New York.

A package of tax breaks and bonding has helped persuade Lufthansa German Airlines to keep its U.S. service headquarters at its Nassau County, N.Y., site.

The county's industrial development authority has agreed to sell $4 million of industrial development bonds for the headquarters' $8 million renovations, officials say.

The bonds will be taxable because they are for a private purpose, but the county will provide Lufthansa with a number of tax breaks to compensate it for having to pay taxable rates.

The airline had been considering moving the 21-year-old service facility to cut expenses, according to Arthur Molins, a lawyer with the airline.

While saying that such factors as quality of life and a ready work force helped persuade Lufthansa to stay in the area, county officials and lawyers with the airline identified the main reason as the county's incentives package.

The airline's tax breaks on the renovated structure will include a yearly 10% decrease in a real estate taxes for 10 years and exemption from all applied sales taxes, said Paul Bloom, a lawyer with Morton Weber and Associates in Melville, N.Y. The firm represents Lufthansa.

He said that these breaks will benefit Lufthansa considerably, and added that the issuance is justified because of its part in persuading the airline not to leave Nassau.

He said the county will keep the 440 Lufthansa employees, many of whom live in the county, as part of its tax base, as well as bringing in 50 more workers.

This will compensate for the cost of the deal and the loss in tax revenue, he said.

The county, meanwhile, welcomed Lufthansa's decision to remain.

"We're delighted that they're not leaving," said Pam Grella, the county's budget director.

The issue will be privately placed with a real estate subsidiary of the airline by a German investment firm, Dalvage etc. A.G., Mr. Bloom said.

The debt will be paid off by Lufthansa through annual payments for 10 to 12 years, he added.

Yields on the issue are uncertain because the terms have not been finalized, he said.

Mr. Bloom was in charge of preparing the documents for the financing and presenting them to the agency's board.

He said that the airline's application was accepted at the end of May and that the formal acceptance of the plan and financing from the board will make the arrangement official.

In order to have bonds issued by the industrial development agency, a corporation must submit a formal application to the agency's board explaining how it will use the attached tax advantages to assist the community.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER