Federal Funding
Judge Orders Chicago Transit Funding Restored as Rail Projects Avoid Demobilization
Ruling blocks freeze on $2.1 billion in CTA funds as court finds DOT selectively applied DBE rule; contractors remain mobilized after March 27 threshold
CTA riders board a train at the Howard Station in Chicago. A federal court order restored funding for major rail construction projects, allowing work to continue after a threatened shutdown.
A federal judge in Chicago has ordered the U.S. Dept. of Transportation and Federal Transit Administration to resume processing grant payments for two major rail construction programs, clearing the way for work to continue after a March 27 deadline that transit officials warned would have forced contractors to demobilize.
U.S. District Judge Thomas M. Durkin granted the Chicago Transit Authority a temporary restraining order March 24, finding the agency's retroactive application of a new disadvantaged business enterprise (DBE) rule is likely unlawful under federal law. The order had been stayed until March 27 at 10 a.m. and with no further court action extending that pause, the ruling now allows CTA to resume drawing down federal reimbursements, pending any further government response.
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At issue is roughly $2.1 billion in federal funding that has been frozen to support CTA's Red Line Extension and the Red and Purple Modernization Program.
The Red Line Extension is a 5.5-mile expansion from 95th St. to 130th St. with four new stations, a rail yard and maintenance facilities, carrying a total project cost of approximately $3.75 billion with federal participation approaching $2 billion.
The Red and Purple Modernization program, a multiyear rebuild of North Side track and stations, is nearing substantial completion but continues to rely on federal reimbursements for remaining work.
Court Finds Selective Enforcement
Judge Durkin issued the order following a hearing where federal attorneys acknowledged DOT had applied its October 2025 interim final rule retroactively only to grantees connected to Chicago and New York—out of hundreds of transit grants issued nationwide.
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The court found that targeting "indicates that the reviews for compliance with antidiscrimination laws are a pretextual basis" for purposes unrelated to the agency's stated rationale.
Building on that finding, DOT provided no further guidance between December 2025—when it informed CTA that its administrative review was complete and funding would resume upon certification—and March 2026, despite CTA having satisfied those conditions.
Judge Durkin identified that silence as an independent basis for finding the agency's conduct likely arbitrary and capricious.
DOT did not respond to ENR's request for comment.
The federal government has not publicly indicated whether it intends to seek a stay from the U.S. Court of Appeals for the Seventh Circuit.
Jurisdiction and Merits
Map shows the preferred alignment for the Chicago Transit Authority’s Red Line Extension from 95th Street to 130th Street, including proposed station locations and rail yard, one of two projects affected by the federal funding dispute.
Map courtesy of Chicago Transit Authority
The government argued the dispute belonged in the U.S. Court of Federal Claims under the Tucker Act, but Judge Durkin rejected this, citing jurisdiction under Title VI of the Civil Rights Act, which allows federal district courts to review agency decisions withholding financial aid—the same authority DOT used to justify the initial freeze.
On the merits, which the government largely did not contest, the court found CTA likely to succeed on four grounds: that retroactive application of the rule was arbitrary and capricious; that DOT bypassed APA notice-and-comment and delayed-effectiveness requirements without identifying any emergency; that the agency failed to follow Title VI's mandatory procedural steps before suspending payments; and that DOT violated federal grant management regulations under 2 C.F.R. Part 200 by withholding reimbursements without identifying specific noncompliance or affording CTA an opportunity to respond. CTA submitted payment requests in early October 2025; more than five months later, the court found that DOT had not acted on them.
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USDOT Freezes $2.1B Already Awarded for Chicago Transit Projects
Contractors Stay on the Job
The ruling removes immediate risk of work stoppage on both programs. Design-build contractor Walsh-VINCI Transit Community Partners, leading the $2.9-billion Red Line Extension, had already mobilized workers, project offices, field facilities and specialized equipment along the corridor.
CTA said hundreds of firms across both projects depend on federal reimbursements, with workforce continuity and construction sequencing tied directly to sustained payment flows.
The case joins similar disputes over New York's Second Avenue Subway Phase 2 and the Gateway Hudson Tunnel, collectively testing whether federal agencies can interrupt reimbursement streams on projects already funded and under construction.
Bryan Gottlieb is the online editor at Engineering News-Record (ENR).
Gottlieb is a five-time Society of Professional Journalists Excellence in Journalism award winner with more than a decade of experience covering business, construction and community issues, including finance, law and real estate. He has reported for Adweek and the San Diego Daily Transcript and led a community newsroom in Santa Monica, Calif. He served as editor-in-chief of the Detroit Metro Times and as managing editor at Roofing Contractor, where he helped shape national industry coverage. At Engineering News-Record, Gottlieb covers breaking news, large-scale infrastructure and megaprojects, regulatory developments and business trends across the U.S. and global construction sectors.
email: gottliebb@enr.com | office: (248) 786-1591
