The downside of the uptick
Pulling up to the pump might not be so pain-free anymore. Those towering price-per-gallon signs around Baton Rouge have been displaying costs close to $2.49 recently, part of a steady increase in the past few weeks.
And while paying more at the pump is usually a good sign for Louisiana—the oil revenues generated for the state help keep the government flush with cash—higher prices might not signal happy days for the state coffers. Instead, industry experts suggest that price increases are artificial and don’t necessarily signal increased demand or increased production. And state budget experts say high oil prices could mean bad news for the budget, no matter how rosy it might look for OPEC.
“Oil and gas has actually been a strength for us,” says Greg Albrecht, chief economist for the Legislative Fiscal Office. “It’s one of the reasons we lag the U.S.” While the rest of the country sank deep into a recession last year, Louisiana held out and managed to remain a haven for those seeking some stability in the global marketplace, and BusinessWeek named Baton Rouge one of the top cities in which to ride out the recession. But there are three distinct reasons why rising oil prices don’t mean rainbows and sunshine for the state.
The first thing experts say is that the price increase doesn’t seem to be tied to a change in demand. Chris John, the president of Louisiana Mid-Continent Oil and Gas Association says global demand is still decreasing. “Everywhere in the world, the economy is still struggling,” he says.
Albrecht agrees. “The worldwide demand is still declining.” That the increase is solely limited to oil and doesn’t include natural gas indicates to him the increase is arbitrarily inflated. “It’s just not real demand.”
Don Briggs, president of the Louisiana Oil and Gas Association, says the increase more likely is linked to speculators hedging their bets that prices will increase. “The reality is that there was no other option for the price of oil to go up,” he says. “You have nowhere else to go when the prices drop to $35 [per barrel].”
Experts say the second reason price inflation won’t impact the state is that investment in new production isn’t happening. Briggs says there are still only 887 rigs drilling for oil in the entire U.S. That’s down from 899 the second week in June and more than 2,000 in summer 2008. In Louisiana, there are only 131 rigs—and that includes those drilling for natural gas. Instead of producing and using oil, the world is now pulling from some of the oil reserves, meaning there’s no drive by oil companies to drill more.
“There are 100 million barrels floating off the coast,” Briggs says, adding that prices will increase after we slowly chip away at that stock. “We’ll see prices level here around $70 or $80 per barrel.”
But that doesn’t mean oil companies are starting new rigs, hiring more workers or refining new stocks of crude—the parts of the oil and gas business that really benefit the state’s cash flow.
The last reason increased prices aren’t necessarily beneficial is that Louisiana and Baton Rouge are finally starting to feel the heady push from the global recession. Albrecht says, “It’s not all good to have rising energy prices. People are not buying oil to consume [at higher prices] … Corporate collections are about 20% below in a month-to-month comparison from 2008 to 2009.”
Louisiana residents still pay the higher prices, just like the rest of the country, so that means they’ll feel the pinch on an already tightened budget. With less cash in their pocket and less cash in their savings accounts, it adds up to a negative impact on the state economy and the state budget.
One question still remains, however. When Albrecht and the rest of the state budget estimating committee next meet, will they adjust upward the price of oil? The budget for fiscal-year 2010 is based on the price of oil at $53.29, but it was selling at $68.69 in the second week of June, according to OPEC.
Albrecht says it’s likely, but that doesn’t mean there will be more cash to inject into higher education, health care or any other funding that’s been cut in the recent fiscal plan. “If we go up from the estimated $53.29 to $54 per barrel, the effect of that on mineral revenue is to add $12 to $15 million to the revenue base.”
But there is also a downside, meaning that corporate income taxes, which make up an even larger portion of the state budget than minerals, could end up coming in lower than they would have if gas prices were lower. “At some point, this seems to hurt the economy again,” he says.—Olivia Watkins
Recession lessons
Recessions are depressing. Or at least they might seem that way to much of the business community. But some companies and organizations are going out of their way to point out that while the recession might make an impact, it doesn’t mean the end of growth.
For example, Dale Carnegie Training has been passing out buttons that say, “We refuse to engage in a recession.” And if you’ve driven around Baton Rouge lately, chances are you may have seen other evidence of the recession-resistant spirit.
One example of anti-recession attitude comes from the Outdoor Advertising Association of America through Lamar Outdoor Advertising billboards. The digital and print billboards look like spiral-bound notebooks with quick bits of inspiration and recession history, including “Recession 101: Self worth beats net worth,” “Bill Gates started Microsoft in a recession,” “Interesting fact about recessions … they end,” “Economic forecasts tend to be shovel-ready,” “Nobody can repossess your future,” and “It’s a test, not a final.”
Mendi LeBlanc, the corporate creative director for Lamar Advertising, says an anonymous donor created the campaign phrases. The OAAA pays for many of the materials, and Lamar also chips in to keep it going. LeBlanc says that Lamar wants to be a positive “part of helping spread this message.”
The billboards don’t aim to sell anything. “They are subtle reminders that our country has survived many difficult economic times in the past,” LeBlanc says, “and everyone must remain optimistic.”—O.W.
Storm watch
June might only mean the flip of a calendar page for some people, but for Louisianans, the summer month starts everyone’s favorite season of the year—hurricane season.
Entergy, which received much criticism for its handling of power restoration in the aftermath of Hurricane Gustav, made extensive preparations for the 2009 season, says Dennis Dawsey, vice president of distribution operations for Entergy.
“We’re ready,” Dawsey says. “We’ve run our storm drill in May. We’re training our people and making sure that we are in communication with our support contractors so they can assist us if a storm does hit.”
Entergy has identified more than 6,200 miles of tree canopy and vegetation that might be hazardous to power lines during a storm, Dawsey says. And 75% of those trees have been trimmed.
The Governor’s Office of Homeland Security and Emergency Preparedness plans to use the social-networking site Twitter as a tool to communicate with users in the event of a hurricane. The agency has also made its Get a Game Plan Web site, getagameplan.org, more user-friendly with updated information in English and Spanish.
“We’re basically asking people to prepare for hurricane season as early as possible,” GOHSEP Communications Director Veronica Mosgrove says. “Especially in these economic times, people can get ready little by little so that if a storm does hit, they will be ready.”
AT&T has identified its South Sherwood Forest Boulevard call center as its command center in case of a major storm in southeast Louisiana this year, spokeswoman Sue Sperry says.
“All of our emergency operations, crews and network will be out of Baton Rouge,” she says. “We want to make sure people get their services back online as soon as possible in the event of a major hurricane.”—Emma James
EXECUTIVE SPOTLIGHT: Molly McGehee Quinn
Commercial real estate developer
McGehee properties
Hometown: Baton Rouge
As a child, Molly McGehee Quinn watched her father at work and knew that she would one day take over the business. “It never crossed my mind to ever do anything else but follow in his footsteps,” she says.
But somehow, while working on projects like her Corporate Boulevard development, Quinn learned that she had another talent outside of development—design.
After a trip to Bali with her husband, Quinn came home to and began designing her home to feel like the island getaway. From the tiki hut inside the house to the bamboo bar by the pool, Quinn sketched out and designed her own personal haven—a passion for design that has continued to develop.
Quinn still develops commercial real estate, but she’s also designing her own line of jewelry for clients from coast to coast. “I am truly in love with what I do,” she says. “It does not get any better than that.”
To read Quinn’s full Q&A, click here.
BOOK REVIEW: Financially Ever After: The Couples’ Guide to Managing Money
Author: Jeff D. Opdyke
Publisher: Collins Business
Year: 2009
Pages: 240
You’re about to make a serious promise. An oath not for the faint of heart. It starts with “love, honor and obey” and morphs into “in sickness and in health.”
So far, so good.
But then, you’ll say something like, “For richer and for poorer … ” and you’ll suddenly realize that those are some powerful words. You happen to like a checkbook in the black. How can you make sure your new life with your beloved is more toward the “richer” side and less of the other?
You can start by reading Financially Ever After: The Couples’ Guide to Managing Money by Jeff D. Opdyke, a Baton Rouge-based reporter for the Wall Street Journal. With this book in hand, your march down the aisle will start out on the right financial foot.
If you’re like most people, you’ve been taught that money is something you shouldn’t talk about. Chances are your parents didn’t discuss family finances in front of you. But now you’re the adult and before you start your life with another grown-up, there are 10 questions you should ask yourself and your future spouse.
Opdyke uses common sense and good advice to help couples avoid one of marriage’s biggest issues, in a way circumventing other problems that arise because of underlying money matters. Opdyke advocates equality and openness, but he also says prenuptial contracts are sometimes near mandatory and, yes, women should have their own credit histories.
If you’ve been married for a while, you’ll wish you’d had this book years ago. And you might still find some good coaching here. But if you’re altar-bound in the near future, find this inexpensive paperback, for sure. Financially Ever After is a book you won’t want to miss for love nor for money.—Terri Schlichenmeyer
FAST FORWARD: A fresh slice
In the Dec. 31, 2007, story, “Family feud,” Johnny DeAngelo was fighting a written request from his nephew, Louis DeAngelo Jr., to change the name of his restaurant, Johnny DeAngelo’s New York Pizza and Italian Restaurant, or face legal action.
But a year and a half later, the threat of a lawsuit has been dropped, and Johnny DeAngelo has moved on to a new restaurant: Johnny D’s Pizza and Italian Restaurant.
“He [Louis] couldn’t keep me from using my name,” says DeAngelo, standing in front of his trademark Statue of Liberty miniature outside the restaurant’s new location on Coursey Boulevard at Millwood Drive—interestingly less than one-half mile from a location of Louis DeAngelo’s Casual Italian Dining. “But just to avoid any further confusion, it’s now Johnny D’s.”
The new restaurant, which opened the second week in June, features a drive-thru and a lunchtime buffet that transforms into a bar by night. The drive-thru concentrates on New York-style pizza by the slice and Italian sausage, while the lunchtime buffet features at least four entrees. The location also boasts full-service delivery service and catering.
“We want to exploit every aspect of this business,” DeAngelo says. “We’ve had a lot of loyal, dedicated people that have helped us successfully get to this point.”
The Coursey location has 15 employees, some of whom are from the former location on Jones Creek Road. The decision to relocate was prompted by road construction that planned to eat up half of the former restaurant’s parking space, which was already hemmed in by traffic from existing businesses.
“We are truly blessed,” DeAngelo says. “Millions of restaurants open every year, and millions of restaurants close every year. We could have been in that statistic, but we’re still around and blessed enough to have success.”
Johnny D’s was also chosen as a vendor for the lunch program at St. Michael’s High School for the 2009-10 year.
“We’re very proud of that,” DeAngelo says with a broad grin. “The principal and staff have eaten here, so they believed that we were good enough to participate. It’s an honor.”—E.J.
FORTNIGHT: June 17 – June 30
June 18 – Walker plays host to its first Business Meet & Greet at 6 p.m. at Revival Temple Church. The city will provide networking opportunities for local businesses and business support organizations. To RSVP or for information, call [225] 665-4356.
June 18 – On this day in 1999 – ?Gov. Mike Foster signed a bill to amend Louisiana’s mandatory motorcycle helmet law to allow freedom of choice for riders 18 and older who carry $10,000 in medical coverage. A mandatory helmet law was reestablished in 2004; a repeal this year passed the House, but died in a Senate committee on June 10.
June 24 – The Louisiana Secondary School Athletic Healthcare Summit is being sponsored by the LSU Department of Kinesiology. The summit will feature topics such as high school athletic health care practices and resources for enhancing athlete safety. For more information, contact Ray Castle at 578-7175 or rcastl1@lsu.edu.
June 25 – On this day in 1868 – Louisiana is one of six states readmitted to the United States following the Civil War. Gov. Henry C. Warmoth, whose administration is regarded as being one of the most corrupt in Louisiana history, took office two days later.
June 25 – The Louisiana Legislature wraps up the end of the regular session no later than 6 p.m. The regular session brought with it a flurry of debate between legislators and the governor’s office regarding budget cuts, taxes and how to fully fund higher education.
June 30 – On this day in 2006 – Gov. Kathleen Blanco signed a bill banning smoking in restaurants and most other public places. A proposed amendment to the ban prohibiting smoking in bars and casinos was defeated in the House on June 2.
BUSINESS OF POLITICS
The final countdown
The state’s $28 billion budget is still in play as the regular session lurches closer to adjournment. During the next fiscal year, the state is expected to receive $1.3 billion less in revenue, which means that programs must be cut or incoming dollars must be increased.
Sen. John Alario, a Westwego Democrat who’s dean of the Legislature, says the Senate is prepared to generate money for the state through various tax changes, but the House has only been willing to consider reductions. As for Gov. Bobby Jindal, a Republican, Alario says the administration has been “directionless,” and the ongoing session is shaping up to be the most contentious he’s seen since being elected to the Legislature in 1972. “In the past, we had a plan that we went by,” Alario says. “It was generally a combination of revenue-raising measures and some cuts within the budget.”
The uncertainty has many lawmakers wondering how this session will end. Will Jindal veto the Legislature’s many changes to his budget plan? If so, will lawmakers fire back with their own veto session in coming days? The one consensus that does exist is that higher education and health care must be saved from drastic cuts before June 25.
But even that seemingly simple task remains unresolved at this late hour. “It’s a difficult tightrope to walk,” says Sen. Dan Claitor, a Baton Rouge Republican.
Senate fuels fires
As the operating budget left the Senate for compromise negotiations, the state’s workforce was scheduled to shrink by 1,223 jobs. Critics contend it’s a small figure, considering how bloated state government is and economic forecasts that predict future budget shortfalls.
Maybe that’s why senators slipped in a last-minute amendment to House Bill 1 that directs the commissioner of administration “to develop a comprehensive study of the state workforce encompassing each department, agency and program of state.” It also calls for the commissioner to recommend reductions to state employment based on the completed study.
The administration must submit its findings to the Joint Legislative Committee on the Budget by Nov. 1. If adopted by lawmakers, the study would have to include a specific implementation plan for Fiscal Year 2011. Lawmakers will debate that year’s budget next spring, but could get a jump on it later this fall thanks to the amendment, which was inserted by the Senate Finance Committee.—Jeremy Alford
Last in line
A new forecast says Louisiana will be one of the last states to get out of the recession, with employment growth not resuming until the third quarter of 2010. “It’s kind of a first-in, first-out situation,” says Mike Zoller, an associate economist with Moody’s Economy.com, which issued the forecast. Moody’s notes that Louisiana didn’t enter the recession until October, about 10 months after California, and the state didn’t record a year-to-year drop in the number of jobs until April.
There’s been a split between the economic fortunes of north and south Louisiana, Zoller says. While the southern portion of the state has held up well because of hurricane rebuilding, the manufacturing industries in the northern part of the state have been hit by the national downturn. “Also, the Haynesville natural gas field is not growing as fast as expected,” Zoller says. The recession in Louisiana hasn’t been as bad as the rest of the nation, but the drop in offshore oil drilling has been “a thorn in the side,” he says. Moody’s says five states should exit the recession by the fourth quarter of this year: Colorado, Idaho, Oregon, Texas and Washington. Those states are benefiting from their strong high-tech industries.—Timothy Boone
Stimulus construction
Baton Rouge is one of 19 U.S. metro areas that added construction jobs in April compared to the year before. There were 2,900 more construction jobs in the Capital Region than there were in April 2008, a 7.3% increase, according to the Associated General Contractors of America. That made Baton Rouge the second-biggest gainer in the country; only Odessa, Texas, had a bigger percentage of construction jobs, growing by 8%.
Shreveport-Bossier City and Lafayette also added construction jobs, while New Orleans was unchanged. AGC economists say the figures show the need to get federal stimulus money distributed to states and local governments. The unemployment rate in the construction industry was 18.7% nationwide, compared with the national unemployment rate of 8.6%. Several cities saw the number of construction jobs drop by 30% or more year to year, including Pascagoula, Miss., and Redding, Calif.—T.B.
ON THE BEAT
Not-so-Capitol idea: The Historic Spanish Town Civic Association board voted unanimously to oppose Capitol Lofts, a proposed 115-unit development that would require rezoning from A4 to A5. The development would be built at the end of North Sixth Street, facing Arsenal Park. Recently adopted historic guidelines say a development should not be higher than buildings adjacent to it.
Got milk? Devin Guillory, a recent McKinley High School graduate, was one of 25 outstanding high school student-athletes honored by the National Milk Mustache Campaign and USA Today. Guillory has been awarded a $7,500 scholarship and will spend a weekend at Walt Disney World after winning the award. He will attend Stanford University this fall.
Off to market: Maxwell’s Market has signed a lease to build a third Baton Rouge location in the Highland Market shopping center. Ron Lewis, who owns Maxwell’s, says he hopes to open the grocery store/deli/restaurant by Nov. 1. The location, across from Ruffino’s, is slightly larger than the Maxwell’s on Corporate Boulevard and on Perkins Road.
Unemployed: The Louisiana Workforce Commission reports initial claims for unemployment insurance in the state rose to 5,753 for the week ending May 30. The commission attributes the rise, up from 4,944 for the week ending May 23, to more first-time filings for jobless benefits in the wood product manufacturing and health care and social assistance sectors.
Re-routed: LSU’s new bus service, First Transit, will establish regular routes from downtown to campus, with shuttle stops every 20 minutes. Plans are to run the buses from 7:30 a.m. to 5:30 p.m. on Monday through Friday, says Davis Rhorer, Downtown Development District executive director. Rhorer says the buses will make several stops downtown, including Spanish Town.
Not fair! Louisiana Attorney General Buddy Caldwell says he’s found violations in the way General Motors is treating its dealerships. Caldwell says the bankrupt automaker sent letters to dealers imposing restrictions that appear to violate Louisiana regulations.
Fęte encore: The Baton Rouge Epicurean Society and the Baton Rouge Convention and Visitor’s Bureau have solidified plans for the first Fęte Rouge: A Louisiana Celebration of Food and Wine, a three-day festival slated for Aug. 27-29. The festival was created by the BRES after the Southern Breeze Wine and Culinary festival was postponed until 2010, says Renee Areng, executive vice president of sales and marketing for the CVB.
Risky behavior
Louisiana ranked 27th in the nation for mortgage delinquencies with 3.88% of borrowers past due in the first quarter, according to credit reporting agency TransUnion.
The report found that Louisiana mortgage borrowers carry an average balance of $123,497, coming in 42nd in the nation. Between the fourth quarter of 2008 and the first quarter of 2009, Louisiana mortgage delinquencies went up by 6.1%, less than half of the national increase of 13.9%.
Nationally, TransUnion says the rate at which people are falling behind on their mortgage payments went up for the ninth straight quarter in the first three months of 2009. The rise is expected to continue.
The TransUnion numbers show a smaller percentage of people behind on their payments both on the state and national level when compared to recently released data from the Mortgage Bankers Association, which said 12% of mortgage holders were past due in the first quarter.
TransUnion tracks delinquencies based on two skipped payments because that’s a strong predictor of foreclosure, says Keith Carson, a senior consultant in TransUnion’s financial services group.—E.J.
Thinking outside the [BIG] box
Bethany World Prayer Center is temporarily leasing the former CompUSA building adjacent to the Mall of Louisiana as a recreational center for its youth ministry.
Megan Bowen, a secretary for Bethany’s 220 ministry, says the building has been set up with video games, TVs, indoor volleyball courts and pool tables. The space has been re-dubbed the “220 Box” and is free for teens and young adults. “We’ve turned it into a hangout spot for teens,” she says.
Bethany is leasing the building through July; the church hasn’t decided yet if it wants to continue beyond the summer. “We’re just getting started,” Bowen says. The CompUSA building hasn’t had a permanent tenant since early 2008, when the chain went out of business. Plans for Michaels to move its local arts and crafts store into the building fell through around Christmas.—T.B.
Cane’s consolidates
Raising Cane’s is consolidating its corporate headquarters to the first floor of the One American Place building after relocating 12 employees to a new office in suburban Dallas earlier this year.
The consolidated office space will house 25 employees, including corporate offices for chief executive officer Todd Graves and his staff as well as marketing, design and construction and restaurant support offices for the chain’s Louisiana locations.
“We had offices in two suites on the first floor and one on the seventh floor of this building,” spokeswoman Julie Perrault says. “With the move of some of our employees to Texas, consolidating the space we had here made sense.”
Raising Cane’s opened a support office in Plano, Texas, in January. That office houses 70 employees who work in restaurant support for the company, career resources and finance. Raising Cane’s has 80 locations, with a little more than half in Louisiana.—E.J.
