The basics:

• Judge vacates federal Gateway funding suspension
• Court finds freeze violated federal grant law
• Gateway Tunnel construction had halted in February
• Ruling removes major legal barrier to project

A federal judge has ruled that the Trump administration illegally froze billions of dollars in federal grants for the Gateway Hudson Tunnel Project, declaring the funding suspension unlawful and ordering it permanently set aside.

The decision marks the latest victory for New Jersey and New York in a months-long legal battle over the future of what officials have repeatedly described as the nation’s most critical infrastructure project. (See a timeline below)

The dispute began last fall, when the U.S. Department of Transportation suspended reimbursements to the Gateway Development Commission while it reviewed the project’s compliance with federal contracting policies. Although construction initially continued using borrowed funds, the funding freeze eventually forced work to stop in February, sidelining roughly 1,000 workers before a temporary court order restored payments and allowed construction to resume later that month.

In her June 29 opinion, U.S. District Judge Jeannette Vargas noted that the federal government effectively conceded the underlying legal issue.

“The States now request that the Court enter judgment setting aside the September 30 Suspension. Defendants do not dispute that the suspension of federal grants flagrantly violates federal law. They nonetheless seek dismissal of this action on the grounds that no federal court has jurisdiction over the States’ claims for relief,” Vargas wrote.

The judge rejected that argument, writing, “The Court rejects the notion that the States are without a remedy in such a circumstance.”

Skipped steps

On the merits, Vargas concluded the administration violated federal regulations governing grant funding by freezing payments before determining that the commission had violated any law or grant condition.

“The September 30 Suspension skipped right to payment suspension without any finding that GDC had violated the law. This was clearly contrary to Section 200.339 of the Uniform Grant Guidance,” Vargas wrote.

The administration had argued the dispute belonged in the U.S. Court of Federal Claims because it arose from grant agreements. The court rejected that position, finding New Jersey and New York were not parties to those agreements and therefore could challenge the funding freeze under the Administrative Procedure Act.

“The Court categorically rejects the suggestion that a federal district court can be deprived of jurisdiction by the Tucker Act when no jurisdiction lies in the Court of Federal Claims,” the opinion states.

The judge vacated the Sept. 30 funding suspension and barred the Department of Transportation from relying on it going forward with respect to the Gateway grants. Claims involving separate federal railroad loans were dismissed for lack of jurisdiction.

A spokesperson for the U.S. Department of Transportation defended the agency’s position.

“USDOT remains committed to ensuring hardworking taxpayer dollars are being spent responsibly and do not fund unconstitutional, discriminatory contracting practices,” the spokesperson said.

Sending a clear message

In a joint statement, New Jersey Gov. Mikie Sherrill, New York Gov. Kathy Hochul, New Jersey Attorney General Jennifer Davenport and New York Attorney General Letitia James welcomed the ruling.

“We are grateful that a federal court has once again agreed that the Trump Administration’s decision to freeze billions of dollars in grants for the Gateway Tunnel Project is flagrantly unlawful. This is the most important infrastructure project in the nation, and thanks to our litigation, 1,000 people are back on the job and construction continues every day.

“This victory sends a clear message: the Trump Administration’s attempt to halt Gateway funding will not stand.”

Gateway Development Commission Executive Vice President Cathy Rinaldi said the commission remains focused on delivering the project despite the months-long disruption.

“The Hudson Tunnel Project is the most urgent passenger rail project in the country, and GDC remains committed to partnering with our federal funders to deliver this critical investment in America’s rail network.

We will continue working with our federal partners to maintain access to funding so we can keep workers on the job and this nationally important project moving forward.
– Cathy Rinaldi, EVP, Gateway Development Commission

“We are grateful for New York and New Jersey’s support to restore federal funding to the Hudson Tunnel Project. Prior to the freezing of federal funding, the Hudson Tunnel Project was on schedule and on budget, and we have made significant progress since federal funding for the project resumed in February.

“We will continue working with our federal partners to maintain access to funding so we can keep workers on the job and this nationally important project moving forward.”

Gaining steam

The ruling comes as the Hudson Tunnel Project has regained momentum following the months-long funding disruption.

Since construction resumed in February, the Gateway Development Commission has awarded additional major construction contracts, advanced work across five active construction sites and begun assembling the project’s massive tunnel boring machines in North Bergen ahead of the start of tunneling operations.

The latest decision removes a significant legal cloud over the project as officials work to keep what they describe as the nation’s most important passenger rail infrastructure project on schedule.