by Nikita Biryukov, New Jersey Monitor
The Gateway Development Commission sued the federal government this week in an attempt to restart frozen federal funding that will soon halt construction on the new rail tunnels beneath the Hudson River.
In its 75-page complaint, the bi-state commission argues the federal government is in breach of contract after withholding more than $205 million in federal funding that the Hudson Tunnel projects are entitled to under grant or loan agreements. There can be “no genuine dispute” that the federal Department of Transportation has failed to reimburse the Gateway Development Commission for multiple consecutive months, according to the complaint.
“And a swift resolution is of the utmost importance: A forced suspension of work will result in massive job losses for workers on the project and would require GDC to spend approximately $15 million to $20 million a month in suspension costs,” the lawsuit says.
President Donald Trump’s administration paused payments to Gateway in October in what federal budget director Russel Vought said was a bid to “ensure funding is not flowing based on unconstitutional DEI principles.”
At the time, the Department of Transportation suggested the pause would end if Democratic congressional leaders representing New York relented in a budget fight over health insurance subsidies that spurred a government shutdown. But the shutdown ended, and the federal funding freeze continued.
Congressionally approved federal dollars were set to fund roughly $15 billion of the project’s $16 billion in costs, and after the freeze began the commission funded work through a line of credit. But that line of credit is set to run dry Friday, forcing an expensive work stoppage expected to cost thousands of jobs.
Gov. Mikie Sherrill (D) won the election in last year’s gubernatorial race after pledging on the campaign trail to fight the Trump administration over actions like the Gateway funding freeze.
“This could be responsible for about 100,000 good jobs in the region, $20 billion of economic impact. We know this area of the country is a huge driver of the economy, so to punish people in this way with money that has already been appropriated — it’s just sitting there waiting to be put to work right now — just makes no sense,” Sherrill said on WNYC Tuesday.
About $2 billion has already been spent on the tunnel project, the commission said in its suit.
Contracts signed by the Department of Transportation allow the federal government to withhold funding only if the commission breaches or defaults on its loan or grant agreements, if the project stalls on its own, or if officials violate the law, the suit says. None of those things happened, it says.
Even if they had, agreements require the department to give the commission notice and a chance to fix any violations, but the department did not do so before freezing payments and has not done so in the months since, the complaint says.
Federal officials initially said funding was frozen over the commission’s disadvantaged businesses enterprise program, which the federal government approved in January 2024, but Trump and other administration officials have repeatedly undercut those claims.
Referencing the tunnel project, Trump in October said his administration was “terminating tremendous numbers of Democratic programs” in states run by Democrats.
After officials announced work on the project would pause on Feb. 6 unless the federal government restored funding, the administration suggested it is now withholding funding over a budget dispute around the U.S. Department of Homeland Security, which stretched into a partial government shutdown over the weekend.
The White House and Department of Transportation did not immediately return requests for comment.
The commission is asking a federal judge to summarily rule in its favor and order the federal government to pay the more than $205 million it owes for work on Gateway, plus damages to cover the costs of any work stoppage.
“It’s madness here to see the federal government attack jobs, attack the economy, attack affordability. As costs soar for this project, any day of delay can move costs up by millions of dollars,” Sherrill said on WNYC.
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