The Deepwater Horizon oil spill is the third disaster the residents and businesses of Louisiana have faced in five years.
But, despite their frustration and the magnitude of unknowns they face – including the impact of the drilling moratorium – they will still do very well, said Bill Balhoff, CEO of Postlethwaite & Netterville, the largest Louisiana-based accounting and business advisory firm. The company also is a member of the AICPA’s Major Firms Group.
“This is a very entrepreneurial state with a resilient population. We have pulled ourselves up by our bootstraps many times,” Balhoff said.
Balhoff expects the Gulf oil spill to have a major impact on the fishing, tourism, and oil industries in the region, which could last for a long time, and is concerned that the moratorium on drilling will affect both employment and the state’s budget prospects.
“Perception becomes a reality in tourism and in the fishing industry,” Balhoff told AccountingWEB. “Right now, the number of people who vacation in the beautiful beach areas of Alabama and Florida has declined dramatically. People may have concerns, although unwarranted, about seafood and order less.”
Americans are deeply troubled by the consequences of the oil spill to the people of the Gulf region, but don’t know what they can do to help. Confronting some of these negative perceptions and deciding to vacation in the region would be a huge source of support, said Carmen Sunda, regional director of the Louisiana Small Business Development Center (LSBDC) in New Orleans, which serves 10 parishes in southern Louisiana.
“The biggest help you can give is to visit and enjoy the culture of this great city!” Sunda said. “New Orleans is alive and well. Enjoy our music, our sea parks, and our festivals. We have a festival every day. We celebrate everything. I eat seafood every day. Only one-third of the fishing areas have been closed, and a lot of the closures have been precautionary. We can’t afford tainted seafood.”
Planning for the future
Small businesses in the region need to evaluate their individual situations and develop plans for the future.
“It is very important that businesses consult as quickly as possible with a CPA, an attorney, or an expert in their industry to reevaluate what they are doing,” Balhoff said. “The quicker they evaluate and look for opportunities, in the cleanup for example, the more likely the business will survive. It may be necessary to think about how to redeploy resources.”
Keeping a business operating and managing cash flow will be very difficult in South Louisiana.
“In the Louisiana district of the Small Business Administration (SBA), many people already have loans from Katrina and Gustav and are reluctant to assume more debt,” Mike Ricks, director of the SBA in Louisiana told AccountingWEB. “We are seeing more deferments than new loans. But as the impact of the spill on the fishing and tourism industries ripples through the economy, we are likely to see more applications coming from restaurants and related businesses.
“We have met with 1,885 business owners at the 12 Business Recovery Centers we have set up in the state,” Ricks said. “They are finding that their costs of doing business are going up and demand is down. They are looking for ways to mitigate cash flow problems and for counseling on ways to remodel their businesses. They are also concerned about the impact of the moratorium on drilling on jobs in the region.”
Ricks expects “a robust cleanup effort” with contract and job opportunities for some businesses. “At the moment,” he said, “there is no federal contracting effort for the cleanup, but Chevron and Mobil are providing money along with BP, and there will be others, and possibly some federal money. We will get through this. Louisiana is a very resilient state.”
The magnitude of unknowns in the situation casts a cloud over the efforts of the LSBDC, Sunda told AccountingWEB.
“This is a huge challenge – so huge it is hard to wrap your head around it. There is still a lot of denial about what it means,” Sunda said. “Right now, the revenue loss for the state is hard to estimate, but it is a concern. BP is really trying hard to contribute to the local economy. And it is obvious that there is some commerce in South Louisiana, but so many businesses are just shut down.
“This is the third disaster for the area in five years. Since Katrina we have prepared our clients in disaster response, helping them to identify and meet their immediate needs, expand their market, and to relocate if they choose to do so, or to plan for the future for those that remain.”
Rays of hope
“There will be lots of new business opportunities as voids are created,” Sunda says. “We are already seeing a movement toward new business opportunities.”
Sunda sees four main areas of opportunity in the long term.
“Disaster response/business continuity is itself an industry and we need to own this one,” Sunda said. “The science and business of coastal restoration is an opportunity. We have the opportunity to get this right, to be in the lead, as Atlantic coast states and other areas work to repair and keep their coastal areas healthy.
“The green economy already has a foothold in Louisiana, and shows potential for small businesses. There is a lot going on down here supported by economic development agencies and the Green New Orleans movement. A fourth area where there is potential for growth is in hydrology.
“Right now we are assisting our clients in the region in a number of ways,” Sunda said. “We are helping them to file their claims with BP. The BP claims process is still evolving. We make sure that a business that may already have filed a claim has the documentation to continue in the claims process. It is really no different than applying for a loan. We help people to document their losses,” said the LSBDC’s Sunda.
The LSBDChas been serving small businesses in Louisiana for 27 years, and is funded through a cooperative agreement with the SBA, Louisiana Economic Development, and participating universities.
“We also encourage them to find out what opportunities they might have with BP. BP has a commitment to buy locally, and businesses can register their services on [its] site. Right now, the hotels on Grand Isle are fully booked with media people, BP, and Coast Guard workers. We cannot find rooms for our people within 100 miles of Grand Isle. Still we know this is temporary.
“We do a lot of brainstorming with our clients. We ask them to think about their other skill sets – consider what is transferable. In many cases, within a family business, one person takes care of the books and we encourage that person to acquire additional accounting and bookkeeping skills. We ask fishermen if they weld or know carpentry, which of course most of them do. What additional training do they need?”