(Business 2.0) – Even before Katrina hit, the Gulf Coast Belt was the megapolitan with the cloudiest forecast, especially in its poorer eastern half. During the past few years, New Orleans's population declined and its economy stalled. Louisiana hopes to rebuild the Crescent City with $250 billion in federal funds--but the key, say urban planning experts, will be overhauling the economic infrastructure, not just the physical one. Here are their ideas for getting the highest returns on the government's money.

INVEST IN SMARTS: New Orleans's only major university, Tulane, has become an also-ran compared with Southern rivals like Duke and Emory, and the city doesn't have technical colleges that turn out enough skilled grads. The thornier problem is the public school system--one of the country's worst. "It's always been a limiting factor for companies moving here," says Rich Stone, a vice president at the city's largest commercial real estate brokerage, Latter & Blum. "That's where we need massive funds."

TAKE OIL UPSTREAM: Most major oil companies are based in Houston, but their presence in New Orleans--port operations and branch offices--offers a base for igniting a surefire growth industry. Earmark a chunk of the federal funds, some suggest, to create a research hub for new energy technologies. "New Orleans has a lot of energy talent," says Robert Lang, an urban planning professor at Virginia Tech. "You can't build that from scratch."

VIVA LAS VEGAS: Remodeling the city after family-friendly Las Vegas--with casinos, luxury malls and hotels, and five-star restaurants--could spark a renaissance for New Orleans's convention trade, lure more tourists, and get them to spend more. "You can build a big metro economy purely out of high-level services," Lang says. "You get people there with gambling, then rope them into consuming other things."