BusinessTN

In the days after Hurricane Katrina hit the Gulf Coast in September, floodwaters washed out the corporate headquarters of New Orleans-based Reily Foods Co., makers of Luzianne iced tea and JFG Coffee. The company promptly relocated its operations temporarily to its Knoxville location.

Government officials in Knox County know the company’s temporary move could easily become a permanent relocation. Like many New Orleans companies, Reily Foods must now balance its desire to help the Crescent City rebuild with doing what’s best and most pragmatic for business. But locals aren’t outwardly talking about the possibility. It’s just not appropriate.

That’s not to say that those who make their living in economic development in Knoxville and across Tennessee are sitting on their hands in Katrina’s wake.

Background conversations with various city and state officials across Tennessee confirm that

target lists of New Orleans companies were quickly drawn up following the levee breaks. Companies were often contacted both to offer immediate help as well as to make clear that if necessary Tennessee should be considered as a great place to restore business long term.

Such lists largely targeted New Orleans businesses like Reily with substantial existing ties to Tennessee. “You have to start kicking it around—what are the natural connections?” says one Tennessee-based economic development official who confirms his inner circle quickly turned an eye toward opportunities for business recruitment and expansion as a consequence of the calamity.

For a company like Reily, relocating operations a second time may prove counterproductive. But even if companies do set their sights on a return to New Orleans, skyrocketing insurance premiums are sure to dampen the allegiance of even the most devoted corporate citizens and business owners. Particularly for those companies that are not privately held, they will have to do what’s in the best interests of their owners and shareholders. “If you’re a business that doesn’t need the port of New Orleans, it would be hard to explain to your owners and shareholders why you were going to continue to be there,” says another ECD official, adding that the full extent of the corporate fallout in New Orleans probably won’t be known for years to come.

Going forward, New Orleans businesses now also face a significant hurdle in attracting and retaining human capital. One relocation expert contacted by Business Tennessee said if a company called him today and offered to make him a top corporate officer based in New Orleans, he would be hesitant to accept.

As a whole, the fraternity of ECD officials in Tennessee does not want to appear as eager opportunists. But in the final analysis, it only makes sense to be plotting strategy. Winning corporate relocations at the expense of other cities is par for the course in economic development circles. Every time Tennessee successfully imports a company there is a loser on the other end of the deal. Businesses leave for all kinds of reasons. A high risk of natural disaster is as good as any reason to think about relocation, and if businesses in New Orleans (and other coastal cities) are currently thinking about relocating, or will be thinking about it in the coming years, then Tennessee ought to be thinking about it, too.

After four hurricanes ripped through Florida in 2004, that state surveyed over 300 executives nationwide to gauge if Florida’s attractiveness had slipped as a place to locate corporate headquarters. Over 40% responded that they had a negative impression of the state’s business climate due to hurricanes, strict building codes, high insurance rates and elevated construction costs. (A $5 million state sponsored advertising campaign soon followed to try to repair the Sunshine State’s image.)

No doubt a similar study done by Alabama, Louisiana and Mississippi officials at the current juncture would yield similar or worse results. And for, say, a car manufacturer looking to build a billion-dollar manufacturing plant in the United States, Katrina’s devastation must give that company’s chairman pause when considering potential coastal locations in Georgia. After all, there are no hurricanes in Chattanooga or Smyrna.