Gateway Development Commission sues federal government over Hudson Tunnel funding freeze
The Gateway Development Commission on Monday filed a breach of contract lawsuit against the federal government, seeking to force the release of grant and loan funds for the Hudson Tunnel Project, a critical rail infrastructure effort connecting New Jersey and New York.
The lawsuit, filed in the U.S. Court of Federal Claims, argues that the federal government unlawfully suspended the release of contractually obligated funding despite binding agreements executed in July 2024. The commission warned that if additional funding is not made available by Feb. 6, 2026, construction on the project will have to pause, resulting in the loss of nearly 1,000 jobs.
The Hudson Tunnel Project includes construction of a new rail tunnel beneath the Hudson River and rehabilitation of the existing North River Tunnel, which opened in 1910 and is a major source of delays for hundreds of thousands of daily commuters.
Most of the project’s budget is funded through federal grants and loans, including Capital Investment Grants, a Federal-State Partnership grant, a RAISE grant and Railroad Rehabilitation and Investment Financing loans. More than $1 billion has already been invested in construction, according to the commission.
Despite those agreements, the federal government has suspended disbursement of the funds since Oct. 1, 2025. The lawsuit contends that the administration’s explanations for the suspension are unlawful.
For months, the commission said it worked with federal officials to address concerns related to the project’s Disadvantaged Business Enterprise program and provided documentation showing compliance with federal regulations.
“The Gateway Tunnel is essential to the future of New York and the economy of the entire region – every day 200,000 commuters who power 20% of the nation’s economy depend on a safe, reliable ride under the Hudson River,” New York Gov. Kathy Hochul said. “For months, Donald Trump and his enablers in Washington have illegally withheld committed funding for this project in a brazen act of political retribution intended to hurt New Yorkers, putting thousands of union jobs and billions of dollars in economic benefits at risk. I said New York would fight like hell to keep this project moving and today, that is exactly what we are doing.”
“I made a commitment to fight for Gateway and New Jersey’s economy, which is why we’re taking action to hold the Trump Administration accountable for breaching its contract. When it comes to fighting for jobs and opportunity in New Jersey, I’m all in,” said New Jersey Gov. Mikie Sherrill.
“As this lawsuit makes clear, President Trump has illegally frozen congressionally appropriated and contractually obligated funding for Gateway,” said Senate Majority Leader Chuck Schumer. “This lawsuit would be unnecessary if President Trump did the right thing for New York and New Jersey and lifted his arbitrary freeze. Gateway is the most important infrastructure project in the country, and tens of thousands of union workers depend on it moving forward.”
Gateway Development Commission CEO Tom Prendergast said the agency has attempted to avoid litigation while keeping the project on track.
“Our goal has always been to work with our federal partners and get funding flowing again,” Prendergast said. “At the same time, we must hold the federal government to its contractual obligations so that construction is not halted. It’s our responsibility to fight for the nation’s most urgent infrastructure project and the nearly 1,000 workers whose jobs are threatened.”
The commission said it has used all available funding sources and credit to continue construction while federal disbursements remain paused. At its Jan. 27 board meeting, the commission announced those resources have been exhausted and construction must stop by Feb. 6 if funding does not resume.
An extended construction pause could jeopardize about 11,000 additional jobs tied to current work and threaten the estimated 95,000 jobs and $19.6 billion in economic activity expected to be generated by the project overall, the commission said.
Officials also warned that delays increase the risk of a shutdown of the aging North River Tunnel, which could sever the busiest passenger rail corridor in the country and lead to billions of dollars in lost productivity.
In addition to seeking release of about $205 million in pending disbursements, the lawsuit seeks damages related to any construction pause or termination of contracts.
