NEW ORLEANS -- Bobbi Rogers feels betrayed.

Rogers and husband Kevin Krause came to New Orleans from Phoenix as volunteers to help rebuild the city after the devastation of Hurricane Katrina. They bought and rebuilt a house in the Mid-City neighborhood and put down roots.

Now, their view of the future could be upended, ironically by a massive post-hurricane redevelopment project.

Two hospitals would anchor a fledgling biomedical district, a $2 billion project that could generate thousands of jobs for tourism-dependent New Orleans and jump-start a health care system that's been slow to recover from Katrina.

To build the new Veterans Affairs and teaching hospitals, officials estimate 70 acres would be cleared. Included would be derelict homes, a cultural center and rebuilt houses including Rogers'.

"We're the type of people they're trying to draw to New Orleans," said Rogers, 33, a computer programmer. "And then ... you find out all the hard work you were putting not only into your home but also into the neighborhood will be demolished."

Pam Perkins, general counsel with the state Division of Administration, which will take the lead in land acquisition, said property owners will be offered fair-market value for houses and commercial buildings and, in many cases, relocation assistance. But the state will be able to seize property if acquisition agreements cannot be reached.

But first, planners must settle on the hospital sites.

\Mid-City was the preferred location heading into a recently ended public comment process, with a site in neighboring Jefferson Parish and in another part of New Orleans raised as VA options. State officials expect property acquisition to take a year.

But there are thorny, unresolved issues.

Some Mid-City residents say court may be an option if their area is selected. They believe officials haven't given sufficient consideration to other, less-disruptive locations.

The state still hasn't fully secured the $1.2 billion it needs for the state-of-the-art teaching and research hospital it has long eyed for the area and envisions near the new Veterans Affairs medical center.

To help raise funds, bonds must be sold in a sliding economy. There's also a dispute with the Federal Emergency Management Agency.

Officials with the state and LSU, which operated the former Charity Hospital that's been shuttered since Katrina, contend damage to the 70-year-old structure near the Superdome was so extensive that FEMA should pay for a complete replacement. FEMA disagrees.

Delayed construction, scaling down or scrapping the proposed new hospital could leave a swath of open land between downtown and the proposed site of the new VA hospital, urban designers with the firm Goody Clancy wrote in a Nov. 5 draft memo for comment to city planners, disrupting what officials hope will take shape as a medical corridor that will drive high-powered economic development. The two hospitals in close proximity are hoped to provide additional business for downtown retailers and hotels and attract new residents.

Caitlin Cain, economic development director for the Regional Planning Commission, doesn't seem worried, noting the commitment she's seen from the VA to the governor's office. "I don't think one would assume one would happen without the other."

Cain and others who support building in Mid-City say the hospitals must be viewed as part of a medical and research corridor capable of competing with similar establishments elsewhere in the country.

The project would transform an area seen as struggling before Katrina hit in August 2005. Not far from the proposed hospital sites, apartments and new commercial development are rising along main thoroughfares. But there are also tough stretches near the parish prison and courts dotted by bail bonds offices and rundown structures.

Beth Bergman says bring it on.

She and her husband, Carl, a photo finisher, live in the area eyed for the new teaching hospital. The neighborhood had been deteriorating before Katrina, she said. Now, there are a lot of parking lots, open space and vacant buildings among the remaining residents. Many of her old neighbors are gone.

Bergman said she and her husband were furious about the plans for about six months. Then, "We got to the point where we said, the neighborhood's not improving, it's going downhill, and it would probably be better for us to sell and go to a better neighborhood," she said.

She figures the couple could probably get a better price for their home through a buyout than on the open market, but they would like a decision soon.

Fellows at the Deutsches Haus, a cultural center and beer hall that is one of the last vestiges of New Orleans' German community, are also in wait-and-see mode. They hope the brick clubhouse that's been a neighborhood haunt for 80 years won't be torn down. A "Save the Haus" sign stands outside.

"The city said, 'Ah, come back, rebuild,' and then we were hit with, 'We want to build a hospital, you might have to move,"' Deutsches Haus board member James Tregler said, a plastic cup of beer in hand. "We tried to put on a happy face and say, 'Hey, we've been a good neighbor, can't we stay?'

"It seems like no one knows what's going on."

Perkins estimated about 260 structures -- many of them empty -- are on the roughly 70 acres. She said environmental reviews will be done and efforts will be made to look at whether any buildings in the eventual footprint can be saved.

"We've listened," she said, "and we'll listen some more."

Officials have set aside about $150 million for acquisition and relocation, based on comparable valuations in the area, she said.

The impact is likely to be greater at the proposed VA site, where there are more occupied buildings and, according to the local director of the National Trust for Historic Preservation, 123 structures considered historic, some dating back to the 1880s.

Some people, like office manager Gayle Ruth, are back. Their renovated homes stand brightly against a closed corner grocery and bar, forsaken homes and empty lots. Cans of paint are stacked on one front porch. Sporadic "for sale" or "for rent" signs dot properties; others are boarded up.

It devastates Ruth, whose house has been broken into. Just think what this area might look like if the threat of demolition didn't hang over it, she said.

She's not opposed to the VA building in the city; she just thinks it could go somewhere else, like the vacant hospital site in another part of Mid-City. Anywhere, so that she wouldn't have to leave the house that she says was the first back on her block. The house she figured she'd die in.

"I'm a native from New Orleans," she said. "But if they take my house, they will no longer get my tax dollars."

(Copyright 2008 by The Associated Press. All Rights Reserved.)