Hurricane perspectives: from Washington to the Gulf.

Washington has become much more partisan since the 2004 Presidential election," says one Senate staffer who asked to remain anonymous. While it can be hard to get beyond the partisan sniping, and the indictments and investigations taking place of powerful Senate Majority Leader Bill Frist and House Majority Leader Tom DeLay, natural catastrophes like Hurricanes Katrina and Rita have managed to focus Congress on getting federal aid to the hurricane victims.

With the scope of these hurricanes at historic proportions, Congress acted quickly (by its standards) and passed Hurricane Katrina tax relief legislation the week of September 19; the President signed the bill into law on September 23. For many of the victims immediately impacted by the hurricane, this may not have been quick enough. Most Americans will feel the impact of cuts to domestic spending programs; this alone emphasizes the severity of the damage from both hurricanes.

In addition to this legislation, President Bush has called for the creation of a Gulf Opportunity Zone (GO Zone), which would encompass regions damaged by Katrina in Mississippi, Louisiana and Alabama. Bush has called for a 50 percent tax write-off for investments in either equipment or structures, as well as additional tax write-off for small businesses, with the White House seeking to expand the 100 percent small business expensing cap from $100,000 to $200,000. The tax breaks would be available until 2007.

To this end, the Gulf Coast's governors have promoted the President's job creation package, the GO Zone. According to a recent article in Tax Analysts, Louisiana Gov. Kathleen Blanco, Mississippi Gov. Haley Barbour and Alabama Gov. Bob Riley have said that the main goal of any tax relief is the creation of jobs that would bring people back to the region and restore the economy.

However, the unproductive side of Washington certainly came out during the past few weeks. Most senators, representatives and agency leaders argued that they did the best they could, though some accepted a share of the blame. Some argued that there was too much finger-pointing and not enough federal or grass-roots help to get an effective job done for the hurricane evacuees. Others warned that the events of the past few weeks showed how unprepared the U.S. is for another major terrorist attack.

FEI Personal Perspective

Mike Vitek, current FEI Houston Chapter President, and Harry Smith, past New Orleans Chapter President, have experienced a direct impact from Hurricanes Katrina and Rita. In interviews with both, they graciously avoided the blame game and noted that the scope of the damage of the hurricanes was far beyond what anyone could have expected.

Vitek, vice president/finance and CFO of Sam Houston Race Park Ltd., notes that his company is offering free admission to the race track. He added that his company has also hired some new employees from New Orleans.

Harry Smith, a family business consultant for Harry Smith Consulting, has been renting a house in Lafayette, La., which is normally a three-hour drive from New Orleans, but is a longer trip now, he says. Luckily, his home was not damaged severely, and he has been working on getting it back in order. Interviewed on Oct, 3, he noted that this "was his first [business] working day in a month." (Two other FEI members' situations immediately after Katrina were covered in the FEI News section in the October issue of Financial Executive.)

It is too early to tell how strong the financial impact of the hurricanes will be for the affected businesses and their employees. In Smith's view, the local infrastructure is the biggest problem: The damage to properties remains unknown, and physically locating all of the business' employees has been daunting. Just as schoolchildren face the issue of not knowing where all of their classmates are scattered throughout the country, or if they are still recovering from the trauma of the event, small business owners and employees face similar challenges.

The sugar cane business is a good example of an industry reeling from the hurricanes. According to the New Orleans Times-Picayune, the Louisiana sugar cane industry was hit with approximately $200 million in losses after the storms blew through. Katrina contributed to about $160 million of that damage.

But if FEI leaders like Harry Smith or Mike Vitek offer any indication of how resilient financial executives are, New Orleans and the other ravaged Gulf Coast areas are well on the way to recovery.

Serena Davila ([e-mail]) is FEI's Director for Private Companies and is based in the Washington, D.C., office.

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