With news that talks between the Port Authority and Larry Silverstein had broken down in the wee hours of yesterday morning, the prospect of even longer and more arduous talks looms. Even worse, to judge by the public statements coming from one side, New Yorkers have reason to fear that things will grow worse still. The talk from the vice chairman of the Port Authority, Charles Gargano, about how there won’t be any more negotiations until Mr. Silverstein and his colleagues “put something on the table that is in the public interest” doesn’t sound calculated to foster the kind of trust and goodwill necessary to hash out such a tough problem. Nor, for that matter, will charges that Mr. Silverstein is “showing bad faith” and is motivated by “greed.” Mr. Gargano is, after all, defaulting on a contract he signed with Mr. Silverstein. The real question is whether Mr. Gargano’s signature is worth the paper it’s printed on.

Tuesday’s round of fierce negotiating unfolded as a midnight deadline loomed for Mr. Silverstein and the Port Authority to reach an agreement on how to develop the site that would be acceptable to both parties, as well as to Mayor Bloomberg, who controls $1.6 billion in Liberty Bonds and has thus far been hostile to Mr. Silverstein’s rebuilding proposal.

The most viable compromise on Tuesday may have been a deal under which the authority would have taken over building the Freedom Tower and a tower to replace the Deutsche Bank building, while Mr. Silverstein would have built the three remaining towers along Church Street. Yet that apparently wasn’t good enough. Mr. Gargano claimed that the deal collapsed when Port Authority negotiators saw documents suggesting that Mr. Silverstein was negotiating in bad faith, although he has failed to say what those documents were. In his own press conference yesterday, Mr. Silverstein asserted that his team had negotiated in good faith and made every effort to be accommodating before the Port Authority left.

It’s hard to have anything other than sympathy for Mr. Silverstein in this instance. He acquiesced to siting and design decisions that made the Freedom Tower, which at the time was his responsibility, a difficult commercial proposition for a developer; it is expected to be the hardest building at the site to lease. He had to endure efforts by various politicians to boot him off the site entirely, or to effectively confiscate the most commercially desirable sites. And all along, he’s been writing a $10 million rent check to the Port Authority every month.

The Port Authority, meantime, didn’t exactly inspire confidence in its real estate acumen yesterday. Mr. Gargano charged that Mr. Silverstein’s “motivation is to get as much money out of the project as possible.” The authority also accused Mr. Silverstein of wanting to minimize his risk at the site, a result, as the New York Observer’s Real Estate Web log suggested, of the developer’s desire to finance his share of construction almost entirely with insurance proceeds and Liberty Bonds. The authority apparently objects to Mr. Silverstein’s reluctance to devote some of those insurance funds to the authority’s building project at the Freedom Tower, despite the fact that such a transfer might not even be legal.

None of which makes very much sense. Mr. Silverstein signed a 99-year lease with the Port Authority in the first place, an act that should be the definition of risk. He paid the insurance premiums that resulted in the pay-outs now at issue. He went to court when his insurers were reluctant to cut such large checks. He’s paid monthly rent on the site in the hope that one day he’ll be able to redevelop there. And yes, he has presumably done so out of a desire to make money.

But since when is that un-American? The Port Authority itself has recognized the virtue of the profit motive over the course of the site’s own history. After all, Mr. Silverstein is only involved in these negotiations today because before the September 11 attacks, the authority had decided that a private developer, motivated by the quest for profit, could do a better job running the twin towers than the authority had done.

There is still time to work out a deal before the scheduled ground-breaking on the Freedom Tower next month, although it now looks increasingly likely that the case will end up in court. That would be bad for New York; the last thing the city needs is yet another long delay before construction starts. But if another round of negotiations is in the cards, the Port Authority will need an attitude adjustment for talks to succeed. And if the case gets to court, we predict the question will be not whether Mr. Silverstein is acting in good faith, but whether the Port Authority acted in good faith when it signed its original contract with Mr. Silverstein.