New Orleans Three Months After Katrina

NEW ORLEANS, Nov. 29, 2005 — -- Three months after Hurricane Katrina hit the Gulf Coast, becoming the most expensive disaster in American history, there are signs of life as the city faces crucial billion-dollar decisions.

In New Orleans, life is starting to look like it did before the storm in the neighborhoods where the flood waters barely flowed -- like the French Quarter and the Garden District.

But that is only part of the story.

"When you leave out those populated areas, New Orleans is a very eerie place right now with no food, no water," said Police Superintendent Warren Riley. "There are parts of the city that are like a ghost town."

As many as 250,000 flooded homes may be uninhabitable. David Towns came back today to save what he could.

With no chance of salvaging his house, Towns decided to have it demolished. He said he's not sure if he'll return to the neighborhood.

Some of New Orleans' low-lying neighborhoods could be permanently condemned if the engineers cannot guarantee the levees will hold. Today, New Orleans Mayor Ray Nagin said that decision has not been made.

"I'm not ready to write off neighborhoods yet," he said. "And I would like to work with the residents for us to collectively make that decision."

With little government housing, businesses can't find workers. At Mother's Restaurant, the staff uses styrofoam plates because there is no one to clean the dishes. The staff they do have live in FEMA trailers parked outside.

"Well, I'm praying today," said worker Patricia Ann Santiago, in tears. "Each day that I leave work and come here, I pray every day that we don't have to live like this. This is hard for me to live like this."

The worst scenes from the hurricane have faded into memory. The convention center where thousands begged to be rescued is now a temporary medical clinic.

The Superdome, which was flooded and seemed to be ruined is nearly cleaned up and could open again late next year.

At Touro Hospital, where patients waited on the roof to be rescued by helicopter, there are cars instead of stretchers on the roof now. It is open, but severely understaffed. Emergency room patients can wait for days to get a bed.

"I would open 50 beds tomorrow if I had the staff to do it. But we don't," said Touro Hospital President Les Hirsch.

Only two of New Orleans' eight hospitals have reopened. Paramedics are forced to fly patients further outside the city and are worried what will happen when people start moving back.

"Currently, the saying is we're only one large bus accident away from casastrophe as far as medical is concerned," said Ray Bias of the Acadian Ambulance company.

There are still very few children in New Orleans. The first public school reopened only this week.

"There are 17 schools planning on opening in January. If more schools are needed, there are facilities that are available that can be deployed. The issue is, will there be enough kids?" said Louisiana Board of Education member Leslie Jacobs.

It is a question no one will answer. New Orleans is now a tale of two cities. At night in the center of the city, there is activity and light, but as you move outside it is a very different and dark place.

Four blocks down from the 17th Street Levee, which broke during Katrina's onslaught, Vincent Signorelli and his wife, Kathleen, have decided to move. They say they don't believe authorities are rebuilding the levees strong enough to protect the city.

"Let's put it this way -- in my opinion it may be enough, but I'm at a point now where I don't believe anybody about anything," said Kathleen Signorelli.

The current plan is to repair the levees to withstand a Category 3 hurricane. The efforts will cost taxpayers $1.3 billion. The plan calls for levee walls to be raised to 17 feet high in some places. The repair covers 170 of the nearly 300-mile system and is supposed to be completed by next summer.

Then there's what many say is the real solution -- levees that withstand a Category 5 storm. The plan, which would cost nearly $35 billion, would repair the entire system, build levees 40 feet high, and put in massive flood gates to block storm surge from reaching the city. At the earliest, construction would finish in 2020.

Walter Isaacson, who was appointed to oversee the region's recovery efforts, says he wants the most protection.

"There should be Category 5 protection for most of the populated areas," he said. "And in return, we'll build a safer city -- one where it's higher and drier and the houses are done to a better code and stuff."

In Louisiana, engineers believe the current plan will work, but they say it won't be completed next summer.

"I doubt there are enough heavy work contractors in the entire country to complete that by next summer," said engineer Gordon Boutwell.

However, if it happens, authorities must convince residents the levees will hold. Without that confidence, families will pick up and leave, banks will refuse to write mortgages, and the federal government will not provide anyone here with flood insurance.

The Quaintance family also lived down the street from the 17th Street Levee, and they lost their home of 29 years.

They said while they don't believe the levee will be fixed, they've decided to stay.

"There's a lot to walk away from," said Bea Quaintance. "So much to walk away from. For us, it's just not a consideration right now. Maybe it's foolish but we're going to remain optimistic. We're going to remain determined."

ABC News' Bob Woodruff and Steve Osunsami filed this report for "World News Tonight."