Trump Administration Appeals $16B Hudson Tunnel Funding Ruling

Litigation Trump Administration Appeals $16B Hudson Tunnel Funding Ruling Updated Sept. 1, 2026, 4:01 p.m. ET The Trump administration filed an appeal Aug. 28 of a federal court judgment barring the U.S. Dept. of Transportation from withholding federal funding for the $16-billion Hudson Tunnel Project, while payments and construction continue on the New York-New Jersey rail link. The Justice Dept. filed the notice in U.S. District Court for the Southern District of New York, appealing to the U.S. Court of Appeals for the Second Circuit the final judgment entered June 30 by U.S. District Judge Jeannette Vargas. The appeal does not stop federal reimbursements or construction while the case proceeds. The filing came two days after the appeals court rejected an administration request to halt payments pending appeal. Vargas ruled that USDOT's Sept. 30, 2025, suspension of federal grant disbursements violated federal regulations governing when agencies can withhold obligated grant funds. She vacated the suspension and permanently barred USDOT from relying on it to withhold future grant disbursements. USDOT had said it stopped payments while reviewing whether the Gateway Development Commission's disadvantaged business enterprise program complied with federal nondiscrimination requirements. The agency had not made a finding that GDC violated federal law when it suspended the payments. The funding freeze eventually stopped construction, forcing GDC to suspend work Feb. 6 after exhausting available funding and credit, affecting nearly 1,000 workers. Construction resumed later that month after Vargas temporarily blocked the suspension and USDOT released about $205.3 million in withheld payments. Looking for quick answers on construction and engineering topics? Try Ask ENR, our new smart AI search tool. Ask ENR → A separate Court of Federal Claims case brought by GDC found that USDOT failed to follow procedures required under six grant and loan agreements totaling about $14.7 billion before suspending payments. Judge Richard Hertling dismissed GDC's claims for the $205.3 million after USDOT released the money, although he found GDC had established a prima facie case that the agency breached the agreements. The $16.04-billion Hudson Tunnel Project includes construction of a new two-tube rail tunnel beneath the Hudson River between New Jersey and Manhattan and rehabilitation of the existing North River Tunnel. ENR reported in April that GDC awarded a $1.29-billion contract to a Traylor Bros.-Walsh Construction-Skanska USA Civil joint venture to bore the Hudson River section. Six of the project's 10 construction packages are completed or underway. New Jersey Gov. Mikie Sherrill and New York Gov. Kathy Hochul called the June ruling a victory that would keep construction moving. In a joint statement after the decision, they said the administration's funding freeze was found unlawful and pledged to continue defending the project. GDC said Sept. 1 that the latest appeal has not disrupted federal reimbursements. Since funding resumed in February, the commission “has received all reimbursements on the schedule established in GDC's federal funding agreements with our federal partners,” spokesperson Molly Beckhardt told ENR. “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,” GDC said in a statement.