RAND Study Recommends Public-Private Partnership and Strategic Approach to Redeveloping New Orleans' Economy

New Orleans should craft a comprehensive economic redevelopment plan that combines public- and private-sector funding with a centralized structure, according to a study issued today by the RAND Corporation.

Hurricane Katrina and the subsequent failures of levees in New Orleans in August 2005 devastated the city's economy in addition to destroying buildings and causing more than 1,800 deaths. Even before the storm, the city's population was declining and the economy was not robust, which complicated recovery efforts, according to the study.

The Horizon Initiative, a private-sector organization formed in 2006 to help New Orleans' economic recovery, asked the RAND Gulf States Policy Institute (RGSPI) to recommend the most effective organizational and strategic approaches to revitalizing the city's economy.

“This is a unique opportunity to not only repair the damage from the storms, but also address some pre-existing problems, in a comprehensive way, to forge a stronger, more vibrant economy for the city of New Orleans and the surrounding region,” said Kevin McCarthy, author of the report and a senior social scientist at RAND, a nonprofit research organization.

The study is not a detailed redevelopment plan, but provides recommendations for designing an effective organizational structure for those efforts.

RGSPI, a partnership between RAND and seven universities in the Gulf States region, examined 17 other cities' economic development efforts. The analysis showed that in many cases, economic development work was spread across a range of different agencies without a common development strategy, and in some cases, with competing messages. The most successful efforts incorporated three key elements: a comprehensive design, an appropriate organization, and an effective implementation plan.

The report provides a series of recommendations, including:

• New Orleans should build its economic development program in three phases: a comprehensive design with a vision of what the city wants to accomplish and a plan to achieve it, including target industries; an effective organizational structure that combines transparency with a clear division of roles and responsibilities; and an implementation component with priorities, goals and benchmarks.
• Economic development efforts should be designed around a three-tier public/private partnership structure: a governing board to set policy, an executive to carry out the policy and coordinate activities, and a resource group to provide expertise as needed.
• The vision statement for a New Orleans economic development effort should be developed through consultation with a wide range of stakeholders to reflect the diversity of their views and make them aware of, and vested in, the development efforts.
• The city's economic development efforts should be targeted at three groups of industrial clusters: maritime, oil and gas and tourism, which have made significant progress during the recovery phase; biomedical, food-processing industries and the small-business sector, which have been slower to recover from the storm; and arts and entertainment, information technology and energy technology, which have growth potential.
• New Orleans needs to recognize the weaknesses in its economic infrastructure, and it needs to set priorities for the improvement of the physical infrastructure as well as the quality of the labor force, improve the interaction between the city and the business community, and refurbish the city's national image.

The study also recommends that the effort be funded jointly by private-sector and public-sector funds, noting that the city already spends between $900,000 and $1.2 million on economic development efforts. RGSPI estimates that the total operating costs of a public-private partnership could run between $2 million and $3 million per year.

“New Orleans needs broad participation from the community at large, but if you're going to get anything done, you've got to have a central agency in charge of the effort, carrying out the plans the governing board comes up with,” McCarthy said. “The public and the private sectors have to function as a team; there's no way to do it otherwise.”

The study also draws a distinction between economic development and urban redevelopment. Much of the post-Katrina planning has focused on the latter — improving the physical and social status of neighborhoods — rather than looking at economic development programs to help increase employment and income in the region as a whole.

“If the city simply focuses on urban redevelopment, the city will be a nicer and pleasanter place, but it will be smaller and less dynamic,” McCarthy said. “Both are important, and they are interrelated.”

The RAND Gulf States Policy Institute is helping government, nonprofits, and the private sector develop a long-term vision and strategies for building a better future for Louisiana, Mississippi, and Alabama in the wake of Hurricanes Katrina and Rita. The goal of RGSPI is to assist in long-term recovery efforts by providing evidence-based policy research and guidance to speed regional recovery and growth.

RGSPI is a collaboration between RAND, including the Pardee RAND Graduate School, and seven universities in the Gulf States region: Jackson State University, Tulane University, Tuskegee University, University of New Orleans, University of South Alabama, University of Southern Mississippi, and Xavier University of Louisiana.

The study, “ An Economic Development Architecture for New Orleans,” is available on the RAND web site, www.rand.org