NY-NJ Gateway Commission Sues Federal Government Over Hudson Tunnel Funds

The Gateway Development Commission sued the federal government on Monday, seeking to force the release of grant and loan funds for the Hudson Tunnel Project, a major rail effort linking New Jersey and New York under the Hudson River in New York City.

In its complaint filed in the U.S. Court of Federal Claims, the commission said the U.S. Department of Transportation (USDOT) has unlawfully suspended reimbursements and other disbursements since late September 2025, despite binding agreements that secured roughly $15 billion in federal commitments for the project.

The commission said USDOT has withheld about $205.3 million in payments due on or before Feb. 2 and warned it would be forced to suspend work on Feb. 6 if funding does not resume, after drawing down reserves and a line of credit to keep construction moving.

The Hudson Tunnel Project is part of the broader Gateway Program and includes building a new two-tube tunnel under the Hudson River and rehabilitating the existing North River Tunnel, which has been in service since 1910 and suffered damage during Hurricane Sandy in 2012, according to the commission’s press release and the complaint.

The commission said the current schedule is designed to place the new tunnel into service by 2035, followed by full rehabilitation of the existing tunnel.

In the lawsuit, the commission frames the dispute as a breach-of-contract case tied to multiple federal awards and loans, including Capital Investment Grants, Federal-State Partnership grant funding, a Rebuilding American Infrastructure with Sustainability and Equity grant, and Railroad Rehabilitation and Improvement Financing loans. The complaint says reimbursements were previously paid within about 30 days, then stopped after a Sept. 30, 2025, letter from USDOT citing a review of the project’s federally required Disadvantaged Business Enterprise (DBE) program.

In guidance issued in the fall of 2025, the USDOT said it had concluded that the overall DBE program’s race- and sex-based presumptions of disadvantage were unconstitutional and issued an interim final rule removing those presumptions. The guidance states DBE certification programs must shift to case-by-case reviews and begin reevaluating existing certifications.

The complaint says the USDOT has not identified a contractual basis for withholding funds, has not made a determination that the commission is in breach or noncompliance, and has not provided an opportunity to cure.

It also says the commission was in compliance with DBE rules in effect before the USDOT issued an interim final rule changing DBE standards, and that the commission provided a detailed response to the department on Jan. 8, 2026, with no reply and no resumption of disbursements.

New York Gov. Kathy Hochul said the federal government “illegally withheld committed funding” and that the lawsuit was meant to keep the project moving, calling it “essential to the future of New York and the economy of the entire region.” New Jersey Gov. Mikie Sherrill said the state was acting to hold the administration accountable for “breaching its contract.”

Sen. Chuck Schumer (D-N.Y.) said the lawsuit “would be unnecessary” if the administration lifted what he called an “arbitrary freeze,” and said the project is “the most important infrastructure project in the country.” Gateway Development Commission CEO Tom Prendergast said the goal remained to restore funding while holding the federal government to its contractual obligations.

The complaint also points to political statements surrounding the freeze. It cites a White House spokesman’s response after the commission said in late January that work would have to stop without restored funding. That response stated: “It’s Chuck Schumer and Democrats who are standing in the way of a deal for the Gateway tunnel project by refusing to negotiate with the Trump administration. There is nothing stopping Democrats from prioritizing the interests of Americans over illegal aliens and getting this project back on track.”

The commission is asking the court for damages equal to the withheld payments and additional damages tied to the costs of any work suspension.

The Epoch Times reached out to the USDOT for comment but did not receive a response prior to publication. The USDOT says on its website that some inquiries may not be answered during the partial government shutdown.

Correction: A previous version of this article misstated the date the Gateway Development Commission filed the lawsuit. The Epoch Times regrets the error.