A Year After Katrina, Many Homes
Remain Abandoned in New Orleans

NEW ORLEANS -- One year after Hurricane Katrina devastated the Gulf Coast, the effort by businesses and residents here to rebuild can be gauged by the coffee at Slim Goodies, a diner in the city's uptown section.

On a recent morning when every stool in the place was taken and patrons spilled out the door, the first thing diners heard from a waitress wasn't a list of breakfast specials, but an apology: "No coffee. No water pressure," she said.

The lack of such a diner commodity -- hot coffee -- is just one of the problems that Kappa Horn, Slim's owner, contends with daily a year after "The Thing," as many locals call the storm. Though the diner was spared the flooding that left about 80% of the city underwater, bringing Ms. Horn's business back has been no cakewalk. True, the crowds in her diner have never been larger. But serving them has never been harder.

Her payroll costs, for example, shot up 30% after more than half the city's work force disappeared. Her insurance bill has jumped to $8,000 a year from $3,500, and she must pay a private trash hauler to supplement the city's irregular garbage service. And if the electricity fails at Bubba's Produce Co. downtown, which happens routinely in that area, her vegetarian omelet may not make the menu.

"No water means no coffee, no dishwashers, no bathrooms," Ms. Horn said. "The other day it went out completely. We were packed. We had to close."

President Bush landed here last night to attend events marking the Katrina anniversary and is expected to give a series of speeches rededicating his administration to the rebuilding effort. "A year ago, I committed our federal government to help you," Mr. Bush said in Biloxi, Miss., before arriving here for a private dinner with local leaders. "I said, 'We have a duty to help the local people recover and rebuild,' and I meant what I said."

In more than a dozen visits over the past year to the Gulf Coast, Mr. Bush has relentlessly praised the region's recovery, which he put under the care of Don Powell, former chairman of the Federal Deposit Insurance Corp.

Mr. Powell says cargo handling at the port of New Orleans has returned to prestorm levels, the region's oil-and-gas industry has recovered, and its tourist trade is on a steady if slow upswing. Mr. Powell also notes that a metropolitan area that lost 81,000 businesses and 220,000 jobs can't recover overnight. "I don't know how you describe this devastation -- biblical? I'm not sure," he said. "But the basics of this region's economy -- the port, tourism, energy -- every one of them are back. People say, 'You're slow,' and I say, 'Compared to what?'"

But a drive through New Orleans underscores how much work remains. Though Louisiana officials say 90% of businesses in the region have reopened, the recovery is uneven. Most national retail outlets, groceries and fast-food restaurants remain closed while their parent companies assess the local market. Whole sections of the city, such as eastern New Orleans, are ghost towns. Mr. Powell attended a ribbon-cutting last week at a Home Depot store in St. Bernard Parish, but the community has perhaps one-tenth of its prestorm population.

Mr. Powell and President Bush have touted the $110 billion that Congress appropriated to assist Gulf Coast rebuilding, but only a sliver of the money has reached the region.

Of the $44 billion spent, about $17 billion was paid out in flood-insurance claims, which are at least partially backed by property-owner premiums. A large portion of the remaining amount was spent on immediate needs after Katrina, such as paying Federal Emergency Management Agency workers, establishing temporary housing for storm victims and providing local governments with operating cash. Very little of this money has a direct effect on long-term recovery for the region, and only a fraction has been spent on repairing infrastructure such as waterworks and electrical grids.

The government of New Orleans, which is struggling to provide basic municipal services, has received -- and spent -- $125 million in direct federal aid. "I've come to see that the word 'appropriation' has very little to do with actual cash in hand," said Oliver Thomas, president of the New Orleans City Council. He estimates billions of dollars will be needed to rebuild infrastructure in a city that independent analysts say has restored only 17% of its bus service, 60% of its electricity and 41% of its natural-gas grid.

But relief may be on the way to homeowners. Last week, the state began accepting applications for a piece of the $10.5 billion Congress recently appropriated to make Louisiana homeowners whole. The money will be disbursed as grants of up to $150,000 and can be used to either buy property from owners who want to be bought out or assist those who want to rebuild. The common wisdom is that such grants will speed rebuilding as residents return and neighborhood businesses follow.

Mr. Powell and Mr. Bush have said they will cede rebuilding plans to New Orleans. But because the city hasn't committed to a master reconstruction plan, redevelopment could be spotty if small groups of residents choose to rebuild in otherwise abandoned neighborhoods. Though Mayor Ray Nagin has said the city may not provide services to certain neighborhoods that can't prove viability, many wonder if the mayor will stick to his guns.

Such worries have heightened tension between local and federal leaders. Washington officials complain privately that Mr. Nagin and other authorities in the region have yet to make hard decisions about rebuilding. For their part, Mr. Nagin and other locals say redlining certain neighborhoods -- even those in low areas at risk of further disaster -- is unfair to people who want to return.

The New Orleans City Council's Mr. Thomas said the decision by individual residents and businesses to rebuild is complicated by one factor the U.S. government could do something about: providing infrastructure improvements that practically every neighborhood in the city needs. While uptown New Orleans suffers from a lack of water pressure, businesses downtown are hit by chronic power outages. Mid-city suffers from balky gas delivery. And all over town, summer rains cause minor flash floods as the city contends with clogged and broken storm sewers.

Jay Joyce, Slim Goodies' vegetable vendor at Bubba's Produce, says the power failures make it tough on his business. If the power fails in the middle of the day, Mr. Joyce says he sometimes shuts down entirely, rather than risk losing all of his inventory to spoilage.

Before Katrina, customers could usually find him hunkered down in an air-conditioned office handling paperwork. Now a smaller staff forces him to do more around his building and he frequently can be seen moving crates with a handcart.

"It's all candles and cellphones now," Mr. Joyce said of working with unreliable electrical service.

At the diner, Ms. Horn measures her success in hassles as much as she does in cash. Opening three weeks after the storm, she fed her customers by searching out supplies beyond the disaster zone and keeping her stocks in coolers on the floor. The early meals were simple and served off paper plates.

Overall she is unhappy with the progress the city is making and may leave for good after paying off her $50,000 business loan. "Everybody's scared, living scared and feeling scared," she said. "A lot of times it just doesn't seem worth it."

Mr. Thomas understands this reaction. "How is somebody supposed to make a decision on rebuilding when they don't know if the infrastructure in their neighborhood will be fixed?" he said. "The feds are doing this backwards -- we need infrastructure help now."

But Mr. Powell sees this reasoning as backward. The former banker said standard market principles guide rebuilding and he has no intention of committing federal infrastructure money to areas that can't demonstrate they will come back. "That's like buying the furniture before the house is built," Mr. Powell said.

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