Gateway funds remain frozen as court battle plays out

Gateway Development Commission

Federal funds for the $16 billion Gateway Hudson Tunnels project remain on pause through at least Thursday as the Trump administration appeals a court order to unfreeze funds for one of the nation's largest infrastructure projects.

U.S. District Judge Jeanette Vargas Friday granted a  preliminary injunction that ordered the government to resume funding after a four-month pause. The Trump administration on Sunday filed a notice of appeal against the injunction decision followed by a motion for a stay on the injunction. On Monday, Vargas denied the administration's request to pause her injunction but granted an administrative stay until Thursday to give the 2nd Circuit U.S. Court of Appeals time to consider the government's appeal.

The stand off between the White House and New York and New Jersey officials is the latest obstacle for the long-planned project to build critical rail infrastructure between New York and New Jersey. After years of fits and starts — including a funding halt under the first Trump administration — the Biden administration by July 2024 had obligated $15 billion of grants and loans to cover the $16 billion project.

The project includes building a new rail tunnel under the Hudson River, repairing another 100-year-old tunnel and adding two sets of tracks linking New Jersey with Manhattan. It also will replace the 117-year-old Portal North drawbridge in New Jersey and a variety of other projects to guarantee the future of that key segment of the Northeast corridor.

The Gateway Development Commission, a public authority established by the two states to manage the rail project, halted construction Friday and laid off 1,000 workers after it said it ran out of funds. The move followed the Trump administration's decision last October to revoke financial support while reviewing the GDC's policies around contracts to women- and minority-owned businesses. The U.S. Department of Transportation said it would not disburse any funds for the project until the review was complete.

Nearly $2 billion has already been spent, according to the commission. Since October the administration has withheld $205 million in payments owed under U.S. Department of Transportation contracts.

The GDC last week sued the administration in the U.S. Court of Federal Claims calling the freeze a "straightforward breach of contract case."

Separately, New York Attorney General Letitia James and New Jersey Acting Attorney General Jennifer Davenport sued in the U.S. District Court for the Southern District of New York for violation of the Administrative Procedure Act.

Vargas granted the preliminary injunction in that case, saying the plaintiffs "are likely to succeed on the merits" of their claim and agreeing that the freeze is an APA violation.

"The court is also persuaded that plaintiffs would suffer irreparable harm in the absence of an injunction," Vargas wrote. "Plaintiffs have [also] adequately shown that the public interest would be harmed by a delay in a critical infrastructure project."

The federal support includes Capital Investment Grants, a Federal-State Partnership grant, RAISE Grant agreements, and Railroad Rehabilitation and Investment Financing loans.