10/25/2012 06:02 pm ET Updated Dec 25, 2012

Tight State Funds Hamper Development of New Orleans BioDistrict

Mid City residents living within BioDistrict New Orleans worry that health and science entities might one day encroach on their neighborhoods. The damage is already done in lower Mid City -- where homes and businesses were torn down or moved by eminent domain to make room for the $1.1 billion University Medical Center and the $995 million Veterans Administration hospital. The BioDistrict itself has little money, however. And Governor Bobby Jindal's health care cuts jeopardize the outlook for the United Methodist Church (UMC), a BioDistrict linchpin.

Formed in 2005, the 2.4-square-mile BioDistrict is to be a nucleus for medicine, research, technology and pharmaceuticals, linking private and public interests to local universities. Other U.S. cities want to capitalize on these industries too, however, making the bio-field a bit crowded.

Last week, James McNamara, president and CEO of BioDistrict New Orleans, said "we're not getting any funding from the state or city. In 2009 and 2011, Governor Jindal vetoed funds for the District. There was some confusion a few years ago because the governor viewed us as an NGO or non-governmental organization, though we're a political subdivision of the state of Louisiana."

McNamara said "in May, the City of New Orleans denied our request for $350,000 a year for 2012, 2013 and 2014, citing the fact that we're a state agency and advising us to look to the state for support."

In July, the BioDistrict's board of commissioners voted to put a 1.5 percent fee on new or renovated commercial buildings within Construction Impact Fee or CIF Zone 1, bounded by Tulane Ave., Broad, I-10 and Loyola Ave. The New Orleans City Council has to vote on that, however. The BioDistrict will ask the Council to consider the fee after the November election, McNamara said. It's unknown if a vote will take place by year end, he said.

"Money from the fee would be reinvested within Zone 1 to fund opportunities to create more demand for employment and new construction," McNamara said.

At a BioDistrict Board meeting last Thursday on Poydras St., McNamara said "one thing we discussed was if District revenues eventually exceed $500,000 from the Construction Impact Fee and other sources, then we will be required to pass a budget under state law." This month, the BioDistrict has only a fraction of that in its coffers, however, and will soon be down to less than $12,500.

Boston's Tufts University School of Medicine is considering a presence in the BioDistrict to conduct pharmaceutical research, McNamara said. "We're working on a memorandum of understanding with Tufts," he said last week.

What else does the District hope to attract? "We're negotiating now with three large, out-of-state bio-science companies that work closely with universities and are interested in locating here," McNamara said. "We're concentrating on scalable companies that will have an immediate impact on local employment."

The District is also home to the New Orleans BioInnovation Center, which opened on Canal St. last year with lab, office and conference space to assist startups and young life-science companies.

"Most of us would like to see the BioDistrict succeed," said Brad Ott, director of Advocates for Louisiana Public Healthcare and cofounder of the Committee to Reopen Charity Hospital. "But we need a strong health system in place to have a viable biodistrict, and after a series of state budget cuts, our system's on life support."

Louisiana State University (LSU) Health's budget was slashed by $152 million, or nearly 19 percent on October 4, eliminating 1,500 jobs statewide along with dozens of hospital beds, and reducing the number of operating rooms and hours at specialty clinics. In New Orleans, $50 million in cuts at LSU's Interim Hospital, the precursor to the new, University Medical Center, will reduce medical-surgical beds to 90 from 136, while 29 psychiatric beds and 36 intensive care unit beds will remain in tact, putting Interim Hospital's total beds at 155.

The latest budget-knifing round was the Jindal Administration's response to a reduction in federal Medicaid dollars for Louisiana. The LSU health system will absorb most of the cuts.

"Once you make these cuts, the money seldom comes back," Ott said. And he said reductions at the Interim Hospital don't bode well for the new UMC. "Based on what's happening at the Interim facility, they may significantly reduce the planned 424 beds at UMC," he said, "There's also interest in privatizing the UMC."

In early September, LSU Health officials said they were seeking private firms to partner with the system's hospitals. LSU Health said in an October 4 press release on budget cuts that "The new UMC will operate under a new model with governance by a private non-profit board, which is working now to develop strategic partnerships to be a catalyst for biomedical innovation and promote long-term financial success of the enterprise."

Marshall Gerson, who was forced to move his 70-year-old family business, Ellgee Uniform Shop, up Tulane Ave. to make way for the new hospitals, said "The UMC never had much of a business plan. Last year, State Treasurer John Kennedy was opposed to it for that reason."

What little business plan LSU Health has for the UMC is based on revenue from a 424-bed facility. If the number of beds is downsized, that plan will probably go out the window. A smaller UMC, along with the less-than-200-bed VA Hospital that's being built, hardly justifies the recent use of eminent domain to destroy the lower Mid City neighborhood, Gerson and Ott both said.

If the state sells the UMC to private interests, critics of that idea say LSU Health might owe Federal Emergency Management Agency hundreds of millions of dollars, plus interest, for money the government provided. Moreover, residents and businesses that had land expropriated may have a case against the state for seizing private property under eminent domain for private rather than public purposes.

Though the LSU and VA hospitals are being built now, the larger BioDistrict seems to be mostly PR hype, said Sandra Stokes, a board member with The Foundation for Historical Louisiana. "It could be a long time, if ever, before anything much materializes with the District," she said last week. "We have a governor who opposed stem cell research and yet we expect to have a world class biodistrict."

Stokes said "Governor Jindal has cut health care to the bone. And with his refusal to participate in the federal Affordable Care Act, Louisiana taxpayers will be paying for other states, while not receiving the act's benefits." Further cuts to Louisiana's hospital system are likely, she said, and added "You have to ask what sort of biodistrict will grow in these circumstances."

Community organizer Janet Hays, who has attended all BioDistrict board meetings in the last two years, including the one Thursday, said "The rationale for the District keeps changing -- from synergy with the UMC and VA hospitals, to supporting the universities, developing the local workforce, etc. The BioDistrict doesn't have any money now and is throwing spaghetti at the wall, waiting to see what sticks." But she said since Mid City residents are within the BioDistrict's boundaries and it's a state subdivision, they worry their property could be expropriated if a bio entity wanted it.

As for the labor force, McNamara said last week "Tulane, LSU, Xavier and Delgado are partners in the BioDistrict. Interested companies need trained and ready-to-work employees. We're laying the groundwork for workforce development through a collaborative called New Orleans Works (NOW), with the Greater New Orleans Foundation, the City and other foundation partners. A $250,000 pilot program, funded by NOW, is in the works, matching employees with employers, and will provide training."

McNamara also said "Proposals are to use buildings that are part of the Charity Hospital complex for a math and science high school, an expanded Delgado School of Allied Health and for retail and residential uses." Mayor Mitch Landrieu is interested in using Charity for City Hall offices, he noted.

McNamara said "the BioDistrict is devoted to green, sustainable development, using the latest in LEED, or Leadership in Energy and Environmental Design, construction, and will set an example of how to live in an energy-efficient, low-carbon way."

But Sandra Stokes questions the sustainability of what she's seen so far. "The LSU and VA hospitals are two monolithic complexes expanded over 67 acres and are not the synergistic, shared facilities on 37 acres that were originally envisioned," she said last week. "The street grid, one of the enviable aspects of New Orleans, has been replaced with super blocks that will have massive structures and parking with only a little green space." Workers will have to be shuttled between the new complexes. "A lack of walk-ability will make it difficult for small businesses," she said.

Stokes said "The once-charming, lower Mid City neighborhood is now a wasteland, yet medical personnel are expected to live there. Some support workers and students will move into new apartment complexes on and near Tulane Ave. But these complexes aren't conducive to creating a great neighborhood."

Marshall Gerson said his new business location is close to several new apartment buildings in and around Tulane Ave. "I don't think many medical personnel are living in them because I seldom see people in hospital garb," he said. "I don't see many people walking around this area either."

Eric Bouler, a realtor with Prudential Gardner, said rather than signing leases on Tulane Ave., downtown medical workers are looking at the Warehouse District and the Lower Garden District, where "listings have become so tight that I often have only one, not several units, to show a client."

Stokes said "What's happening in the new, Tulane Ave. hospital area is the antithesis of good planning, and it doesn't meet the objectives of the city's Master Plan -- to protect the historic core and be pedestrian friendly with efficient mass transit."

As for what might be coming if bio entities sign on, McNamara said "The next frontier for commercial development is Tulane Ave., South Galvez, and the older, industrial area between I-10, Broad and Jeff Davis. We very much want to use existing building stock. The VA Hospital plans to retain part of the Dixie brewery and will use 55,000 square feet of it for a federal research facility."

Regarding Hurricane Isaac, which struck in August, McNamara said hurricanes are less of an issue for developers now. "Mindful of those who suffered damage and inconvenience, Isaac turned out to be positive for us. It showed America and industry that the city's reinforced storm protection holds."

The BioDistrict needs more than storm protection if it's to grow. Ott said, "A number of U.S. cities are competing for bio business." Cleveland's Medical Mart and Convention Center is scheduled to open next summer. "Nashville, which is larger than New Orleans and has more resources, has run into trouble promoting bioscience," Ott said. Plans for the Nashville Medical Trade Center were suspended this month after it didn't sign enough leases, according to the project's developer.

On October 23, BioDistrict New Orleans holds its annual lunch -- with former Pittsburgh Mayor Tom Murphy as the speaker -- at the downtown Hyatt Regency.