Rough Cut
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

As Merrill Lynch, a major investment banking employer in Lower Manhattan, seemed to be considering leaving the city, Mayor Bloomberg said he would eschew any effort to use tax incentives or other sweeteners to keep Merrill in town. The city, he said, is such a desirable location that he’s confident the bank will stay anyway. Yet at Midtown, the mayor is gung-ho about offering a $37.5 million tax benefit to a developer, Gary Barnett of Extell Development Company, so that Mr. Barnett can build a $433.5 million tower in the Diamond District.
The Extell proposal is being met with fierce opposition. Mr. Barnett claims his tower will offer something the district desperately needs — modern office space that will continue to attract the leading lights of the global diamond trade. Owners of neighboring buildings counter that there hasn’t been any new construction on the block for so many decades because there hasn’t been evidence of any demand for new space. One reason has been a shift in the business toward outsourcing, to the point where all but the highest end jewelry is typically manufactured outside America now.
Ordinarily, this saga would play itself out in the normal zoning process, but the proposed tax breaks are complicating matters significantly. Current Diamond District landlords say they don’t object if Mr. Barnett wants to build a new structure in the neighborhood, but they don’t think he should be singled out for a tax break to do it. City officials suggest that the economics of the jewelry business wouldn’t support the higher rents of new construction without a tax break for the developer. The tax reduction is only applicable if Mr. Barnett attracts a certain number of jewelers to his building. Otherwise, he’ll have to pay the going tax rate.
We’ve been among the most enthusiastic boosters of the building boom sweeping the city, and we don’t hold much truck with the argument from some opponents of the Extell proposal that it will irrevocably change the character of the district. Construction of Midtown itself irrevocably changed the rural character of Manhattan. But selectively propping up projects with tax breaks is another matter. The best way to use the tax code to spur economic growth is to reduce taxes across the board, strategically and equitably.
The alternative — using selective tax cuts to try to engineer growth from City Hall — isn’t pretty. To support this proposal, one has to believe that the “experts” in the administration know more about the current and future needs of the Diamond District than do the individuals in the private sector, current landlords and other developers alike, who have so far decided not to build there on their own. Let Mr. Barnett feel welcome to go ahead and propose building a new tower without government help. Whether he could find financing and tenants for it would be a more reliable indicator of whether it’s really needed than any economic analysis from City Hall.