Real Property Associates, Inc.

PO Box 74233 Metairie, LA 70033 Page 1

ST BERNARD RECOVERY PROGRESS AND

MARKET CONDITONS
JUNE 2009

BY

WADE R. RAGAS, PHD

REAL PROPERTY ASSOCIATES INC

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ST BERNARD RECOVERY PROGRESS

JUNE 2009

In January 2008 a report by this author evaluated the market demand for the proposed Lot Next
Door plan for LRA as part of the redevelopment plan for St. Bernard. The plan expected St.
Bernard population to reach 35,000 by 2008. Over 12,500 households were expected to be
attained in 2008 which has occurred. St. Bernard Parish proposed to demolish 75% of all housing
on lots acquired by the Louisiana Land Trust or about 5,000 housing units. The plan envisioned a
reduction in overall housing density with larger lots, more open space and a natural environment
better able to cope with high rates of sustained rainfalls.

All of these expectations are being realized and in many cases exceeded. According to the U.S.
Census as of July 2008 a population of 37,722 resided in St. Bernard or 58.3% of its pre-storm
level. The population expectation was to only have reached 35,000 by 2008. The recovery, as
documented in Table One, added 4,293 persons or about 1,650 households from 2007 to 2008. I
expect the rate of population recovery to be slower in 2009 and 2010 due to the severe national
recession but for population growth to reach 63% ofpre-Katrina levels in 2009- about 38,800
persons in 14,900 housing units. Vacant units or lots would total about 10,100.

The roughly 25,000 occupied housing units before Katrina have had over 7,600 units demolished
with housing removed and foundations now being removed. FEMA Hazard Mitigation grants of
$14 million are likely to remove an additional 500 severely damaged housing units. The
remaining 2,000 vacant housing units have nearly all have been gutted and sheet rocked. Many
are already fully renovated. The demolished housing is likely to stay in open space or green
space either by deed restriction in the Lot Next Door program or for civic use or because it is far
more economically feasible to renovate to completion the existing vacant 2,000 units. These
vacant but partly renovated or fully renovated units could house about 5,200 more people. St.
Bernard could grow from 38,800 persons to 44,000 without needing to start any new houses by
just filling the partly renovated vacant stock. About 70% of the pre-storm population could live
in St. Bernard within the current housing stock, leaving much larger lots and more greenspace
than existed before the storm.

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Table One
Total Population Estimates

July 05 July 06 July 07 July 08

Orleans 453,726 210,198 288,113 311,853
St. Bernard 64,683 13,875 33,429 37,722
St. Tammany 217,551 224,227 226,625 228,456

Source: U.S. Census

Note: St. Bernard population recovery is 58.3%

Future Growth

In July 2005 the Louisiana Work Force Commission (Dept. of Labor) estimated 30,527 jobs
were located in St. Bernard. The Metro New Orleans area was estimated to have 606,242 jobs.
By April 2008 the metro area had fallen to 512,760 jobs or an 18% loss of all jobs. St. Bernard
lost, according to the state, about 20,800 jobs. Growth would slow sharply as new jobs were no
longer available for returning households. St. Bernard according to state estimates had lost two-
thirds of its jobs.

St. Bernard employment fell from 30,527 to 9,711- a staggering two-thirds decline. Before
Katrina there were enough jobs in St. Bernard to support a population of 65,000. For the past
year nearly all new population gains are among households who are working outside of St.
Bernard (see Table Two).

Jobs inside St. Bernard fell from 9,711 in April 2008 to 9,439 in April 2009. The metro area
from April 2008 to April 2009 lost 13,600 jobs. Unemployment in the metro area rose from 2.9%
to 5.3%. More ominously unemployment in Orleans reached 7.5% and within St. Bernard 7.2%.

The slowing or ceasing of job growth in Orleans and St. Bernard will slow the rate of household return.

Table Two
Employment Estimates

April Unemployment
2009 2008 2009 2008
Metro 498,435 512,760 51% 2.9%
St. Bernard 9,439 9,711 7.2% 3.6%
Orleans 103,325 106,294 7.5% 3.8%
St. Tammany 113,943 117,217 4.1% 2.4%
Jefferson 215,801 222,003 4.8% 2.6%
Tangipahoa 50,524 51,390 6.1% 3.5%

Sources: Laworks.net, Louisiana Department of Labor

Note: In July 2005 St. Bernard had 30,527 jobs and the metro area 606,242

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Rate of Household Return

Table Three shows the growing pattern of households receiving mail in St. Bernard from
October 2006 to December 2008. Before Katrina 25,604 households received mail. Katrina
reduced the resident household count to 6,800 by December 2006. The 12,470 households
receiving mail in December 2008 is 49% of the pre-storm levels. School enrollments and census
estimates show a higher percentage of these families have school age children now than were
present in St. Bernard before the storm.

The rate of new household relocation to St. Bernard has been a steady 140 per month throughout
2008. I expect this rate to decline to 100 or so a month in 2009 which would fi111,200 more of
the 2,000 now vacant housing units. In 2010, if a severe recession continues, only small gains in
population would be likely. If vacant, finished units decline to only 800 during 2010 a nearly
norma11eve1 of vacancy (5.3%) would have been achieved.

Table Three
Rate of Return to St. Bernard Based on
Households Receiving Mail

St. Bernard
26.3%
Level
45.4%
141
42.1%
26.6%
n.a.Pre-K25,604
48.7%
140
36.5%
90
239
35
n.a. 11,631
12,470
10,782
6,807
9,350
6,736 Share of
Dec. 2006 Oct. 2006
2008
2007
uly 2005
uly 2008
2007 Gain
Monthly

Source: GNO Community Data Center Analysis of

Postal Delivery Records

However, Wa1-Mart and Lowe's will open over 300,000 feet of store area in March 2010. They
should employ about 450 persons. Also, large scale levee and storm surge protection projects
around the edge and perimeter of St. Bernard will employ thousands of persons working for
employers based elsewhere and not counted in the St. Bernard published employment numbers.

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Public School Enrollments

Historically, one of the finest public school systems in the nation has been based in St. Bernard.
National awards for academic excellence continued with in 2009 for St. Bernard public schools.
Public school enrollment fell from 8,872 to 955 in the spring of 2006. An amazing recovery of
school facilities and personnel has occurred. Enrollment is now back to 53% ofpre-Katrina
levels (see Table Four).

St. Bernard has always been a welcoming environment for all races, religions, and nationalities.
Before Katrina 25% of the public school students were African American, Hispanic or Asian.
Today 31 % of the students are minorities. Before Katrina nearly half the students or 4,319 of the
8,872 students were from low income families who qualified for free lunches. Today, 2,768 of
the 4,684 students receive free lunches or nearly 60% of the student body (Table Five).

St. Bernard is now serving a more racially and income diverse environment than it served before
Hurricane Katrina.

Private school enrollments have plummeted from 2,267 before Katrina to only 567 today. The
closure of almost all the Catholic churches in St. Bernard and their schools, including
Archbishop Hammond high school, has caused this sharp decline. The public schools continue to
offer exception of educational quality levels (Table Six for private school enrollments).

Table Four
Public School Enrollments

St. Percent of
Bernard Pre-Storm
Fall 2004 8,872 100%
Spring 2006 955 10.8%
Fall 2006 3,536 39.9%
Spring 2007 3,764 42.4%
Fall 2007 4,198 47.3%
Spring 2008 4,229 47.7%
Fall 2008 4,684 52.8%

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Table Five
Racial Composition of
St. Bernard School Enrollment

Asian
2%
4%
73%
92%
69%
5%
White
75%
1%
3%
4%
22%
African
19%
18%
Hispanic Free Reduced
American Lunch Lunch
4,319 760
955 n.a.
3,414 125
2,768 458

Source: Louisiana Department of Education

Table Six
Private School Enrollments

St. Bernard
2004-05 2,267
2006-07 313
2007-08 584
2008-09 567

Educational Quality

LEAP Test scores for the spring/summer of2008 are reported on Table Seven. The statewide
LEAP score passing rate for fourth graders was 84%'but in St. Bernard was 94%. In the metro
area St. Tammany with a very affluent student population had only a 95% passing rate. Among
eighth graders St. Bernard had a 76% passing rate and the state 78%. However, Orleans had
only a 57% eighth grade passing rate and Jefferson just 72%. Clearly in the midst of incredible
adversity the highly motivated teachers down to St. Bernard and their hard working students
continue to offer a high quality educational experience.

Table Seven
Public School Students Passing LEAP Test
S ring/Summer 008
Fourth Grade Eighth Grade
Parish Tested Percent Passed Tested Percent Passed
Orleans 2,142 68% 2,105 57%
Jefferson 3,160 78% 2,769 72%
St. Tammany 2,516 95% 2,919 91%
St. Bernard 269 84% 309 76%
Louisiana 48,528 84 % 45,413 78%
Source: Louisiana Department of Education

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Housing for Sale

Typically St. Bernard had about 195 houses for sale each month prior to Katrina. This level of
195 houses for sale was reported in March 2007. Now 356 houses or more are for sale by
realtors. For sale by owner are at least 150 more. The 2,500-unit stock of partly or fully
renovated houses is driving the for sale inventory up (see Table Eight).

Rental occupancy rates are between 85% and 90% based on actual field surveys. The majority
of the rental stock is occupied by households receiving DHAP (Katrina Displaced household) or
Section 8 rental assistance or LRA small rental housing units. There is an excessive supply of
rental and for sale housing available in St. Bernard.

Days on market is a reasonable guide to the balance between demand and supply (see Table
Nine). Before Katrina days on market were nearly 3 months (89 days). It is likely days on
market to sell a house will exceed 4 months during the summer of 2009. Many owners not using
a realtor have reported marketing times of 6 months to one year.

Housing Price/Price Trends

Housing prices for renovated homes remained steady at $134,000 in 2008. The typical price per
foot ofliving area was only $85 (see Table Ten). This is for below the metro average of about
$105 per foot. Price declines were just beginning to occur throughout St. Bernard in the second
half of 2008, just as prices were declining in almost every parish of the region.

Non-renovated damaged property averaged $19 per foot which was 31% lower than in 2007.
Vacant lots and damaged houses were dropping by 2.5% per month in average price during
2008.

Table Eight
ernar .
St BmgJe- dSale
S'
aeForAugust
ouses
Month
amlY
March
381 I F '1 H
or
92Houses
356
195 £ S I
2007
2008
2006 2005

Source: New Orleans Metropolitan Association of Realtors

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Table Nine
A IIIays
verage
gJe- amI arD ouses
yFor
e,
on March
MonthM
89 k t S" I F
November
Sale
41
59
67
83Houses
52
September "I H
2008
2006
2007 2004
2005

Source: New Orleans Metropolitan Association of Realtor

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Table Ten
St Bernard Parish Single Family Housing Prices
2006 to 2008

70032 -2]%
13%
32%
2%
-13'%
-6%
7%
-8%,
30%
-43%
-16%
8%
-76.5'%
$16
-50.9%$21
$23
-61.3''/0
-71.1%
$39$97
$90
-4\}o
$22
$24
$23
$34,852
$15
$24
$78
$59
$77
$25
$23
$86
$85
$38,280
1,680
1,710
1,642
1,749 $24
$93
$84
-65J}'Yo
$28,945
$42,254
$30
$23,308
$45,944
$81,455
$38,571
$43,748
$53,479
$38,032
1,894
$42,031
1,835
1,500
1,774
1,488
1,555$39,376 $117,207
$136,200
$127,976
$132,794
$146,257 $94,345
$25,649
$145,340
$136,802
$127,092
$148,638

St.Bernard $134,259 $86 11.7% $134,873 $85 1,591 -2";',

Dama ed $47,727 $27 -65.4% $38,623 $28 4% $41,334 $19 1,804 -31%
Source: New Orleans Metropolitan Association of Realtors and Real Property Associates Inc.

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Rent Levels and Housing Subsidies

Rents in St. Bernard are cheaper than the metro area by nearly 20%. Table Eleven compares the
HUD Fair Market Rents to a sample of current rents from several hundred St. Bernard
apartments, fourplexes and duplexes. For average income and lower income households the
modes rents for newly renovated (rebuilt) units are a real bargain compared to all the rest of the
metropolitan area housing market.

Subsidized housing units are a larger share of the rental housing stock than in Orleans, St.
Tammany or anywhere else in the metro area. Current HUD records report no public housing
units in St. Bernard but HUD reports 281 current Section 8 units and 1,093 Displaced Housing
Assistance Voucher recipients. In addition over 900 units are approved for the LRA small rental
program with below market rents many of which are not yet renovated. The 1,374 subsidized
housing units are about 44% of the estimated rental housing stock in St. Bernard of3,120 units
(20.5% ofthe current housing stock). [see Table Eleven).

In addition over 200 elderly section 202 units are to be built by Christopher Homes and 288
LIHTC units are proposed to still be built. St Bernard will have the percentage rate of subsidized
housing stock as a part of all rental units in the metro New Orleans area.

Orleans has 16,509 units available and up to 6000 more units under construction. The rental
housing stock is at least 53% of all in Orleans or 68,900 units based on the current population.
About 24% of all rental units in Orleans are now subsidized housing and as much as 31% will be
the subsidized share when all of these units are finished. This is still far below the 44% rising to
50% of rental housing stock share in St Bernard. Before Katrina St Bernard had only 7% of its
rental housing stock in subsidized housing. This will have been a 600% increase in the rental
housing stock share of the overall rental housing market in St Bernard since Katrina.

In St. Tammany only about 15% of the housing stock are now rental units. These 12,700 rental
units include 1,572 subsidized rental units or 13% of the rental housing stock.

St. Bernard Parish is providing housing at very affordable rents for a larger share of subsidized
units than either Orleans, St. Tammany or Jefferson at this time (see Table Twelve).

Table Eleven
Apartment Fair Market Rents - 2009

Metro New
A artment Type Orleans St. Bernard
Efficiency $795 $650
One-Bedroom $881 $750
Two-Bedroom $1,030 $830-$850
Three-Bedroom $1,323 $1,000-$1,100
Four-Bedroom $1,367 n.a.
Source: U. S. Department of Housing and Urban Development and Real

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Table Twelve
Subsidized Housing Vs Overall Rental Housing Stock
St. Bernard, Orleans, St. Tammany - January 2009

ernar
ammany T ype r 24% . .
eans
53%
2,067 483
15%
13%
5,914965
8,528
16,509
68,900
1,572
12,7001,093 St44%
B
281 0 3,120
1241,374 20.5% d o I St T
Rental Share of all Housing;

Source: HUD, GNO Community Data Center, Census and Real Property Associates

The St Bernard housing stock of 14,500 units is estimated to be at least 20.5% rental today and
rising to 25% by the end of2009,just as it was the rental housing share of the housing stock
before Katrina. However the composition of the rental housing stock after Katrina is radically
different from the before Katrina composition. Before Katina about 7% of the rental housing
stock was subsidized, now 44% is subsidized-a 500% increase. The addition of over 200202
elderly units, 288 LIHTC units and the completion of hundreds ofLRA small rental housing
units with below market rents will place over 50% of the rental stock in the subsidized housing
category. This is a 600% increase in the share of rental housing that is subsidized. Huge
increases in public service costs accompany this shift at a time when St Bernard government is
struggling to fund and provide basic resources. It is also happening years ahead of the opening of
modem medical services through a new hospital.

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Road Home

Table Thirteen shows the status of Louisiana Road Home rebuilding and acquisition funding
program for St. Bernard. In April 2008 among the 9,922 settled cases a total of 3,557 or 36% had
chosen to be bought out and move elsewhere. By November 2008 the settled cases had grown to
11,114 with 3,841 choosing to be bought out (see Table Thirteen).

Today nearly all the cases have been settled and 4,194 households have chosen to be bought out
and move elsewhere.

Consistently, about 35% of the Katrina damaged households have chosen to be bought out. This
large sample relocation rate is consistent with a 2009 overall population loss of about 40% since
some households had so much insurance as to not receive any significant Road Home benefit.
Less than half the former residents of St. Bernard received Road Assistance.

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Table Thirteen
Road Home Closings
By Option in St. Bernard

April 10, Nov.

2008 2008
Total Closings 9,922 11,114
Story & Rebuild 6,365 7,273
Percent 64% 65%
Sell to State 3,557 3,841
Percent 36% 35%

Note: 4,194 lots from sell to state option have

been acquired as of April 2009.

Source: Louisiana Recovery Authority

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Recovery of Tax Base

St. Bernard has one of the lowest rates of residential property tax collections of any suburban
housing market in Louisiana. The average house price is only $140,000. The homestead
exemption of $75,000 and low property assessments leave only a small part of the households
with taxable property tax assessments.

The large petrochemical, port and refining complex in St. Bernard provides a substantial
property tax base.

Historically, St. Bernard had a large and successful retail sales community. Usually the best
month of the year was December with $4.2 million in sales tax collections (state and local taxes).
Since Katrina December sales taxes have been between $2.4 to $2.7 million or a decline of about
42%. This is consistent with a population loss of about 42% as the census concluded for mid-
2008.

Without a Super Walmart and more grocery stores (one Winn Dixie- and no Rouse) growing the
sales tax collections would be unlikely (see Table Fourteen). Walmart has announced the
reopening of the Super Walmart as of March 2010. Lowes will open a new store in Chalmette in
the Fall of2009 Together, this 300,000 feet of added store area should generate about $6.75
million in sales taxes or a $550,000 per month increase in the current volume. St. Bernard sales
taxes should recover to about 80% of pre-storm levels.

By mid-20 lOSt. Bernard parish government and the public schools should have attained a much
firmer future fiscal footing.

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Table Fourteen
Sales Tax Collections
St. Bernard

Dec. 2004 $4,196,004

Dec. 2005 $2,208,112

Dec. 2006 $2,440,220
Dec. 2007 $2,461,378
April 2008 $2,728,243
Sept. 2008 $2,746,687

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FEMA Redevelopment Funding

As of December 2008 the Federal Emergency Management Agency had obligated $1.17 billion
in funding to St. Bernard parish government including parish flood/drainage funding, public
schools, libraries, fire stations, local government, recreation and police facilities. Of these funds
FEMA had paid out $685.7 million or 58.8%. The additional $500 million or more should be
fully obligated during 2010.

Orleans Parish had achieved a paid FEMA funding level of 44.6% as of December 2008 for a
similar collection of agencies including the airport and convention center (see Table Fifteen).

St. Bernard government over the past year had made huge strides in meeting FEMA' s
requirements to obligated funds for projects as well as securing FEMA paid funding.

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Table Fifteen
FEMA Public Assistance Grants
December 11, 2008
St. Bernard, Orleans

St. Bernard Orleans

FEMA Projected Funds $1,120,000,000++ $2,090,000,000++
FEMA Obligated Funds $1,166,994,452 $2,386,296,000
Paid FEMA Obligated $685,695,507 $1,664,900,020
Percent 58.8% 44.6%

Source: FEMA

Note: New Orleans includes City of New Orleans, Recovery School District,
Charity Hospital, N.O. Airport and N.O. Convention Center

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Broader Region and the Economic Future

St. Bernard is a small part ofthe overall metro New Orleans area. Its growth and economic
vitality are dependent to a substantial degree on the region's economic growth. Historically,
seven major areas underly the New Orleans metro economy.

1. Conventions and Tourism

2. Port and river oriented commerce
3. Petrochemical, minerals processing
4. Maritime repair and building
5. Oil and gas exploration
6. Medical services
7. Business services

The best proxy for the overall vitality of the tourism and convention industry is passenger
deplanements plus enplanements at Armstrong International. The July 2005 level was near the
peak volumes before Katrina of 881 ,500 passengers in a month- an annual 10 million passenger
pace.

By July 2008 a 720,000 passenger level or a 8.5 million annual pace had been reached. Tourism
and conventions were back to about 85% of pre-storm levels. Unfortunately, nearly every hotel
room and 120% of the pre-storm restaurant count had been restored. Overall hotel occupancy
rates were 60% or lower. Little new hiring and some employee layoffs were likely (see Table
Sixteen).

Cargo activity in Orleans fell from 7.77 million general cargo short tons in 2005 to 4.48 million
in 2008. Bulk cargo fell from 17.4 million to 14.3 million. Containers fell from 203,000 in 2005
to 179,400 in 2008. Clearly, the Port of New Orleans was being substantially impacted by
competing ports and the national recession. Job layoffs were likely. St. Bernard has fully
reopened its port and is experiencing these same competitive pressures. However, the closing of
the MRGO has moved some bulk cargo from those operations to it (see Table Seventeen).

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Table Sixteen
Passengers New Orleans International Airport

Passengers Share of July 2005

2005 July 881,552 100%
2006 July 564,178
2007 July 671,440
2008 July 720,286

Table Seventeen
Cargo Activity
Port of New Orleans
(Tons or Units)

General
Bulk
Containers
7,412,028
4,482,739
7,936,723
9,380,451
7,773,997
203,411
250,649
251,102
179,431
175,905
10,380,118
21,052,393
258,448
20,060,153
21,894,179
19,960,460
17,438,589
14,324,859

Source: Port of New Orleans

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Petrochemical processing at the Exxon and Murphy refineries has been fully restored. American
Sugar's refinery continues to be the largest in the nation. Expansions of these refineries or the
storage capacities may occur.

Maritime boat repair continues in St. Bernard and the east bank of Plaquemines. There has been
a sharp pullback in oil and gas exploration over the past 8 months which could limit employment
growth in St. Bernard for the oil and gas exploration part of the maritime services business.

A new hospital for St. Bernard is now funded and design work has begun. A site has been
acquired and approved for development. In Lake Forest funding of $40 million by the state to
assist in reopening Methodist Hospital has occurred. Still, overall medical services and
employment in St. Bernard are at very low levels compared to the before storm levels.

Business services were always an under developed part of the St. Bernard economy.
Construction trades and small self-employed plumbers, electricians, roofers, air conditioning
services and contractors are a major part of the business services in St. Bernard. Unfortunately,
new construction of houses in the metro area has nearly ceased. Repairs and maintenance are
now the primary source of revenues for these firms.

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Conclusions

St. Bernard parish government has achieved or exceeded its goals for population recovery,
FEMA obligated funding, school system recovery, affordable low income housing, new retail
services, restoration of the tax base and securing new medical services. Katrina severely
damaged nearly 100% of all buildings in St. Bernard. Less than four years later over 60% of the
housing stock which originally took over 70 years to build has been restored. The majority of the
population has returned. The schools are back to winning national awards for excellence.

The recovery struggle is not over but huge strides to rebuild the St. Bernard community in a new,
less dense, more storm resistant configuration have occurred.

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