Federal Funding
Gateway Project Officials Sue Feds Over $16B Hudson Tunnel Funding Freeze
Project could be forced to pause if funding is not restored by Feb. 6
An aerial view shows circular excavation and support work underway at a Hudson Tunnel project construction site between New Jersey and New York, part of early civil packages now at risk as developer Gateway Commission warns that federal funding could run out by Feb. 6.
Less than one week after federal funding for the $16-billion Hudson River tunnel between New Jersey and New York City was frozen by the Trump administration, the agency building it has sued the government, challenging its hold on contractually-obligated grant and loan funds for the critical megaproject.
The Gateway Development Commission filed its lawsuit Feb. 2 against the government in the U.S. Court of Federal Claims, stating that it will be forced to pause the project if funding is not restored by Feb. 6. The developer—which wound down work on Jan. 27 as soon as the freeze was announced—seeks $205 million in disbursements and damages incurred in the event of a construction pause or termination of existing contracts.
The commission estimates that the construction pause could increase the project total cost by $2 billion, according to media reports.
Separately, the governors and state attorneys general in New York and New Jersey announced a lawsuit in the federal district court in Manhattan (Southern District of New York), which seeks emergency relief, including a preliminary injunction, to stop the U.S.Transportation Dept. indefinite funding freeze.
The states cite "independent harms," includng loss of "benefits of the millions in funding and land they provided to the Gateway Project" and the need "to incur significant new operating costs."
A hearing on that lawsuit is set for Feb. 6 at 1:00 PM before Judge Jeannette A. Vargas.
Hudson Tunnel Project Scope
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The project scope relying on about $12 billion in federal grants includes constructing a train tunnel connecting New Jersey and New York City under the Hudson and rehabilitating the 116-year-old North River Tunnel, which was damaged during Superstorm Sandy. The project’s remaining $4 billion in cost is being financed through loans repaid by New York, New Jersey and the Port Authority of New York and New Jersey.
The commission said federal disbursements from both grant and loan programs have been halted since Oct. 1, 2025. “Our goal has always been to work with our federal partners and get funding flowing again,” Tom Prendergast, commission CEO, said in a statement. “At the same time, we must hold the federal government to its contractual obligations so that construction is not halted. It’s our responsibility to fight for the nation’s most urgent infrastructure project and the nearly 1,000 workers whose jobs are threatened.”
The White House press office did not immediately provide a comment in response to the lawsuits.
The Gateway Commission complaint proves the administration’s explanation for breaching its contract are illegal, says the commission, noting that for months it has promptly responded to government requests for documents showing the project complies with regulations. This includes providing information about the project’s federally-mandated Disadvantaged Business Enterprise program.
The lawsuit says that the federal DOT’s “only explanation for its withholding of funding” has centered on concerns about the DBE program. The suit says the department has not identified or alleged any specific breach or noncompliance by the commission in connection with the program, and that the project’s grant and loan agreements do not permit withholding funding in the absence of such findings. The lawsuit contends that “in any event, DOT’s concerns are entirely unfounded.”
The department approved the commission’s DBE program in January 2024, and it has been “consistently administered … in full compliance with DOT regulations.”
Approximately $1.8 billion has already been spent on the tunnel project, the suit contends, with about 150 contractors and subcontractors working on the project for more than two years. “That work has produced substantial progress,” the suit says. “Workers have completed over 75% of the concrete casing for the new tunnel that will pass under Hudson Yards on its way to Penn Station, putting that tunnel on track to be finished in 2026.”
Tunnel-boring machine components await installation in New Jersey, where digging is set to start in the spring. The commission says it has already exhausted available funding sources and credit to try to maintain the project schedule while federal funding disbursements are paused.
Further delay will result in nearly 1,000 construction jobs lost in the short term and could risk up to 11,000 in the long run, the suit claims. The commission also says that the aging North River Tunnel, which already causes daily transit delays, could shut down entirely.
“If federal funding is not restored expeditiously,” the suit says, the commission "may be forced to terminate construction contracts for convenience to mitigate ongoing suspension costs.” The developer says termination “will result in additional significant costs” to the tunnel project.
