Brandy Christian, President and CEO of the Port of New Orleans, CEO of the New Orleans Public Belt Railroad
Kevin Dolliole, Director of Aviation for Louis Armstrong New Orleans International Airport
Michael Hecht, President and CEO of Greater New Orleans, Inc.
Jay Lapeyre, President of Laitram, LLC
Marshall Redmon, Managing Partner of Phelps Dunbar LLP
The COVID-19 pandemic put logistics in the spotlight. Ninety percent of every product that gets to a household goes on an oceangoing ship or a rail car to get there. Our panel discussed how New Orleans can become a hub for logistics by:
- Onshoring manufacturing supply chains
- Building up our cargo business through the increased capabilities and upgraded facilities of our new airport, as well as through our port and railroads
- Dredging parts of the Mississippi river, creating the deepest water draft of any port in the Gulf
- Supporting the port’s strong container business as cruise business recovers
Our panelists also talked about economic development, including:
- How to create the conditions where people feel comfortable investing their capital and raising their family in New Orleans
- Ways to attract people and companies to New Orleans in the rise of remote work and when limitations of bigger cities are more pronounced
- How businesses, nonprofits and government can work together to solve infrastructure and economic problems
- The need to commit focus and funding to our innovation sectors and the talent we have at our research and clinical institutions
- How to emphasize environmental initiatives that help our economy and create a more sustainable city
- How our elected leaders can tell the right story—not just saying we’re going to recover, but describing what the future looks like
Our panel agreed that if we make the right investments in infrastructure and people, and tell the right story, there’s an opportunity to come out of this stronger than we were going in. Read on for a transcript of the conversation.
Note: The comments in this article and accompanying video were made on Oct. 13, 2020. This transcript has been condensed for brevity and clarity. Click here to watch the full discussion.
Marshall Redmon: We all have a common goal to make New Orleans a place where honest, productive people want to work and raise their families. We have a world-class port, a fantastic new airport, and we’ve got the city, which is our greatest attraction. How can leaders in this sector come together to retain and attract businesses and talent to New Orleans? Let’s start with Michael. What opportunities are you seeing for New Orleans?
Michael Hecht: There’s two things I would say from a table-setting standpoint or, to use an airport analogy, at 38,000 feet.
One, people think economic development is either about golf outings and Chardonnay and cheese cubes, or it’s about incentives and who can give away the most to the least-deserving corporation. Both of those are grossly inaccurate. Economic development, when you really see it, is basically about creating the conditions where people feel comfortable investing their capital and raising their family. If you can do that, then the economic development is going to happen organically.
So I just encourage us all to remember that it’s about the basics. It’s about public safety, public amenities, good government, good schools, and if you get that stuff right, then our biggest challenges are going to be growth challenges. And those are good challenges to have.
Two, coming through coronavirus, I think we’re at another inflection point. If we’re smart now, make the right investments in infrastructure and in people, and tell the right story, there’s an opportunity to actually come out of this stronger than we were going in, like what happened with Katrina. There is an opportunity to bring supply chains for certain types of manufacturing back to the U.S. and particularly to Louisiana, thanks to our logistics. We have the river, six Class 1 railroads, a new airport, roads, low utility rates and a workforce to fill those supply chain needs. And that’s everything from steel to LNG and pharmaceuticals. The fact that 90% of the drugs that we use in the U.S. are made in India and China is a massive geopolitical risk that we can rectify here in Louisiana where we make a lot of the raw materials. So there’s an opportunity there. Also, with logistics dominating retail right now, again, because of our river, our rail and our highway, we have big opportunities.
The recent announcement of the Medline facility on the North Shore—about a million square feet from the biggest medical supplier in the country—is an example of that. We’re always in discussion with the biggest distributors in the country. They really like our assets in our geography for logistics, some of which will be very sophisticated, advanced manufacturing type of logistics.
There are other opportunities that are not as transportation-focused, but let me just mention them. Technology—a lot of tech jobs are coming back to the states, and they’re looking for secondary, less expensive markets. We already have one of the fastest growing tech communities in the country as well as one of the most inclusive. We’re number five for African Americans and number three for women in tech per capita in the country. We continue to grow that, and not only by having companies like DXC locate here, but also we’re beginning to see folks who are working remotely for companies like Google move to New Orleans, because now they can.
We have opportunities in health care—with infectious diseases, where Tulane’s been a leader, going back to the yellow fever, and then with telemedicine. And we’re also now looking at neuroscience and trying to become what MD Anderson is to oncology, but in the areas of neurodegenerative diseases like Alzheimer’s. We’ve got some great starting points there with LSU, Tulane and other institutions, even the Saints.
And then finally, there’s a general opportunity here at the lifestyle level. People are leaving New York, Chicago and San Francisco because the trade-off in terms of energy, opportunity and the necessity of being there is no longer there. We’re going to see that a lot of secondary markets like the New Orleans region have an opportunity to attract people, attract companies and build back critical mass. But it gets back to my first point—we’ve got to get the basics right.
Marshall Redmon: Those basics include infrastructure, like our port and our railroads, which brings me to Brandy. Can you take us down the river a little bit and give us an idea of what’s happening at the port?
Brandy Christian: Through the pandemic, the one thing that did not stop when retail and tourism were being shuttered was the river. If anything, we took a lot of lessons through the pandemic and the everyday person suddenly realized the criticality of maritime. Whether it’s basic food items to toilet paper to thermometers, 90% of every product that gets into a household has gone on an oceangoing ship or crossed a rail car to get to a store to get there. When we look at that experience during COVID, we see a lot of challenges in the global supply chain. But we also see a lot of opportunities that we can capitalize on because of the infrastructure here in the region.
We like to say in the transportation world that when it comes to economic development, the market will attract business. But it is infrastructure that closes the deal. At the end of the day, that’s really what the job of the port is—to deliver that infrastructure.
The Port of New Orleans is a diverse port. We have the cruise business, which has been severely impacted. Prior to COVID, we were the sixth largest cruise industry in the nation. We have cargo, both containerized and non-containerized, which has always been the bread and butter of what we do, as well as operating the railroad. Our value is that we can move goods by multiple modes of transportation.
A lot of retailers and manufacturers experienced some real hiccups in their supply chains during the COVID pandemic. We had moved to just-in-time inventory and a centralization of supply chains, and when a supply chain or a workforce was impacted, there wasn’t a lot of flexibility in some of those supply chains. A good example was when COVID first started hitting, it was hitting in China and Asia. Those were the first manufacturing entities that went into quarantine and stopped production. Vessels that take 30 days to get from China to Los Angeles were no longer sailing with goods to Los Angeles. Those were the first impacts we saw. If you are a manufacturer or retailer and you didn’t have any other established supply chain, you’re stuck. Moving forward, we’re going to see a number of manufacturers and retailers look to onshore components of their sourcing or manufacturing and have more localized warehousing and distribution. Don’t put all your eggs in one basket, so to speak. Regions like New Orleans that can offer so many modes of transportation and access to a growing South and Midwest are going to fare very well to be a big player in logistics.
Marshall Redmon: One of those transportation modes is the airport, so let’s see if we can get up to Michael’s 38,000-foot cruising altitude and move over to Kevin. Can you tell us a bit about where we are at the airport and how you see things moving forward?
Kevin Dolliole: Airports, of course, are a very critical transportation provider in the regions they serve. Our airport serves 85% of travelers flying into or out of Louisiana. From 2008 to 2018, we were the fifth fast growing airport in the country. We saw about 65% passenger growth through that period, 35% growth to nonstop destinations and 20% growth in daily flights. Last year, we saw a record 13.7 million passengers, and that was on top of four previous record-breaking years. So the market was very strong and growing. We were home to 16 airlines before COVID and we had 55 destinations, including eight international destinations. Right now, all domestic flights are operating, though limited in terms of the numbers, but the international flights, of course, have all been suspended for a variety of reasons, primarily due to travel restrictions and lack of loads. But we stay in close contact with all of our carriers, especially the international carriers, and we’ve received positive indications from everyone that they intend to gradually return once restrictions are lifted and traffic starts coming back.
In 2013 or 2014, an economic impact study showed that the airport created 53,000 jobs and about $5.3 billion in local spending. It was anticipated, and these numbers will change given COVID and how we ramp back up, that by 2023, we would support about 64,000 jobs and $6.4 billion in local spending. When COVID hit, we were about six months into operations at our brand new, $1 billion terminal complex. The pandemic seriously impacted our traffic. In April, the first full month of the COVID impact, traffic was down about 97%, here and nationwide. Then it was a slow tick up for several months. So far in the month of October, we’re tracking about 67.8% down over October of last year. So it’s a slow come back and a slow rebuild. The industry projects four to five years out before we see the level of activity we saw pre-COVID.
But on a positive note, we moved up 12 spots, from 23rd to 11th, on J.D. Power and Associates’ customer satisfaction ranking after having ranked near the bottom with the old facility. That was very positive, and I’m very anxious to see how much further we’ll rise after the first full year in the facility. Our goal, of course, is to get to first in that survey. I was part of the team who achieved that once when I was director in San Antonio. It’s a very good place to be, and there’s no reason we can’t get there as well.
Although passenger traffic is down significantly, what’s going on now does present some opportunity for the cargo arena. We have been active in that arena in recruiting for additional activity in our market. You may, in the very near future, see an announcement or two on the cargo side.
We also have had to take the necessary safety measures to make traveling safe and regain the confidence of the traveling public. We did a lot of things in our facility. We’re also going through the GBAC STAR facility certification. GBAC is a global biorisk advisory council. It’s third-party validation that you have the proper procedures and protocols in place to ensure a safe travel experience for the public.
COVID has drawn us into a different position. Where the focus before was on continuing to push and grow air service, now you’ve had to adjust and take advantage of the opportunities there. You have to ensure facility safety and prepare yourself to put a lot of effort into retention on the back end of this, because as our traffic starts coming back up, you do want to see all of this air service come back. So we were putting a lot of work into hand holding with the carriers that were here to keep them apprised of what’s going on in our market, what’s up for the foreign carriers, and what’s going on in the U.S. and how it relates to us. We’re doing everything we can to ensure they come back on board as the traffic comes back.
Marshall Redmon: I think we can all be confident that the traffic will return, hopefully sooner rather than later. And when it does, we’ve built it right and people will come. But it’s also about getting people to stay. Jay, after Katrina, your company could have gone anywhere, but stayed. Why did you decide to stay, and how has that worked for your company?
Jay Lapeyre: Post-Katrina, everyone thought we needed to leave New Orleans, but nobody could agree on where we’d go. I had a crowd that said Houston and then a crowd that said, “I’m not going to Houston!” And we had the same discussion about Dallas, Memphis, New York and the West Coast. So that put us in a position of saying, “What do we do now?” And the answer became, “How do we make New Orleans a place where productive people want to live and work and raise their families?” It’s all about creating the fundamentals and the quality of life. Post-Katrina, we saw businesses, nonprofits and, even to a material extent, government align and work together to try to solve decades-long problems. And we made a ton of improvement. You can look at all of the things we collectively put in as a city. The Inspector General, the Sewage & Water Board reforms, the levee boards, assessors, education—we attacked fundamental things across the board. We’ve got the muscle memory and the engagement from business today that allows us to take this to the next level.
Given all that progress and given where we are, we have to figure out how to engage business and improve things—to integrate with GNO, Inc., and the Idea Villages and to come up with business models that allow us to capitalize on some of the unskilled labor that exists to solve our quality of life problems. The combination of technology and thinking more about markets and thinking more about how to outsource and reform and use those models could go a long way to solving some of our basic city needs. It could also help us find a path for reentry for under-skilled people, because everything in life is learned by doing. You develop skills and habits over time by practice and work, and to the extent you can get a job and work and build a sense of pride, you’re going to be in a better and better position to move up the channel. That’s a big opportunity.
We started working with police reform and criminal justice reform, and that’s a material success at the state level, but it’s also a monster success in New Orleans. The EPIC program, which stands for “ethical policing is courageous”—that’s not new. When the George Floyd situation occurred, New Orleans was already way ahead of the game. As for the eight principles, the “eight can’t wait,” New Orleans has had those in place for four or five years. It’s definitely a work in progress, but it’s a real opportunity.
Marshall Redmon: Speaking of technology and innovation, I’d like to come back to Michael. How do we position ourselves to attract more companies like DXC to New Orleans?
Michael Hecht: In terms of technology and DXC, a lot of our challenge there is simply about getting the word out. New Orleans is now a fairly digitally sophisticated place in terms of our companies and even our workforce capabilities. We have Louisiana’s Community and Technical Colleges and our nonprofits, but the brand is still very analog.
Trying to change that brand and broaden it is a challenge with limited dollars. So it’s important that we do things that are cheap. For example, we have a social media campaign right now that’s scraping the internet, looking for anybody in tech who’s gone to high school or university in Louisiana. We’re directly marketing to them on LinkedIn and Facebook and telling them to consider coming back to New Orleans.
It’s also about having our elected leaders tell the right story. One of the things post-Katrina that we did a very good job on at the state and local level is we not only said we’re going to recover, but we described what the future looked like. And that’s important. That’s picked up by the media and it’s reflected, and we have to do that now.
In terms of bio and that type of innovation, the two things that we’ve lacked to this point are not beautiful buildings and intrinsic talent with our research and clinical institutions. It’s been focus and it’s been funding. So we need to focus, like on neurological diseases, which, with the population over 65 doubling by 2050, is a real opening for us. And as far as funding, we have to make a commitment to put the dollars in at the state level to attract world class attention here. Right now, to some degree, it’s like we’ve got the Superdome, but we haven’t been able to pony up for Drew Brees.
Marshall Redmon: To carry on with the idea of focus and vision, Brandy, where do you see the port going in the future?
Brandy Christian: Going through this pandemic, we often think about March, when we were celebrating Disney and looking at our biggest cruise year ever—1.5 million cruise passengers and ready to move forward with a third cruise terminal. We saw double-digit, unprecedented growth in our container business in the past three or four years. The good news is we’re very confident that both of those businesses will be strong and will come back.
About 30% of all cargo that moved through U.S. ports was declined during COVID. We did much better here in the Gulf than you saw in the East and West Coast ports. The most important thing that the port can do for this state and for the region is our investments in the container business. The pandemic has made us push the gas pedal even harder on the container front with the emphasis on the supply chain and the demand for more opportunity.
When you think about the opportunity to attract more manufacturers and distribution centers like your Amazons, you don’t even get on the ballfield if you don’t have an international container port. Just like if you don’t have an international airport, don’t even think about talking to the big Fortune 500 companies about a corporate headquarters. That’s where we have to be in terms of the container business. We’re doing a $100 million expansion of the current container facility. We’re adding crane and yard capacity in the Uptown facility because of the growth that we’re seeing. A lot of that has been driven by the export manufacturing and the petrochemical industry here in Louisiana and in Texas. Where our real emphasis is trying to drive more imports into the Gulf and Louisiana through attracting those distribution centers, much like what Michael talked about with Medline. Having that modern container facility, as well as the rail assets, will make us competitive in doing that.
And the ships are getting larger. Most ocean carriers are somewhat like the airlines. They call multiple ports. If they’re sailing from Europe or Asia, they’re typically going to stop in Houston, New Orleans and Mobile. So you have to be able to take the same size ship as those ports. Water depth and air restrictions, like bridges, can limit this. What’s very exciting for New Orleans is that we just started dredging the river to 50 feet. That started in the middle of September, and we will have the deepest water draft of any port in the Gulf within the next couple of years. The Houston ship channel has some significant challenges, and to really beat their infrastructure, New Orleans needs to move forward with a second container terminal that will not limit our air draft, so we can take any size ship that the water depth can take. We have been actively moving forward on that, and we expect to make an announcement by the beginning of the year. We’re finalizing the property acquisitions, and we’re excited about that, because there is incredible demand for it.
The Gulf is extremely well positioned. We are making our neighbors very nervous about the potential of our infrastructure, both in water depth and air draft. We really would have the best infrastructure for large ships and the best rail infrastructure to get into those markets. It’s a huge opportunity, and as Michael mentioned, for the first time, you’re seeing markets like New Orleans and Baton Rouge popping up on the radar of your Amazons and your distribution centers. That’s only going to happen if we deliver this infrastructure. So for us, it’s the top priority of all time.
And ironically, even on the cruise business, as challenging as it is right now, with 2023 forecast as the time we’ll get back to 2019 levels, we still have a number of investors and partners that want to pursue the third terminal because of the confidence in the New Orleans market. It’s a little bit mind blowing to us right now, but it’s a good sign about the confidence in this market. But for right now, delivering that container terminal is the most important emphasis.
Marshall Redmon: Sustainability is also a huge issue. What is the port doing to address wetland restoration with the dredging project?
Brandy Christian: What’s really exciting about the dredging project is that all of the dredge material will be placed at the mouth of the river to restore wetlands. It’ll create over 1400 new acres of wetlands to restore the channel. It’s very innovative. You’ve seen something like that done in Port Fourchon recently, but it’ll be one of the first projects like this. It really takes the opportunity to use a project like dredging to restore the habitat and also to maintain the health of that shipping channel. Opportunities like that are key.
For ports today, environmental initiatives have to be at the forefront of everything that we do, from the operations on the terminal to the equipment that we utilize, in addition to how we do our projects. A good example is one of the projects that we’re most excited about and have had great success with, which is replacing local trucks. We’ve done five rounds of replacing trucks with modern, low emission engines for small local businesses that couldn’t afford to buy these types of trucks. This has a big impact on the local air quality. So we’re trying to do projects like that, that not only have a good impact on the environment, but also help the small business owner.
Jay Lapeyre: There are a couple of interesting opportunities that are closely related, and the wetlands is one of them. If you reimagine what soft footprint, low-skilled labor could do in the wetlands and outsource some of that and create business models that allow nature to actually be your friend, you could go a very long way of using low-skilled labor in many places. The problem is no one owns it. There’s no business model. And it’s a good example of the kind of opportunities that exist everywhere for outsourcing.
We talked earlier about how we can attract large businesses. Laitram wasn’t a large business. We grew organically. The challenge is to figure out how to make the kind of environment where people want to be, so they will stay and grow organically. A lot of things get developed here and leave, and that’s what we want to avoid.
The Institute for Justice came out with a report that said that out of 104 industries studied, Louisiana has more licensing restrictions than any other state. We have 73 required occupational licenses. Some states like Vermont, Kentucky and others have as low as 27. That tells you that many of these licenses are not essential to public safety, and we should be rethinking a lot of that. The combination of new models and licensing can create an entrepreneurial mindset that is going to be really attractive over time for a lot of people.
Hospitality also creates an opportunity, because that excess capacity is in place for people to say, “That’s a great place to live.” You’ve still got a lot of the charm that Michael mentioned earlier, but you don’t have the crowds that you used to have.
Marshall Redmon: To circle back to Brandy’s comments about opportunities on the cargo side, Kevin, what’s the view from the airport in terms of supply chains and the cargo side of things?
Kevin Dolliole: I’m often asked how the airport’s going to be developed as it relates to the south side facilities. We will be master planning the airport. Airport master plans are a 20-year look ahead. This includes inventory and analysis of the facilities you have on hand, employment projections and traffic projections going forward through the 20-year period. It assesses and determines the facilities needed to ensure you have proper capacity to service your needs going forward. The worst thing we could do is take the facility and develop it in ways that inhibit our ability to get all the capacity we can out of this 1700-acre site and would prove to be a choke point down the road, which would be to the disadvantage of the region. So it’s very critical we do this.
Besides protecting for our capacity needs going forward, master planning lays out our aeronautical needs going forward and protects for that as well. And then it layers in where other things could potentially happen.
On the 1700-acre site, it’s going to be primarily aeronautical uses, but aeronautical uses can be exciting, too. One is cargo, as I mentioned. We’ll be able to grow and develop our cargo area in a more organized fashion on the airport as cargo operators grow their operations, since folks’ buying habits have changed a lot with COVID. Airports around the country are seeing more activity on the cargo side, while the passenger side has gone to little or nothing. So there’s a definite need going forward to, in a very organized fashion, develop cargo facilities and attract more cargo operators.
An opportunity that could come to us on the south side is development of an MRO facility. That’s an aircraft maintenance facility. Those types of operations bring with them many high paying jobs. It’s a very good operation to have at the airport. It brings a good bit more critical mass through the facility in terms of aircraft. And if you can attract air carriers to locate MRO operations here, you could also have other indirect benefits.
So we’ll be going through that process and determining our capacity, protecting for all of our aeronautical needs, bringing in and pivoting to different operations of that sort, and trying to attract those types of operators to the airport. So we see exciting opportunities in that arena outside of just the passenger carrier activity.
Michael Hecht: Can I add one more piece of optimistic news for the future? In chatting with the airlines, they’re seeing, not surprisingly, a big challenge going forward with business class traffic due to remote work capabilities. They think leisure travel is going to come back quicker and stronger than business, and that business travel might never come back to what it was before. So they’re going to try selling more premium leisure and get more people paying a business class ticket but for vacation. And those dynamics work in our favor since New Orleans is first and foremost a leisure and tourist market.
Kevin Dolliole: You’re absolutely right, Michael, that is an advantage for us. And even though that gap is closing—we’re at about 60/40 leisure over business travel—that will work to our advantage as air carriers school back up.
Marshall Redmon: It’s always great to flip the playing field and turn a challenge into an advantage. Energy production is one of those challenges that we can use to our benefit. As the world moves towards alternative forms of energy in the transportation of goods and services, what are the challenges and opportunities for New Orleans?
Brandy Christian: One area we will definitely see on the water side is with LNG. We have a number of LNG plants developed in Lake Charles, but also going into Plaquemines and Fuchon. You’re seeing a number of vessel owners invested in that technology. So a fueling system that can feed the river is a big opportunity. I think you’re going to see more investment in those alternative fuels.
Jay Lapeyre: And that’s a big deal. If you look at environmental impact, not carbon dioxide emissions, you’re always going to move toward greater energy density. And as you move away from coal, LNG and gas are clearly the answer. And then there’s nuclear, which I think is politically a long way off. But this creates a vast space for gas.
Michael Hecht: We’re beginning to move into the manufacture of elements for wind power and eventually the deployment of wind power in the Gulf because the technology is improving. That’s a big opportunity for our offshore marine folks who have traditionally served oil and gas. Edison Chouest just announced they’re making the first Jones Act-approved boat to service windmills in deep water. That’s going to be a logistics and transportation niche for us, which could, to some degree, begin to offset any declines we see in traditional hydrocarbon in the Gulf.
Jay Lapeyre: If we could just capture the power of a hurricane or two, is that the idea?
Michael Hecht: That’s right. We have vast quantities of hot air here. I was on the phone with LM Wind Power yesterday, and they’re bringing down the longest windmill blade in the world next month. It’s 107 meters long, longer than a football field. So we’re going to be publicizing that. Those are currently being designed and tested out at Michoud in New Orleans East. We would love to see them mass manufactured at Avondale or someplace like that on the river where we have a place to lay them down. The challenge we have now is that a lot of the places using the windmills, like the East Coast and Rhode Island, have local manufacturing requirements. That’s one of the reasons why we want to start to get deployment off the Gulf, because that way, that obviates that issue.
Our next step is trying to get the governor to ask the Bureau of Ocean Energy Management to set up a wind energy task force, which is a procedural step to get wind leases done in the Gulf in the same way that we have oil and gas leases done.
Marshall Redmon: We have a lot of great ideas, incredible resources and great people. What can we do from a collaborative standpoint to accomplish these goals?
Michael Hecht: We’re about to publish our post-corona revision of our 10-year plan, GNO Future. A lot of people on this call have given input into that plan. It’s pretty straightforward. I don’t think there’s too much to disagree with in it. But the more that we can get people to coalesce around that plan and to reflect it and reinforce it, we will begin to get momentum going in a single direction. And we know from studying successful regions that this stuff is not overnight. It requires sustained effort for a decade or more. So we’re hopeful this plan can give us some of that cohesion and direction.
Jay Lapeyre: Michael, earlier you made the point that I think has been key to everything that has worked. The clearer you can make a vision, the easier it is to get alignment and buy-in. The more micro that vision is, meaning showing the specific examples up to the potential to scale, the better, because that’s the key. Take the skepticism and remove as much as you can with a vision.