for tech companies, view New Orleans as a quirky, cool place to live.

New Orleans startups, formed at a per-capita rate 64 percent higher than the national average from 2011 to 2013, continue to be in a growth mode.

Training programs such as Tech Talent South and Operation Spark, offer weeks-long computer coding immersion workshops. Operation Spark offers boot camps for at-risk New Orleans youth in addition to adults.

With the startups and arrival of digital media companies and the type of employees they have imported or hired locally, there is huge residential growth in the central business district.

Nearly 1,000 new apartment or condo units have been completed, being built or in the works, and more than a dozen hotel projects, valued at nearly $1 billion, are proposed or under construction.

Now there is some disagreement on whether New Orleans public schools have improved vastly since Katrina. Hecht says his children are in public schools,  which he cites as the most improved in the nation. I think he makes a strong case.

What we do know is that a decade after Katrina, charter schools educate over 90 percent of the city’s public school students and that the percentage of New Orleans students passing the state’s standardized tests has nearly doubled, to 62 percent. The graduation rate has climbed to 73 percent – a renaissance aided by federal and philanthropic funding.

Not All Boats

Make no mistake, despite a growing economy, the Big Easy is still a city beset by poverty. The rising tide has not lifted all boats, which should be the ultimate goal of economic development.

A report by the New Orleans-based non-profit Data Center shows that 10 years after Katrina, black families continue to struggle while the gap between the rich and poor grows wider.

Annual median household income for black families in New Orleans was $27,812 in 2013, less than half the amount white families in the region brought home. Less than a third of metro New Orleans residents had at least a bachelor’s degree in 2013. That figure fell to 12 percent for black men.

The Data Center says poverty is increasing in the surrounding parishes “undermining social cohesion and resilience capacity across the region.”

The Big Question and Challenge

And I believe that scares GNO. I was in New Orleans last week with a group of other site selection consultants. I sensed a strong belief that while progress has been real, it also fragile. The challenge is how to go forward, how to make positive generational change, not for just 10 years, which has already happened, but for 30 years.

Now that much of the big federal and philanthropic spending has largely occurred, can the momentum, the progress, continue or could New Orleans lapse into its old ways?  That’s the big question and challenge ahead.

“We are at a critical juncture. We cannot take our economic progress over the past decade for granted, and we must continue to focus on creating the conditions for long-term job growth and wealth creation,” according a GNO Inc. email following the group’s annual meeting earlier this month.

Which takes us back to GNO Inc.’s vow to create jobs and wealth, and that should include all facets of society, and a great place to grow a company and raise a family.

If they continue to get that right, then the Big Mo in the Big Easy will continue.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.

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