Most of Katrina Redevelopment Money Going to Oil Companies

The post-Katrina federal program to help rebuild local business in the gulf has not gone where it was supposed to.

Ariella Cohen
Newsweek

Standing in a generator-lit French Quarter square 17 days after Hurricane Katrina, President George W. Bush ended his first major prime-time address in the post-catastrophe city with a call for reinvestment in the battered region. Speaking in a dark, mostly empty New Orleans, he described a business-incentive program that would lure people and commerce back to devastated Gulf Opportunity Zones in Alabama, Louisiana, and Mississippi. Within these GO Zones (also known as disaster areas), subsidies would “create jobs, and loan guarantees for small businesses, including minority-owned enterprises, to get them up and running again,” Bush told an audience still wide-eyed from endless newsreels of poor black people stranded on waterlogged rooftops.

The GO Zone program’s largesse included $323 million in tax credits for affordable-housing construction, significant tax deductions for real-estate investors, and billions in tax-free bonds for private development. Louisiana, which had suffered the most damage, received the lion’s share of the bonds: $7.9 billion out of an available $14.9 billion.

For battered and broke New Orleans, the untaxed borrowing was to be the cash infusion needed to attract developers facing sky-high insurance costs and a risky, uncertain market. “This was the money that was supposed to get people rebuilding our housing, our hotels, our stores,” said Jimmie Thorns, a New Orleans real-estate appraiser who, until 2008, headed the city-appointed board responsible for approving all local bond allocations.

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