A federal judge on Monday declined to reverse an earlier ruling that directed the federal government to restart reimbursements to states for the stalled Gateway project, but she agreed to pause that order until Feb. 12 to allow the Trump administration to appeal it.
Judge Jeannette Vargas’ order is the latest in the legal saga over more than $200 million in federal reimbursements owed to the Gateway Development Commission, which is overseeing the construction of new rail tunnels under the Hudson River. The funding freeze began in October, and last week it forced construction on the project to halt entirely.
New Jersey and New York, which are suing to restart the frozen funding, have demonstrated that the construction shutdown “will have an immediate and severe impact on the region’s economic interests,” Vargas wrote in the ruling, adding that the commission “has already begun laying off workers who depend upon the Hudson River Tunnel for their livelihood.”
The $16 billion project is key to the region’s economy, and state officials have warned that a stoppage would cost between $15 and $20 million each month and the immediate loss of 1,000 jobs, with thousands more job losses expected if construction remains paused.
The states’ lawsuit alleges the Trump administration violated contract terms and federal law that requires governments to give reasoned explanations for their decisions, among other infirmities. The administration has repeatedly given morphing explanations for why it froze funding to the project.
Initially, federal budget director Russel Vought claimed funding was frozen to stop money from flowing to “unconstitutional DEI principles.” The Department of Transportation later said it froze payments over compliance with new — and later, old — rules for its disadvantaged business enterprise program.
The White House in January claimed money was frozen due to an impasse over funding for the U.S. Department of Homeland Security. That funding came into political focus months after the administration began the freeze.
President Donald Trump has repeatedly indicated his partisan preferences were behind the freeze.
“What we’re doing is we’re cutting Democrat programs that we didn’t want,” he said on Fox News in October.
Governors in New Jersey and New York are Democrats, and the party holds majorities in both legislative chambers in those states. Funding for Gateway was approved by Congress under President Joe Biden.
Monday’s administrative stay gives the U.S. 2nd Circuit Court of Appeals time to consider the federal government’s appeal of Friday’s ruling.
Trump administration attorneys in filings argued that requiring it to repay the more than $200 million it owes to the commission would irreparably harm the federal government because it would be unable to recover the money later if the Trump administration ultimately prevails in court.
The administration also claimed New York and New Jersey lack standing to sue because the funding freeze is a contract dispute judicable within the Court of Federal Claims, where the Gateway Development Commission has sued the government over the funding freeze.
Gov. Mikie Sherrill (D) has sharply criticized the Trump administration for forcing construction on the project to stop.
“That’s what the president doesn’t seem to get, that there are working men and women feeding their families on this job, and every day that goes by that he doesn’t release the funds is a day that our families are in trouble. So the president needs to release the funds,” Sherrill said to laborers at a rally in North Bergen Monday.
“Release the funds now,” the workers chanted in response.
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