The first steps were taken yesterday to allocate $1 billion in Liberty Bonds to investment bank Goldman Sachs to help finance its 40-story headquarters in Battery Park City.

The New York Liberty Bond Development Corporation, a subsidiary of the Empire State Development Corporation, gave preliminary approval for the bonds, which would be the largest Liberty Bond project to date.

A public hearing will be held on the bond issuance in the coming months, after which the board will convene for a final vote. The financing is expected to pass with little resistance.

“This is really good news for the city of New York,” said a member of the Lower Manhattan Development Corporation board, Carl Weisbrod. “Goldman Sachs is one of the most prestigious and important banks, and for them to make this long-term commitment is an expression of its faith and confidence in Lower Manhattan.”

“We are delighted to reaffirm our 135 year old commitment to downtown Manhattan,” said the chairman of Goldman Sachs, Henry Paulson, in a statement.

The 1.9 million-square-foot Goldman Sachs office tower marks the first headquarters to be built in Lower Manhattan since J.P. Morgan built its facility in 1988, and will cost an estimated $1.8 billion. The building is being designed by Pei Cobb Freed & Partners and will be erected on the last remaining commercial parcel at Battery Park City. It is expected to be complete by 2009, and it will house 7,400 front-office workers, including investment banking and commodities trading staff.

The bonds could be issued as early as November, according to the spokeswoman, Deborah Wetzel.

The $8 billion Liberty Bond program is part of the federal assistance given to the city following the September 11 terrorist attacks. The city and state each have $4 billion of the tax exempt financing to allocate to housing, office, utility, and retail development mostly in the area south of Canal Street, East Broadway, and Grand Street.

In return for the financing, Goldman Sachs has agreed to maintain its current employment level of 9,178 jobs in New York, with plans to create 4,000 additional jobs by 2019. It has also promised to maintain this level of employment and to keep its headquarters in the city at least through 2028.

Goldman Sachs is negotiating a ground lease with the Battery Park City Authority for the site through 2069.The lease is expected to provide up to $13.4 million in sales tax exemptions to be earned through job growth and payments in lieu of real estate taxes.