NEW ORLEANS — For nearly 40 years, customers flocked to Bachemin's Meat Market to buy spicy beef sausages, share cooking recipes and swap gossip.
Today, exactly two years after Hurricane Katrina ripped through the Gulf Coast, the future of this neighborhood institution in the Seventh Ward is in doubt. A sign still proclaims it the "Home of Creole Hot Sausage." But the shop has long been gutted, the walk-in freezers emptied.
"You can say, 'If you build it, they will come,'" says Kevin Bachemin, a third-generation butcher whose grandfather bought the shop in 1969. But because most of the neighborhood has yet to return, "I'm unwilling to take that chance with my kids, my wife, my house."
New Orleans has always been a city of family-owned meat markets, dry cleaners, diners and corner stores. These businesses tended to be the ones most affected by Katrina because they had the least financial resources. Two years later, many of them still haven't received the loans and grants they need.
Even as tourists and residents trickle back, they're coming too late for thousands of businesses. Nearly 7,900 businesses in southeast Louisiana — including New Orleans — shut down between the second quarter of 2005 and the fourth quarter of 2006. The smaller the company, the higher the failure rate. Those that remain open are struggling with rising insurance and difficulty finding employees, customers and supplies.
Across the Gulf Coast, Katrina killed more than 1,800 people and displaced an additional 450,000. In New Orleans, one-third to one-half of the residents have yet to return, according to various estimates.
Studies tend to provide only a hazy picture of how well businesses have recovered. Research by Louisiana State University notes an upswing in the number of employers in southeast Louisiana as "concrete evidence" of recovery. But it includes little data on how businesses are coping. Meantime, one of the most comprehensive studies yet on small businesses, to be issued today by the non-partisan Political & Economic Research Council (PERC), says most of the 1,032 companies surveyed are struggling. Its research, though, doesn't analyze the firms that have gone out of business. Michael Turner, the council's president, cautions, "These are the success stories."
Success in this region, though, is relative. While nearly one in four businesses is ringing up more sales than before Katrina, almost half of small businesses have 75 percent or less revenue than before — even with fewer competitors, the council found. Overall, two of every three small-business owners — those with fewer than 25 employees — are bringing in lower revenue than before Katrina, its research shows.
"What this means," Turner says, "is staff reductions, salary cuts, the inability (of businesses) to fulfill credit obligations."
The saga of small businesses in New Orleans goes beyond dollars and cents, though. It speaks to the livelihood of generations of families and the impossible decision many had to make: whether to forsake a city with mounting problems or rebuild against high odds. And it's a story of recovery on two fronts: Those who owned small businesses typically had homes in the region that were damaged, too.
"Funding your business while having to rebuild your house creates stress of a magnitude most people have never dealt with," says Randy Waesche, a financial planner in Metairie, La., who specializes in business planning. "People are frustrated. They're in pain. Sometimes, they don't know where to turn."
Some are benefiting
Certainly, some businesses are thriving and boosting states' tax revenue. Local banks are benefiting as residents deposit grants and insurance proceeds into short-term, low-interest-bearing accounts that can be accessed quickly. Construction companies, woodworking shops and contractors are booming from the region's rebuilding.
At New Orleans Millworks, a shop tucked away from the shopping thoroughfare of Magazine Street, Scott Taranto and his 10 employees can scarcely keep up with the orders for shutters, moldings, mantles and doors.
Before Katrina, Taranto worked full time as a medical resident while managing a small wood mill on the side. But demand for construction after the storm meant "I was getting more calls for the millwork than from the hospital."
So Taranto opened a larger shop and decided to make shutters and doors a full-time career. He says he's earning at least as much as he'd be making as a doctor.
"There's a possibility I'll go back (to medicine), but I'm enjoying things right now," Taranto says, noting that he has more time for his wife, Melissa, and two daughters, Evie, 2, and 3-week-old Jessica.
The growth in the construction industry, though, could be concealing losses in other sectors and temporarily propping up the economy. "We refer to this as a false economy," says Mark Drennen, CEO of Greater New Orleans Inc., a public-private partnership that supports business development. "Everyone recognizes that this will not last. At some point, people will have rebuilt their house."
Overall, in southeast Louisiana, the average number of employees is falling, as some businesses make do with fewer workers amid a tight labor market, says Dek Terrell, director of the economic development division at Louisiana State University. The health care and retail industries, in particular, are hurting.
Pho Tau Bay, a Vietnamese noodle shop in Gretna, La., has raised wages for its seven employees by up to 15 percent since Katrina but still fears losing them. "Sometimes, employees don't show up, and you either wing it or shut down," says Karl Takacs, who owns the shop with his parents.
Before Katrina, Takacs' family owned five Pho Tau Bay shops in the area. Now, there's just one. Because so many residents have yet to return to the city, Takacs says, small businesses like his are having a hard time finding and keeping workers, even with higher wages.
Changing to survive
The storm didn't only hurt established businesses. It forced existing ones to change their business models to survive in a city with fewer residents and tourists, says Robin Barnes, a senior vice president at Seedco Financial, a community development group that works with Louisiana to provide business loans and grants.
Besides revamping their operations, "A lot of them also had to figure out how many times to open per week," Barnes says. "If the business is in a residential neighborhood, and many people have not come back, they might decide Saturday is not a good time" to open.
Loretta S. Harrison, who owns Loretta's Authentic Pralines, is remodeling her candy warehouse in the historic Faubourg Marigny neighborhood to try to attract more tourists. She's begun serving lunch on Fridays. She's staying open longer. And she's selling more of her pralines on the Internet.
Still, revenue is off 75 percent to 80 percent from pre-Katrina levels. "We're barely making ends meet," says Harrison, who began selling the pralines — made from a longtime family recipe — 31 years ago.
A mile away, Praline Connection, a soul-food/Creole restaurant on the edge of the Faubourg Marigny and the French Quarter, is doing brisk business most nights, with family recipes for chicken cooked three ways — baked, fried and stewed — along with turkey wings, gumbo and bread pudding. But co-owner Curtis Moore says he's still struggling. Two of his three other restaurants remain closed. And his property taxes are set to skyrocket after a recent assessment.
The city's new tax assessments mean that those who've been in the same property for years could see their taxes rise sharply after years of failing to keep pace with property values. The system is designed to ensure that property owners pay their fair share of taxes — even if it ends up hurting old-timers such as Praline Connection.
"I'm back, but I'm not where I was before Katrina," says Moore, 60, who received a $20,000 state grant this year and is applying for a state loan to "catch up" on bills.
Some small businesses have turned to the state or non-profit groups for loans and grants because they didn't qualify for a federal loan from the Small Business Administration. Loans could be denied for a variety of reasons, including too much debt, marred credit or a limited track record of profitability.
The SBA has granted about $5 billion in loans related to Katrina. Less than one-fifth went to small businesses. The rest went to homeowners and renters trying to recover.
Unable to get SBA help
Many small-business owners couldn't access SBA money because their collateral was their house - and their house "may not be worth anything if it's wrecked," says Andy Kopplin, executive director of the Louisiana Recovery Authority, the agency in charge of helping the state rebuild.
Long delays have also plagued businesses that applied for SBA loans. Congress has held hearings on these snafus, which are blamed for helping put some companies out of business.
SBA Administrator Steven Preston acknowledges that the agency didn't "respond quickly enough" but says it was "overwhelmed" by applications for loans.
"For the businesses that could have survived with capital and didn't" get it, Preston says, "it's a tragedy, and we can't let that happen again."
As the cost of operations rises, nearly a quarter of businesses are relying more on personal credit cards, PERC found. For roughly a third of these companies, personal credit cards are their main source of credit.
Small businesses ranked supply shortages and costs, government red tape and difficulty finding labor as their stiffest challenges. But their biggest problem of all: insurance.
Soaring insurance costs — which have up to tripled since Katrina — are a grave threat, they say.
"Everything I sell goes to pay insurance," says Harrison of Loretta's Authentic Pralines. She's paying $17,000 a year for insurance on the 3,000-square-foot candy warehouse, compared with less than half that amount before Katrina for coverage on the same space as well as a shop in the French Quarter. (The shop is closed while the building is renovated.)
Insurance costs were already high before Katrina, and many owners couldn't afford to fully insure their business. "You buy what you can," says Leah Chase, who owns Dooky Chase's restaurant in Treme, one of the oldest African-American neighborhoods in New Orleans, with her husband, Edgar. "If you can't pay $5,000 or $10,000 a month, you don't buy it, because (the policy) will be canceled. You never think you'll lose everything in one shot."
Since the storm, more businesses — small and large — are underinsuring out of financial necessity, just hoping the next hurricane won't wipe out their livelihood. In Gulfport, Miss., Jeffrey O'Keefe of Bradford-O'Keefe Funeral Homes has one-eighth the coverage on his five funeral homes and a crematorium that he had before Katrina. Buying more, he says, would be a financial hardship. Even so, his overall premium has risen 45 percent, to $88,612 a year.
"I'm paying more for insurance than my buddy is paying for 20 funeral homes in South Dakota," O'Keefe says.
Optimism endures
Yet despite ongoing challenges, nearly two of every three small-business owners say their long-term prospects for recovery are good, according to PERC's survey.
That optimism is reflected in the outlook of Jerik Daenarson, whose business, for nearly 30 years, has been reading tourists' palms in the sultry heat of the French Quarter. He says his income has gone from "excellent" before Katrina to "just acceptable" now.
Daenarson is careful to point out he can't predict the future, just interpret what the palms tell him. Even so, "This is my home, and I see my home coming back," he says.
Others are less sanguine. In the Seventh Ward, where his butcher shop remains closed, Bachemin says customers are still clamoring for his family's hot sausages, a staple in traditional New Orleans dishes such as rice and beans and gumbo.
"That's my barometer" of whether to reopen, says Bachemin, who still makes the sausages at home on weekends for customers. Demand is high, he notes, but not high enough.
For now, he's working as a technician for an oil company while he decides what to do with the business.
"It was mom-and-pop businesses that made New Orleans the way it was, and some of them are gone," he says. "Others, like me, are in danger of not coming back."
Contributing: Barbara Hansen in McLean, Va.