A Boom Could Follow

Source: Bloomberg Columnists - December 30, 2005

Joe Mysak is a columnist for Bloomberg News. The opinions expressed are his own.

Alabama City Shows Us There's Life After Hurricanes: Joe Mysak
Dec. 30 (Bloomberg) -- The eye of the hurricane made landfall around 3 a.m. The storm surge destroyed houses, condominiums and roads, and made a hash of the little souvenir stands and restaurants near the beach.

``It's Catastrophic,'' said one newspaper headline.

``Killer Storm Wipes Out Coastal Homes,'' said another.

The stories referred again and again to demolished houses, front yards filled with debris when they weren't either entirely washed out to sea or buried beneath five feet of sand, boats left miles inland, high and dry.

Looking at the scenes of devastation, it was hard to see how life ever would return to normal again. Here and there a few hearty souls vowed to rebuild. There were even a few optimists who said that the storm would give everyone a chance to start anew, to build structures that could withstand fiercer storms, to get it right this time.

The storm was Ivan, and it was terrible, and it pummeled Alabama and Florida's Gulf coasts in September 2004.

Life begins again, as Moody's Investors Service reminded everyone earlier this month in its analysis of $25 million in warrants being sold by the hard-hit city of Gulf Shores, Alabama, to purchase land for a 62-acre shopping complex and for other municipal capital projects.

On Rebound

Gulf Shores is a town of 5,044 year-round residents (which swells to 200,000 on some days during the summer) some 214 miles east of New Orleans, in the southwest portion of Alabama on the Gulf of Mexico. It is rated A1 by Moody's Investors Service, the fifth-highest municipal rating there is. This part of the Redneck Riviera, as the coast of Alabama and Florida is called by some, appears to be one special place, even after the storm.

``The city's tourism-based economy will continue to rebound strongly after Hurricane Ivan, with redevelopment projected to increase the tax base by 50 percent in the near term,'' says Moody's. ``Gulf Shores is one of the premiere beach resorts in the state of Alabama.''

The rating company spells out the recent history of Gulf Shores: ``Hurricane Ivan hit the city in September of 2004 and damaged many buildings on or near the coast.'' Because of the storm, property occupancy has been less than 80 percent of what it was before Ivan. The city has asked the state to finish its cleanup of the Gulf State Park's hotel and conference center, destroyed in the storm, and of course there are complaints about how dilatory the Federal Emergency Management Agency is.

This hurricane season was kinder to Gulf Shores, which escaped serious damage.

Big Complexes

But there's more to this story than just the grim work of rebuilding. ``City management believes the storm has provided an opportunity for redevelopment of the beachfront, which had previously been populated with older structures and single and multifamily resort homes,'' says Moody's.

``City officials have worked with developers to direct redevelopment into large condominium complexes, allowing for an increased housing capacity and more ocean vistas,'' says the rating company, adding that building permits increased to 1,518 in 2005, from 779 in 2003. With the completion of the new condominium complexes, occupancy in the city is expected to rise to 150 percent of pre-Ivan levels by 2007.

Perhaps this is why the city's Web site calls it the place ``Where Business Meets the Beach.''

Value Per Capita

More than a year after Ivan, it looks like the city of Gulf Shores is on the mend. It surely is a thing of beauty in the terms dearest to the municipal bond market, which is full value per capita. That's the value of all taxable real property in a municipality divided by population.

Not surprisingly, the leaders when it comes to full value per capita tend to be small, mainly resort towns where the real estate is very pricey and the year-round population very small. Keep in mind that, nationally, the median full value per capita of cities in the U.S. is $68,262, according to Moody's. A full value per capita of $100,000 is, well, just peachy, although the companies that give out credit ratings generally describe localities' full value per capita as ``substantial,'' ``significant,'' or ``strong.''

The estimated 2005 full value of Gulf Shores, Alabama, is $4.4 billion. The estimated full value per capita is a ``very high'' $1.2 million, says Moody's.

The calm after a storm is often a time of despair. And then, as Gulf Shores shows, a boom can follow.