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May 13, 2015 – The Times-Picayune (Greater New Orleans), By Paul Purpura

Sheila Celestin recalls the community meetings she attended a decade ago, when the Navy announced it was pulling up anchor after more than a century in Algiers. The Naval Support Activity, a 200-acre complex that straddled the Mississippi River and once employed more than 4,600 people with a $142 million annual payroll, would be converted into something called Federal City.

Government agencies and private businesses would move in. In 10 years, backers said, they would bring 10,000 jobs to the shuttered military installation.

Since then, the Marine Corps Support Facility New Orleans has been built in Algiers, its mammoth headquarters towering over Celestin’s neighborhood as an anchor around which Federal City would grow. But those 10,000 jobs?

“We have yet to see it, and that has been a disappointment,” said Celestin, an environmental scientist. “My main concern is, we thought we were going to get businesses in the area. We’re not getting it.”

Indeed, 10 years after the Pentagon announced that it wanted to close the Navy base, Federal City, once considered one of the largest economic development projects in the state, is far from reaching 10,000 jobs. Its owner, the Algiers Development District, estimates 2,000 jobs are there. And that includes the Coast Guard’s Sector New Orleans headquarters, which is nearby but not actually part of the campus, and the New Orleans Police Department’s 4th District station.

Most of the jobs belong not to government agencies and private businesses but to the Marine Corps, which already was in New Orleans at the Bywater campus. Daily, 1,186 people work at the Marine installation in Algiers, according to Marine Forces Reserve.

On orders of the federal government, the Marines merely crossed the Mississippi River to Algiers. They occupy their state-built spaces inside the 29-acre base like cavalry soldiers at Fort Apache, largely alone amid vacant century-old administrative buildings and motel-like living quarters.

To make Federal City happen, Louisiana provided $150 million. That’s more than $125,000 per job to keep the Marine Corps headquarters in Orleans Parish, instead of it moving -- at the Pentagon’s expense – to the Naval Air Station-Joint Reserve Base in Belle Chasse.

Which raises the question: Is Federal City a failure? Or is it a work in progress?

Jackie Clarkson, a former state legislator and New Orleans councilwoman who has been involved in Federal City from the beginning, concedes the project likely will never produce 10,000 jobs. But she still sees it as a success, as its original intention was to retain as many military jobs as possible in New Orleans, positions that would have gone to Belle Chasse and out of state.

“Will it bring 10,000 more? No,” Clarkson said. “Will it bring several thousand more? Yes. Maybe we’ll end up with 6,000 jobs. That’s better than lost jobs.”

Since the Marines moved across the river in 2011, the Marine Corps Support Facility New Orleans has been a bustling headquarters. They oversee the Marine Reserve forces throughout the United States and the Marines’ piece of national homeland security.

aerial view of the Marine Corps Support Facility New Orleans
An aerial view of the Marine Corps Support Facility New Orleans and the adjacent Federal City in Algiers, as pictured on Nov. 3, 2011. The Marine Corps installation is viewed as Federal City’s first phase, although it’s not part of the campus. (David Grunfeld, NOLA.com | The Times-Picayune)

Although they own their facility that’s adjacent to the Federal City, Marines were always viewed as project’s first phase and its anchor tenant, around which the project would grow. But it hasn’t.

The reasons are myriad: Hurricane Katrina and the ensuing recovery, the national recession, friction in the Federal City governance structure and a falling out with the site’s first master developer. And eight years passed between the time the Navy announced it would close the base and when it actually sailed away.

Now, having put $150 million into building the Marine Corps Support Facility New Orleans, the state is largely standing down. State officials still help recruit tenants, but in February, before he resigned as Louisiana’s economic development secretary to become chief executive for the LSU Foundation, Stephen Moret said Federal City is a local project “with local goals and objectives. The state’s primary objective at Federal City has been met.”

These days, state Rep. Jeff Arnold, D-Algiers, who also has been involved with Federal City more than a decade, distances himself from the 10,000-jobs figure. But he’s not abandoning it, either.

“Is it unrealistic that we have that? It’s possible, for sure,” said Arnold, who chairs the Algiers Development District board.

Tim Ford, chief executive of the Association of Defense Communities, says the story of Federal City is a common one. His Washington D.C.-based group comprises about 200 communities, including New Orleans, with active or closed military installations.

“Every project has taken longer than what people expected at the beginning,” Ford said. “That’s almost the standard.”

Navy liked Federal City

The Federal City concept dates back more than a dozen years. With the Pentagon contemplating base closures around the world, local officials worked up a suggestion to move the military commands that were based at the Naval Support Activity’s Bywater campus to the Algiers part of the base. Those commands were the national headquarters for the Navy and Marine Corps reserve.

Site plan of Federal City
Federal City Site Plan Map. (Dan Swenson, NOLA.com | The Times-Picayune)

The Navy initially was receptive, in part because it would put the commands into modern buildings more suited to their work. They had been in Army warehouses that were built during World War I and converted into offices. Civilian federal agencies would be recruited for Federal City, too, officials envisioned.

Then the Pentagon announced on May 13, 2005, that it wanted to close both parts of the Naval Support Activity altogether, move the Navy commands out of state and relocate the Marines to the air station in Belle Chasse. City officials balked and, joining with state officials, launched a bipartisan effort to save the Algiers base. Gov. Kathleen Blanco pledged $125 million to ensure Federal City happened, an amount that grew to $150 million after Bobby Jindal succeeded her in the Governor’s Mansion.

The city and state efforts paid off. A federal commission that reviews the Pentagon’s base-closure recommendations let the Navy sail away from New Orleans. But it bought into the Federal City concept, ordered the Navy to retain the Algiers base and decreed that the Marine Corps be part of it.

That decision came on Aug. 24, 2005. Five days later, Hurricane Katrina arrived.

It was in the weeks leading up to the decision that Federal City’s founders optimistically touted 10,000 jobs in 10 years. Now, it appears that might have been too optimistic.

Katrina undeniably was a local setback. “The world came to a stop as far as New Orleans was concerned,” Arnold said.

But all across the United States, the 2005 base closings came during a recession that hampered efforts to repurpose military installations, Ford said. “We had projects reorganizing their entire plan because the economics changed so dramatically,” Ford said. “It’s never an easy process.”

Bipartisan effort

Another hurdle was intense lease negotiations with the Navy, which initially would retain ownership of the Algiers property. So tenuous were the talks that in May 2008, Louisiana’s two U.S. senators, Democrat Mary Landrieu and Republican David Vitter, who didn’t always see eye to eye, jointly stepped in. They said they were “disappointed” in the process and demanded a meeting with senior Navy and Marine Corps leaders. Jindal also weighed in, reassuring Navy Secretary Donald Winter in an April 2008 letter that the state was committed to Federal City and that the project was “an important cornerstone of Louisiana’s efforts to rebuild” after Katrina.

“There was a time we didn’t think (Federal City) was going to happen,” Arnold said. At one point, the Navy decided it did not want to enter into a lease with the New Orleans Federal Alliance, the apolitical nonprofit that had been created in 2004 specifically for Federal City. The state wouldn’t enter into the lease, either.

State and local officials were working against a deadline. When the federal base closure commission overruled the Pentagon in 2005 and allowed Federal City to move forward, it set a deadline of Sept. 30, 2008, to commence construction on the Marine Corps base. Had the deadline been missed, the plan would have been scrapped, and the Marines would have gone to Belle Chasse.

Into the breach stepped the Algiers Development District, a public entity comprising elected officials or their appointees. It was already was overseeing a tax-increment financing district in the West Bank portion of New Orleans and had funded lobbying efforts to keep the Naval Support Activity open. In September 2008, more than three years after the base closure order, it signed the 75-year lease taking control of the site from the Navy.

In turn, the district sublet its Federal City responsibilities to the New Orleans Federal Alliance, which had selected the master developer, HRI/ECC.

By then, construction had begun on the Marine Corps complex. Overseen by the New Orleans Federal Alliance, the installation was built ahead of schedule and under budget. When construction was finished, the state gave the complex to the Marine Corps.

But redevelopment of the remainder of the Naval Support Activity could not start until the Navy closed the base. That finally came on Sept. 15, 2011, when the Navy ended a 110-year presence in Algiers. For the first time, the public and developers had unfettered access to the site.

Cracks develop in oversight

As Arnold sees it, that’s when the 10-year clock to bring 10,000 jobs to Federal City began ticking -- not in 2005, when the Navy announced it wanted to close the base. But as the focus turned to commercially redeveloping the rest of the site, cracks appeared in the relationships between the Algiers Development District, the New Orleans Federal Alliance and HRI/ECC.

A contract dispute landed the federal alliance and the developers in court. At one point, Entergy threatened to turn off the electrical power to the site, while the federal alliance and developers disagreed over who was responsible for paying the utility deposit.

And the Algiers Development District and the New Orleans Federal Alliance battled over which group would govern Federal City. For instance, Arnold was publicly critical of the revenue-sharing arrangement that the alliance had reached with the developers for rent money from tenants moving into a parking garage retail center. A Subway and a Navy Federal Credit Union branch are among them. Under that agreement, the developer would keep 88 percent of the rent, with the alliance keeping 12 percent for its operating expenses.

The district, which has a guaranteed revenue stream from sales tax revenue in Algiers, had agreed to support the alliance financially until lease and other Federal City came rolling in. But amid the disputes, the district held back money. The alliance, it appeared, was being starved.

Clarkson, an original member of the federal alliance, called it growing pains. “Sooner or later, it had to be one board,” she said. “Sooner or later, there had to be a clash. And neither of us got along with HRI.”

In the end, the Algiers Development District prevailed, after the Pentagon authorized the Navy to give the property away. The Algiers district became the owner of 118 acres and 51 structures in May 2013, because it was the entity that signed the lease with the Navy.

That real estate transaction also nullified the lease and sublease agreements. HRI/ECC parted ways with the project, although HRI Properties continues to operate Federal City Inn & Suites, Algiers’ only hotel. The New Orleans Federal Alliance still has ownership in Federal City and remains involved in the project.

Maj. Gen. David Mize speaking at a podium
Retired Marine Corps Maj. Gen. David Mize, largely credited with spearheading Federal City’s early successes, smiles as he addresses an audience, during the Sept. 30, 2008, groundbreaking for the Marine Corps Support Facility New Orleans, viewed as the anchor for the Federal City in Algiers. Mize is no longer involved with the project. (Rusty Costanza, NOLA.com | The Times-Picayune)

The federal alliance’s president and chief executive, retired Marine Corps Maj. Gen. David Mize, whose full-time job was to be running Federal City, ended his involvement with the project soon after. Well-sourced in military circles, Mize, who commanded Marine Forces Reserve in New Orleans for three years through 2001, was instrumental in devising the Federal City plan in the beginning, and he spearheaded the project for the state through its successful first phase.

He also was a proponent of pursuing 10,000 jobs over 10 years. He would not comment for this story.

‘Always been disagreements’

The governance dispute led to the creation of yet another group, the Federal City Joint Development Committee, a partnership between the Algiers district and the federal alliance. GNO Inc. and New Orleans’ mayor each appoint a member, too. The Algiers district still holds sway over the committee’s work.

Ford said the governance dispute is not unique among military base reuse projects. He cites as another example the community battle that was waged more than 10 years over how the Marine Corps’ shuttered El Toro airfield near Irvine, Calif., would be reused. In the end, the Defense Department stepped in and sold the property to a private developer. “There’s always been disagreements,” Ford said.

In New Orleans, Mayor Mitch Landrieu was not publicly vocal as the Federal City governance dispute carried on. When asked in January for comment on this story, his office made available Cedric Grant, deputy mayor at the time and now the Sewerage & Water Board’s executive director, who said Federal City “remains an important anchor for continued development in Algiers.”

In January, the Algiers Development District signed a new 10-year master developer contract for Federal City with Vista Louisiana LLC, giving the project a second wind. The new team is to update the Federal City master plan that the federal alliance created in 2009, and to lead a marketing push for potential tenants, Arnold said. The new master plan is expected to be complete by late May. Federal City also might be renamed, he said.

“They see it as a place you can live, work, play,” Arnold said. “I think housing will be part of it. They’ll have things for after hours, for people who live at Federal City.”

Vista Louisiana also helped find a new operator for the West Bank YMCA at Federal City. The Y announced in February it no longer wished to operate the fitness center, which is owned by the Algiers Development District. YMCA officials said the center did not enroll as many members as it had hoped when it took over operations there in 2012. In April, the district chose Ochsner Health System, which runs the Elmwood Fitness Center, as the new operator.

The Y’s exit was a small setback, yet one of many that have plagued Federal City over the past 10 years. Now, however, Federal City’s leaders say they are determined to move forward.

“All of those issues are behind us now,” said Bill Oliver, a retired Army Reserve officer and former AT&T/BellSouth executive whom GNO Inc. appointed to the Federal City Joint Development Committee. “Our focus has to be in front of us.”

Oliver, who was elected the committee’s chairman last year, said he wants to see a new master plan in place by June to addresses the types of businesses that will be targeted for the site. Those must appeal to others in Algiers -- a grocery store, for example -- and have a regional appeal: a restaurant, maybe a condominium building with retail space in it. Technology services firms could be recruited to support the Marines and the Coast Guard, which has its Sector New Orleans headquarters adjacent to Federal City, he said.

While Vista Louisiana focuses on redeveloping the 118 acres for Federal City’s second phase, Oliver’s committee must be concerned with further developing the property inside the 29-acre Marine Corps Support Facility. The committee began seeking a developer on March 17, working closely with the Marine Corps.

The committee also has approved a plan to demolish an array of buildings, including the motel-like bachelor quarters, to make space for new development. They also face stabilizing the historic buildings and residences at the site, which could cost more than $3 million, according to a study done by the Mathes Brierre Architects firm.

“I think we have some momentum going as a group, organizationally,” Oliver said. “I don’t think we have anybody that has an agenda to create drama on the teams. I think we need to stick with that momentum and keep it going, just from an internal standpoint. This is a good project, and there’s a lot of opportunity here.”

Still, some Algiers residents are skeptical. “I kept waiting, waiting, waiting. And nothing came around,” said Patricia Combs, who recalled the promises of 10,000 jobs. “It ain’t what they said it was going to be. I’m very disappointed.”

Celestin said she had big hopes for the area. But what she’s seen, in addition to the bustle from the Marine Corps base, are the Regional Transit Authority buses that now pass her home since its routes were changed to accommodate Federal City years ago.

Her husband, Oliver Celestin Sr., an Air Force veteran, appears impressed with his Marine Corps neighbors, with their platoon formations on the parade field and the Marine Corps Band New Orleans, which increases its rehearsals as Mardi Gras season approaches every year. As for the remainder of Federal City, he said he’d like to see a new deadline set for development.

“It’s disappointing, because you built up the community’s hopes for a big let-down,” he said. “Ten years goes by, and they say they’re doing work. But we don’t see it. We want jobs for the community.”

Clarkson expressed confidence that the project will succeed, with large and small businesses concentrated around a “town center” community, much like was envisioned in the original master plan.

“Is it later than we would have hoped? Yes,” she said. “The economy had something to do with that. But later is better than never. Later will be better, and better than ever.”

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The information above is for general awareness only and does not necessarily reflect the views of the Office of Economic Adjustment or the Department of Defense as a whole.