Ignoring complaints from fiscal watchdogs and from John Whitehead, chairman of the Lower Manhattan Development Corp., the New York City Industrial Development Agency voted yesterday to approve $650 million in federally subsidized Liberty Bonds to help pay for the construction of a 52-story office tower at Midtown. The building, which will serve as the New York headquarters of the Bank of America, is being developed by the Durst Organization. The deal is is an affront to those who intended these bonds to help heal the economic damage done on September 11.

The site of the new Bank of America building is miles from ground zero, across the street from Bryant Park at the corner of 42nd Street and the Avenue of the Americas. That doesn’t automatically make it a bad idea. A great many factories, financial services firms, transport companies, dining establishments, and the like throughout the five boroughs can fairly demonstrate financial harm suffered in the wake of the terrorist attack.

The real problem is that the Bank of America isn’t one of those companies fighting for survival; rather, its proposed tower is simply a consolidation under one roof of bank offices scattered across New York City. That means taxpayers are being asked to subsidize the removal of tenants from one group of city landlords in favor of another. The net boost to the local economy could end up being close to nil.

Only half of the 2.1 million square feet of new office space that the public is subsidizing will even be used by the bank. The rest, presumably, will be rented out. Why make a public allocation of credit to finance the Durst Organization’s speculation in new Midtown office space? Also troubling is Bank of America’s history of failing to hold up its end of these sorts of arrangements. According to Good Jobs New York, a watchdog group that monitors public subsidy deals, a corporate retention deal between a host of government agencies and the Bank of America in the 1990s had to be revoked. In 1993,the bank received $12 million worth of sales tax abatements, along with two years of free rent at One World Trade Center and free office equipment purchased by the city; in exchange for this package, valued at $18 million, the company promised to keep 1,700 jobs in New York and sign an extended lease at the World Trade Center.

At the time, the deal was hailed as a patriotic, can-do response to the first World Trade Center terrorist attack. Bank of America’s deal raised the World Trade Center’s occupancy rate to 92% from 88%,prompting Governor Cuomo to announce that “Bank America is sending an important message that the World Trade Center is back.” But in 1998, the subsidy deal had to be terminated because the bank laid off 800 workers following a merger with Security Pacific National Bank. As of 2002,the 1,700 jobs that were supposed to be kept at the World Trade Center had shrunk to 346.

We dredge up these facts not because we don’t appreciate Bank of America, but because a pattern has emerged in which Liberty Bonds and other scarce public subsidies for post-attack rebuilding are being diverted to support new luxury apartments and corporate office deals that don’t clearly benefit the public at large. There is also the effort by the New York Times Co. and its real estate partner to secure $400 million in Liberty Bonds to help subsidize construction of a new headquarters building approximately two blocks south and one block west of its current location, an ambition that was in the works long before September 11. The city deserves better than these kinds of abuses of scarce public funding capacity.