In Louisiana alone, the hardest hit area along the Gulf Coast, about $6bn-worth of new projects are under way.

The primary drivers – besides the market itself, which presents its own opportunities in the rebuilding – are the tax incentives underlying relief legislation passed at the beginning of the year.

Advertisement

Called the Gulf Opportunity Zone Act, the legislative package includes assistance such as direct subsidies to the states, bonus depreciation provisions and tax exempt financing, which is provided under the bonding authority that has been granted to the states of Louisiana, Mississippi and Alabama.

Of all the incentives, the tax exempt financing has proven to be the most popular, say financial and legal advisers who are active in the area.

“We did a deal for Chevron recently and, although it didn’t particularly need the depreciation, it did take advantage of the tax exempt financing,” says Jerry Johnson, a partner at Baker, Donelson, Bearman, Caldwell & Berkowitz.

A lot of firms are opting for the financing, as investors have a choice of one or the other – bonus depreciation or tax exempt financing – but not both.

“In the Go Zone [as locals call the area covered by the Act], there is a whole range of activities that can be supported by tax exempt financing: basically anything, except ‘sin’ activities”, such as gambling, liquor or, strangely enough, tanning salons, says Mr Johnson.

The reasons for this preference are both positive and negative. Denise Killebrew, also a partner at Baker, Donelson, reports that the bonus depreciation provision, which gives companies a 50% bonus depreciation for any investment in the Gulf Coast, turned out to be difficult to use, primarily because of the inherent difficulties of doing business in the devastated region. “Labour, construction, supplies: they are all still very scarce,” she says.

By hook or crook, though, projects are getting done. In Louisiana, recently announced investments include Synfuel’s $5bn coal gasification plant in Ascension Parish; NuComm International’s $3.5m customer contact centre in Lafayette; and Dow Chemical’s $65m plant expansion in St John the Baptist Parish.

Italy’s M2 Emmedue has opened a $6m manufacturing plant in Kenner, La. It decided to locate in the state after attending a Louisiana Department of Economic Development (LED) factory building systems symposium, according to LED spokesperson Lana Sonnier, who says it is the firm’s first investment in the US.

Why Louisiana? The company saw a demand for its rapid concrete construction system, which has been used to build housing and commercial properties in more than 40, usually storm-prone, countries.