Gulf Coast Rebuilds

Erika Morphy is co-editor of Debt and Equity Journal, from which this article is excerpted.

Birmingham, AL—Many of the incentives offered by the federal government to rebuild the Gulf Coast areas devastated by Hurricane Katrina more than a year ago are proving to be cumbersome in some cases and impractical in others. Early this year, relief legislation–the Gulf Opportunity Zone Act–became law. The act offers assistance in the form of direct subsidies and tax incentives to promote investment. Of the latter, says Denise Killebrew, a partner with Baker, Donelson, Bearman, Caldwell & Berkowitz PC here, the bonus depreciation provision–which initially created the most stir because it gives developers a 50% bonus depreciation for any investment in the Gulf Coast–has proven difficult to use.

Developers have gravitated to other incentives, including tax exempt financing provided under the bonding authority granted to Louisiana, Mississippi and Alabama. However, those programs also poise challenges for all but the largest mixed-use projects, she says.