JPMorgan Chase, the recipient of $25 billion in TARP funds, has been awarded a long-term lease to build "the premier corporate aircraft hangar on the eastern seaboard" in Westchester County, NY, after the county's Board of Legislators gave the bank the thumbs up yesterday to take over a 53,000-square-foot hangar at the local airport outside New York City.
The hangar will be used to house the bank's private jets, with a planned upgrade including nearly $120 million for two Gulfstream 650 planes and an $18 million lavish renovation of the hangar itself. The hangar, according to JPMorgan Chase architects, will be built with reclaimed wood, quarry tile and a "vegetated roof garden."
JPMorgan Chase will pay the county $1.1 million a year in rent for the 10-year lease, which has two additional 10-year options. The bank declined to comment.
JPMorgan has said it won't begin construction or acquire new aircraft until it repays the millions it has received from TARP. Westchester County officials have said the bank expects to pay back the $25 billion by the end of this year.
JPMorgan Chase CEO Jamie Dimon has previously said the bank didn't need TARP funds.
In a Mar. 27 interview with CNBC, JPMorgan Chase CEO Jamie Dimon said the money won't be paid back immediately.
"I think what is important is not necessarily the timetable but maybe that you know what is going to happen to it overtime," Dimon said in the interview. The bank is expected to issue an earnings report later this week.
The lease is set to begin April 1, 2010, but it won't be signed by the county's executive for at least 30-50 days because of a federal lawsuit that Avitat Westchester, the hangar's current renter, has filed against the county.
Avitat's suit alleges that the county's action on the lease goes against past practices and violates the company's First and Fourteenth Amendment rights.
Avitat Westchester Fights Back
Mike Dolphin, president of fixed-based operator Avitat Westchester, said he wasn't at all surprised by the county's decision. "Our livelihood now rests with the courts," he said.
Dolphin said his company approached the county in 2007 to renew the lease for a 30-year term. But, he said, the county uncharacteristically decided to look elsewhere for another tenant and put out a Request for Proposals. Dolphin believes the county is retaliating against them after previous disagreements between the company and the county, which the county has denied.
Plans for Jet Hangar Renovations
Westchester County Officials told ABC News they favored the JPMorgan proposal because it "is the best deal for county taxpayers and the best deal for the environment." They said the county "will be happy to discuss with any company that may be displaced from the current hangar other alternatives for them."
But Dolphin is fighting the bank's grand plans and the county's decision because he says JPMorgan's proposed expansion would force his company out of the hangar it is currently operating out of.
"I am the little guy, so we have a bit of a David versus Goliath fight on our hands," Dolphin told ABC News. He said JPMorgan Chase's plans come at the "wrong place, wrong time" and that despite scaled back private aviation from other TARP-funded companies, JPMorgan Chase is going ahead with its plans, which, if finalized by the county, will cut his business and his staff in half.
Previously, Joseph Evangelisti, a spokesman for JPMorgan Chase, told ABC News that the bank would have nine years to make its $18 million in renovations.
Westchester County said that JPMorgan Chase's plans indicate that renovations would be complete within six months of assuming the lease.
According to Westchester legislator Martin Rogowsky, JPMorgan will "want to be ready to go on day one" when the lease starts next year, because if the hangar isn't ready, the bank will be stuck paying two rents: one at the newly acquired hangar and the other at its current hangar, until the renovations at the hangar in question are finished.
"If they get this lease, they will certainly be ordering some equipment, that takes many months to manufacture," said Rogowsky. "But there won't be any work on the hangar until the lease begins. It's in their economic interest to renovate as quickly as possible."
TARP-funded corporations have been harshly criticized recently for continued use of luxury perks and corporate waste. President Obama has voiced his outrage, introducing regulations on executive compensation and on the disclosure of money spent on such perks. After pressure from his administration, Citigroup abandoned plans for a new $50 million corporate jet from France. And in February, Obama said the days of bank executives flying corporate jets "were over."