Authorities have set up a huge morgue for the bodies being found in New Orleans, as floodwaters begin receding from the hurricane-ravaged city.

A Louisiana state health official, Bob Johannessen, says the morgue, a massive warehouse in the town of Saint Gabriel, can hold several thousand bodies if necessary.

The state's death toll from Hurricane Katrina currently stands at 71, but state and local officials have warned they expect the number to soar into the thousands.

Rescue teams have spotted numerous decomposing bodies as they go house to house in New Orleans to evacuate survivors. Some people have insisted on staying in the city despite warnings that the floodwaters - still high in many areas - are contaminated with toxic chemicals, raw sewage, and dangerous debris.

The U.S. Army Corps of Engineers began pumping out the water Monday after repairing a key levee that broke during the storm, flooding the low-lying city.

Officials say it may be three months before New Orleans is drained completely.

Hurricane Katrina also destroyed vast areas in the nearby state of Mississippi. The official death count there stands at about 150, but is expected to rise.