Why Was New Orleans's Charity Hospital Allowed to Die?
Howell’s law office occupies a small camelback house (a narrow “shotgun” with a partial second floor) a block from the footprint in this diverse but doomed neighborhood. She recognized “the relentless juggernaut” approaching the neighborhood before her neighbors did; they were still exhausted from the hurricane and from rebuilding their homes. “I never knew anything about this stuff,” Howell says, referring to urban renewal and historic preservation, with a spirited laugh. “I was used to the relatively simple life of police killing people. I understood the roles of all those players, but here was sheer cowardice of the entire political leadership that absolutely knew better.”
When she joined the board of the Foundation for Historical Louisiana, Stokes had never participated in a civic battle. “Besides the issues of sustainability and the reuse of historical buildings,” she says, “I was concerned with returning healthcare faster and cheaper and hated watching the government waste and social inequity of what was happening. We could have had everything faster at less cost, plus genuine economic revitalization.”
The huge demolition-and-rebuilding project that is under way instead demonstrates the outsize influence exercised by LSU, the state’s flagship university, located in Baton Rouge. No elected official or other institution wields both the political power and claim to state funds that this institution appears to do. As Louisianans like to say, there are four branches of Louisiana government: executive, legislative, judicial and LSU. When Stokes talked with state legislators, she was told about the four branches “with a smile.” One legislator added, “Sometimes we think LSU has the most power.”
An administrative complaint filed by Howell on behalf of two longtime residents of Lower Mid-City in June 2010 with HUD Secretary Shaun Donovan faults HUD for allowing funds to be spent on a project for which those funds were not approved, and claims that the city’s application includes “false and misleading information.”
The complaint argues that the city’s and state’s use of the $75 million in HUD funds for site acquisition and relocation did not meet any of “the three national objectives of HUD, in violation of federal law.” The original application sought to justify the use of the funds under the objective of “prevention/elimination of slums or blight” but was then “materially altered, without appropriate authorization,” to seek funding under the “urgent need” category. (The third objective, to “benefit low and moderate-income” residents, was never mentioned.)
A March 23 letter from the state Office of Community Development/Disaster Recovery Unit insists the project satisfies what was called for in the UNOP, only represents a “design change” and is not “directly counter to the Recovery Plan” as charged. Howell notes, “I filed the complaint with HUD. HUD referred it to the same state agency that approved the grant in the first place. Needless to say, the state responded that everything is basically OK. It’s just ridiculous.”
The design of the complex calls for closing all the streets, erasing the street grid and minimizing pedestrian access, all adding up to a fortress-like campus. Only about one-third of the new LSU site is needed for the hospital complex; the rest is for six city blocks of suburban-style surface parking, temporary green space and future speculative development by LSU, which will compete with existing commercial space in the core, much of which is already vacant.
It is almost six years since Katrina. Charity sits empty. A quintessential New Orleans neighborhood has been razed, its inhabitants scattered. Residents report all the broken promises typical of 1960s urban renewal. Although more than seventy historic houses were moved, they have lost so much of their exterior or interior and architectural details that they are unrecognizable, and some have been moved to the shadow of the highway or other undesirable sites.
LSU is still far from successful in raising the $1.2 billion it needs to build the new complex. While $775 million has been marshaled for the project ($475 million from FEMA, $300 million from the state), the hospital board is counting on mortgage insurance from HUD to back the sale of low-interest bonds to cover the remaining costs. If HUD grants that request, the federal government will be holding the bag if LSU defaults.
“This whole project is built on a financial house of cards,” says Jacques Morial, son of legendary former New Orleans Mayor Dutch Morial, brother of subsequent former Mayor Marc Morial and a persistent critic of the project. Jacques Morial, a public finance specialist and investment banker with experience in healthcare issues, adds, “Its financial calculations are based on pre-healthcare [law] changes and in contradiction to it. And without Wall Street or HUD-backed financing, the state will likely have to back this loan in some way, allowing for no bonding capacity for other projects across the state, including roads, highways, bridges.”
If and when the complex is built, the state will have to come up with another $70–$108 million annually from the general fund to cover operating losses, according to a recent assessment by Kaufman, Hall & Associates, an independent healthcare finance consulting firm, which concluded that the project, “as currently envisioned, is materially larger than is supportable.”
This is one of those tales in which the primary culprit is clear—LSU—but in which multiple power centers are complicit: former Mayor Nagin and his recovery czar, Blakely, on whose watch this began; current Mayor Mitch Landrieu, on whose watch it continues; Governor Bobby Jindal, who in January declared that “the hospital will be built” with the desired HUD mortgage insurance, and whose deputies, brandishing shovels, presided over a groundbreaking ceremony at the LSU site in April; the Obama administration, particularly HUD and Donovan, who could have pulled the plug along the way; and the New Orleans business community, which has served as a cheerleader for the plan throughout.
Mega-projects like this frequently cost more than anticipated, destroy more than required to meet a goal and move ahead outside a genuine public review process. But the context for this today is the national, state and local financial crisis. With Louisiana facing a $1.6 billion shortfall for the coming fiscal year, state workers are enduring a pay freeze and mass layoffs, while major service cuts are on the table—including to public hospital services for the poor. Yet LSU’s hospital project moves along in ways certain to drain state coffers.
In the end, the city too will spend more than it gets, the jobs will not be as many or as local as promised and the healthcare that finally comes will arrive at a stiff price. The waste of public funds on this project seems criminal in the face of the physical and human needs of this storm-decimated city. By the time the truth is clear, the destruction will have occurred, and New Orleans, like too many cities today, will be forced to spend endless funds and decades rebuilding its urban fabric.