Oil spill generates economic winners, losers on Gulf Coast


The oil spill, and BP’s response to it, is affecting local economies in drastically different ways, creating winners and losers among the cities on Alabama’s coast, recently released tax data shows.

Beachfront communities, heavily reliant on tourism and fishing, have suffered.

Larger inland cities, which have abundant, cheap lodging and a more diversified economic base, fared better, even benefiting in some cases.

The city of Mobile, for example, reaped a substantial windfall in the month of May, netting $10.84 million in general-fund sales tax revenue, a 14 percent increase over the previous year and an 11 percent gain over the previous month.

The city’s lodging taxes increased 81 percent over the previous year.

Mobile has yet to tabulate tax figures for economic activity in June.

BP PLC, majority owner of the well being drilled by the Deepwater Horizon rig, based its cleanup efforts in Mobile after the rig exploded April 20, unleashing millions of gallons into the Gulf of Mexico.

The Unified Command Center is the hub of a response apparatus that covers four states and includes thousands of contractors, company officials and government workers. The influx of workers has been a shot in the arm for the city’s economy, which had been struggling.

Even BP’s $2.5 million purchase of the west Mobile office building that houses the operation was something of an economic plus, according to Don Epley, who runs the University of South Alabama’s real estate center. He said the buy was one of Mobile’s only major office space deals in recent memory.

The silver lining doesn’t even appear to have come with a storm cloud. The city’s major economic engines — the port, government and health care — seem to have escaped the oil disaster unscathed.

Mayor Sam Jones said that he believes the city’s tourism industry has taken a hit, but those losses are drowned out by gains related to the influx of people working on the oil spill.

“As the Unified Command winds down, we would be interested to see what the trend is after that,” he said. Tax collection in parts of Alabama, inland in Montgomery for example, were flat in the month of May, suggesting that Mobile’s boost is entirely related to the spill response.

Mobile’s fate contrasts with that of Orange Beach and Bayou La Batre. May sales tax revenue in those cities showed double-digit declines over the previous year.

Gulf Shores sales tax revenue also declined, though by a smaller amount.

Cindy King, the city’s finance director, said the May decline in Gulf Shores stings because economic activity in the previous months had been trending upward. The city’s tourism industry appeared to be clawing its way out of the hole created by the recent real-estate bust, she said.

“We were expecting our best year ever,” King said.

A new tourist draw this year, The Hangout Beach, Music and Arts Festival, blunted the edge of May’s losses, she said, but not enough to salvage the month.

June, which had no such event to fall back on, was even worse.

Most municipalities have yet to report sales tax income collected for the month of June, but preliminary numbers from the beach towns paint a gruesome picture.

Lodging taxes in Orange Beach were down nearly 45 percent compared to June of last year, according to the city.

In Gulf Shores, June losses in sales tax and lodging totaled $1.5 million, 6 percent of the city’s budget for this year.

“It’s getting to the point where it’s going to be an immediate cash flow problem,” King said.

Unless something changes, she said, the city will have to dip into its reserve money, usually left untouched in case of a hurricane.

BP’s claims process has been slow, King said, so she filed an advance claim to cover part of June’s losses. “We’ve yet to hear back from them on that,” she said. “I’m not sure they understand how governmental budgeting works.”

Dauphin Island, which also relies heavily on tourism, actually saw an increase in sales-tax revenue in May, probably due to the large numbers of oil-spill workers who flooded the island.

Those gains, however, were largely offset by a steep decline in lodging taxes, and the situation appears to be getting worse as time goes on.

Preliminary numbers for June show a precipitous drop.

Mayor Jeff Collier’s assessment of the spill’s impact on the economy echoed that of other officials interviewed for this article.

“Only time will tell how this is going to turn out in the long run,” he said.

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
Cooper Law Firm

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