NEW ORLEANS – The plucky motto on a banner above a coffeehouse here, “Rebuilding New Orleans one party at a time,” is perhaps not as frivolous as it seems.

No less an authority on financial matters than Standard & Poor’s, the revered credit rating firm based in New York, declares in a new report that New Orleans’ recent celebration of Mardi Gras demonstrated a positive economic indicator for the city’s effort to rebuild from Hurricane Katrina.

“The turnout for the pre-Lenten street bash – sparse by historical standards but otherwise successful – showed that the city, even in its shrunken state, can at least provide minimal support to its important tourist, visitor and convention sector as hotels, restaurants and police services seemed to be in place and working well,” the Standard & Poor’s review said.

Read further, however, and an Ash Wednesday kind of sobriety settles in.

The need for housing is “stark,” future government revenue is uncertain, the number of hotel rooms is rising but still down 26 percent since Katrina and the number of restaurants is 63 percent fewer, the report said. Only about one-fourth the number of pre-Katrina conventions are expected this year. Any expansion in business will be constrained by labor shortages.

The work force for the New Orleans area has declined 32 percent, and the jobless rate, though down since November, is at 8.2 percent, well above the 5.8 percent before the storm. A “dearth of community resources,” such as schools and hospital beds, is a concern, the report said.

“Over the next six to 10 weeks, we believe that the Gulf region, and New Orleans in particular, will face critical choices in deciding how to rebuild infrastructure, restore the tax base, and whether to refinance some troubled public sector debt,” said Alexander Fraser, Standard & Poor’s public finance analyst.

Responding to Katrina, Standard & Poor’s and other debt evaluation firms lowered their ratings on some bonds for the city and state late last year, meaning it now costs more for the public sector to borrow. The near-term outlook on some of those ratings “remains grim,” the report said.

“Questions remain about whether these borrowers, some of which are in special tax jurisdictions supported by dedicated revenue streams, can return to the markets given the erosion of their revenue bases,” the report said.

Standard & Poor’s is not the only major credit firm keeping a close eye on developments. Robert Kurtter, senior vice president for state ratings for Moody’s Investors Service, said officials from the firm have been to Louisiana and that more visits will follow.

State revenue has been better than forecast. “That’s a good sign, that’s positive news,” Kurtter said.

The Standard & Poor’s analysts anticipate that billions of dollars in potential housing support from the federal government could make a big difference, once the program gets under way. Gulf Opportunity bonds, a federally backed and state-run program similar to the Liberty Bonds issued in New York after the 2001 terrorist attacks, could jump-start private development and assist some public debt in Louisiana.

“At least one prime New Orleans venue seems to be on the rebound,” Fraser said. The Superdome Commission, which overseas the Dome and neighboring New Orleans Arena, soon will issue new bonds and renew old debt.

“But the bond security is dependent on hotel tax receipts,” Fraser said. “It’s a big question where that will come from as recovery workers begin to leave.”

Those workers occupy thousands of hotel rooms, whose fortunes depend on whether they can replace government-paid guests with a regular retinue of tourists and conventioneers, he said.

The “biggest wild card” in the recovery is the April 22 mayoral election in New Orleans, which “could help further refine the city’s rebuilding efforts” and lead to more long-term decisions, the firm’s analysts Robert McNatt and Frank Benassi said.

“We believe the overriding issue will be incumbent Mayor C. Ray Nagin’s handling of the disaster and its aftermath. We also think that many reconstruction initiatives will not begin in earnest until the city’s leadership is determined,” they wrote. “Whatever the state and city decide about rebuilding cannot be solidified until there is a clear mandate about New Orleans leadership.”

In the midst of all this came Mardi Gras, which the New Orleans area embraced despite the setbacks and a measure of public criticism locally and across the country.

“The revelry of Mardi Gras was more than just a colorful respite from the Gulf Coast’s agonizing slog toward normalcy. It was also an indicator of how the battered city of New Orleans and surrounding areas will fare as rebuilding proceeds,” the report said.

“If public issuers in the region achieve the fiscal stability they are aiming for, and residents regain their homes and jobs, then perhaps Mardi Gras 2007 will be not just a dry run for the future, but a full celebration,” the analysts wrote.

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