Gulf Coast Economics Reshaped by Katrina

The Beau Rivage casino reopens in 2006. Credit: Justin Sullivan/Getty Images. i i

People arrive at the grand opening of the Beau Rivage Resort and Casino in August 2006 in Biloxi, Miss. While casinos have returned to life on the coast, many small businesses are struggling to find their footing in the wake of Hurricane Katrina. Justin Sullivan/Getty Images hide caption

itoggle caption Justin Sullivan/Getty Images
The Beau Rivage casino reopens in 2006. Credit: Justin Sullivan/Getty Images.

People arrive at the grand opening of the Beau Rivage Resort and Casino in August 2006 in Biloxi, Miss. While casinos have returned to life on the coast, many small businesses are struggling to find their footing in the wake of Hurricane Katrina.

Justin Sullivan/Getty Images

Part Two of the Series

Profound changes to the economy of the Mississippi Gulf Coast are under way nearly two years after Hurricane Katrina devastated the low-lying area. Labor is scarce and land values have risen to new heights.

The French first built ships on the Gulf Coast three centuries ago. Today, United States defense contractor Northrop Grumman operates a 600-acre shipyard where the Pascagoula River meets the Gulf of Mexico.

The company builds ships for the Navy, including the Truxton, DDG-103. It's a hulking vessel, 500-feet long and more than six stories tall.

Company spokesman Bill Glenn says the shipyard has been one of Pascagoula's major employers since 1938. Today, Northrop Grumman is the largest private employer in the state of Mississippi. The shipyard is still struggling to come back from the storm, but not because of structural damage.

"Our biggest need ever since Katrina has been people," Glenn said. "Right now, we need 400 craft jobs, 250 professionals."

The labor shortage, combined with rising insurance costs, forced another major employer, the Oreck Corporation, to leave the coast. The vacuum maker closed its Longbeach, Miss., plant and moved to Tennessee.

Northrop Grumman had 13,000 employees before Katrina. It is down to 11,500 today. With its average wage of $18 an hour, and a strong benefits package, Northrop Grumman has traditionally attracted workers from all along the Gulf Coast, from Louisiana to Florida.

But after Katrina, the competition for workers drove wages up. McDonald's offered signing bonuses, and skilled laborers could make more working construction than at the shipyard.

Right after the storm, Northrop Grumman went to extraordinary lengths to keep its work force. The company provided temporary housing on a barge in the Pascagoula River, paying workers even if their jobs weren't back on line yet.

Housing remains an issue of concern for area employers. But now the problem is more to do with cost than availability.

"Affordable housing is the No. 1 problem right now," Glenn said. "If we go out and recruit folks from other areas and want them to move here, 'affordable' is the main word. Can they afford to live here?"

Online ads feature homes with prices more than double what they would have cost before Katrina. A 2-year-old brick home in Ocean Springs, Miss., is selling for $350,000. A nice house in the same area might have cost about $120,000 before the storm. It's not the dynamic people expected after Katrina's destruction.

"It's like gold," banker D'Auby Schiel said. "There's this sort of [land] frenzy."

Schiel is chairman of the board and CEO of Community Bank of the Coast, based in Ocean Springs. She says some families with homes here for generations found it too costly to rebuild once they factored in stricter building codes, and insurance premiums that have jumped as much as 150 percent. They're selling, opening up prime waterfront lots to speculators.

The premium property lines U.S. Highway 90, the road that follows the coast. Before Katrina, the landscape here was an odd mix of modest neighborhoods, local shops, stately ante-bellum homes and, in the last decade, glitzy casinos.

The casinos are back — some even bigger than before. But Schiel says developers are bundling much of the rest of the land into tracts for large condominium projects. That's squeezing out working-class folks and small businesses.

"And I don't know that they'll ever be back because that corner on the Highway 90 in Biloxi would now be, maybe, a $2 million piece of property," Schiel said.

What you'll see instead, Schiel predicts, are smaller, mom-and-pop retail stores and affordable residential developments moving inland.

That worries community activist Derrick Evans of Gulfport. He's concerned that the recovery on the coast favors what he calls big-box economic development, at the expense of what made the region unique.

"I mean, who wants to drive from Arizona to go eat at a Hooters?" Evans asked. "They want to come to coastal Mississippi to get a shrimp sandwich, or a barbeque sandwich, in a more culturally rich situation."

Evans is critical of the state legislature for quickly passing a law that allowed casinos to rebuild on land, instead of on the water, which was the policy before Hurricane Katrina. Many on the coast argue that the casinos are the economic engine of the coast, and restarting them was vital to the rest of the economy. Evans does not agree.

"It's really unfortunate for neighborhoods, and older communities, and small business owners, who are still trying to figure out where there is capital available for them to either rebuild or start new," Evans said.

Local businesses have banded together to tackle these issues. They've formed a private, not-for-profit corporation to build 10,000 affordable homes so workers can stay on the coast, close to where the jobs are.

But Mississippi Gov. Haley Barbour (R) says it may not be possible to return to the way things were before the storm.

"The Mississippi Gulf Coast is one of the few areas of the country where not only working-class people, but literally poor people, live a stone's throw from the water, where they could see the water," Barbour said.

The governor says he expects that to change, with the coast sprouting higher-density developments, including high-rise condominiums. It's the flood of money following Katrina that will change the character of the coast for good.

Tomorrow — in part two of this story — a visit to one small Mississippi town where residents are determined to stay together, while getting back to business.

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