The Gateway Development Commission sued the U.S. Department of Transportation in the U.S. Court of Federal Claims after USDOT withheld more than $205 million in federally approved funds, saying the withholding breaches contracts. The commission warns construction on the $16 billion Hudson River tunnel—backed by about $15 billion in federal support and nearly $2 billion already spent—could stop this week, jeopardizing jobs and the project's viability. The dispute reflects broader political tensions over infrastructure funding between the administration and Democratic leaders.
Gateway Commission Sues USDOT to Restore $205M, Warns Hudson Tunnel Construction Will Halt
A construction crew works on the Manhattan Tunnel Project, which is part of the Hudson Tunnel Project, in New York City, U.S., October 1, 2025. The U.S. government has paused some funds for major transit projects in New York, including the Hudson Tunnel and the Second Avenue Subway, while the Department of Transportation reviews whether any small-business contractors are engaged in improper diversity initiatives. REUTERS/Kylie Cooper
The Gateway Development Commission has filed suit in the U.S. Court of Federal Claims seeking immediate restoration of more than $205 million in federal funds withheld by the U.S. Department of Transportation (USDOT). The commission says the agency breached contractual obligations and that withholding the money will force construction on the $16 billion Hudson River rail tunnel to pause as soon as Friday.
Who sued and why? The Gateway Development Commission (GDC), created by New York and New Jersey in 2019 to oversee the bi-state tunnel project, filed the complaint late Monday. GDC says USDOT refuses to release funds approved under the prior administration and that the agency's action has no legal basis.
Immediate risks: GDC warned the court that, without the federal payment, it "will be unable to pay its contractors to continue construction activities, causing work on this critical project to grind to a halt—leaving unfinished work sites with massive holes in the ground, threatening the livelihoods of the many hundreds of construction employees working on the project, burdening GDC with astronomical costs in delays and penalties, and putting into question the future viability of the project."
"The federal government has breached its contractual obligations by withholding more than $205 million without any legal basis," GDC's filing says.
The White House and USDOT did not immediately comment on the lawsuit. Earlier statements from the White House accused Democrats of blocking a deal for the Gateway Tunnel Project and said lawmakers were prioritizing other issues over the project. Democratic leaders, including Senator Chuck Schumer, New York Governor Kathy Hochul and New Jersey Representative Mikie Sherrill, urged the administration to restore the funds and welcomed the lawsuit.
Project background and stakes
The Hudson River rail tunnel project is estimated at $16 billion. It involves repairing the existing 1910 tunnel—seriously damaged by Hurricane Sandy in 2012—and building a new parallel tunnel for Amtrak and state commuter services between New Jersey and Manhattan. Nearly $2 billion has already been spent, and the initiative has received roughly $15 billion in federal support to date.
The existing tunnel handles about 200,000 passenger trips daily and serves a metropolitan economy that accounts for roughly 10% of U.S. economic output. Officials warn that failure or extended disruption of the current tunnel would severely hamper commuting and commerce in the region.
Political and legal context
President Donald Trump said in October he had terminated the project, and USDOT has since refused to release the approved funds. The dispute comes amid broader tensions between the administration and transit initiatives in Democratic-led states, including a separate fight over Manhattan's congestion-pricing plan, which was created to reduce traffic and raise revenue for mass transit.
GDC says it has informed USDOT that it is in compliance with federal law. The commission's lawsuit asks the court to compel the department to honor the previously approved funding and prevent imminent disruption to work and workers on the site.
What happens next: The U.S. Court of Federal Claims will consider the commission's request. If the court grants emergency relief or USDOT releases the funds, construction could continue. If not, GDC says crews may be forced to pause work this week, triggering possible delays, higher costs and legal disputes with contractors.
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