Post-Katrina HUD funding has underwhelmed in Gulfport

by Adam Millsap on August 28, 2015

in Economic Policy, Infrastructure, Public Goods

Hurricane Katrina made landfall 10 years ago and devastated much of the gulf coast. In the immediate aftermath of the storm, both public and private aid flooded into the effected areas. Not all of this aid was effective, and my colleagues at the Mercatus Center have meticulously analyzed what worked, what didn’t, and how the region was largely able to get back on its feet.

One project that is still being scrutinized is the Port of Gulfport Restoration Program. In 2007 the Mississippi Development Authority (MDA) requested that $567 million of federal Housing and Urban Development (HUD) funds be diverted to the newly created Port of Gulfport Restoration Program. Prior to Katrina there were 2,058 direct maritime jobs at the port, and the 2007 plan submitted to HUD projected that there would be 5,400 direct, indirect, and induced jobs once the restoration project was complete in 2015. In return for the money the administrators promised HUD that at least 1,300 jobs would be created, and HUD Secretary Julian Castro was recently in Gulfport to check on the progress that has been made. As is typical with HUD projects, the actual progress on the ground has not lived up to the hype.

In September of 2014, nine years after Katrina, the port employed only 814 people. This was well short of even the 2,348 jobs predicted by 2010 in the original 2007 plan. Ignoring the fact that jobs are a poor metric for judging economic development – labor is a cost, not a benefit – the project has failed to live up to the promise made to federal taxpayers who are footing the bill.

HUD funding has a long history of failure. Billions of HUD money has poured into cities such as Detroit and Cleveland since the 1970s with little to show for it. Moreover, any successful HUD story is really just the result of transferring economic activity from one place to another. The $570 million being spent in Gulfport came from taxpayers all over the country who could have spent that money on other things. Moving all of that money to Gulfport caused small declines in economic activity all over the country, such as less investment in local businesses and/or lower demand for local goods and services. These small declines are hard to see relative to the big splash that $570 million in spending creates, but they are real and they do affect people.

Large, federal spending projects rarely live up to their hype and usually waste resources. Local citizens using local assets are often much more effective at revitalizing devastated communities. There are lessons to be learned from Hurricane Katrina, and at the top of the list is don’t expect too much from federally funded programs – they are usually not up to the challenge.

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