Gateway Tunnel: Federal funds still frozen after Trump admin appeals order to temporarily fund Hudson River rail project

Federal funds for the critical Gateway Tunnel rail project remain frozen after U.S. District Judge Jeannette A. Vargas on Monday paused her Feb. 6 decision pending the Justice Department’s appeal to a higher court — issuing the order minutes before the feds would have had to disperse up to $200 million to the project.

Vargas had ruled Friday that the Trump administration had to temporarily disperse funds it had withheld from the Gateway rail tunnel project. Work on the Gateway Tunnel — a $16 billion endeavor to build two new train tubes for Amtrak and NJ Transit service across the Hudson River — halted on Friday and will remain paused until the funds are released, officials with the Gateway Development Commission overseeing the project said on Monday.

In court filings on Feb. 9, the Trump administration asked Vargas to stay her Friday ruling, which held the states of New York and New Jersey would suffer irreparable harm if she didn’t force the U.S. Department of Transportation (USDOT) to temporarily unfreeze funding to the major rail project, which had been halted since Oct. 1. The case stems from a lawsuit filed by New York and New Jersey Attorneys General Letitia James and Jennifer Davenport seeking to force the feds to release the funds.

Vargas said on Monday that she granted a brief stay on her order — until Feb. 12 at 5 p.m. — to allow for a decision from the Second Circuit Court of Appeals first. If the government loses its appeal, Vargas’ Friday order mandating the unfreezing of funds will take effect.

Gateway Tunnel pause can put entire NYC region in big trouble, pols say

View of construction underway for the Gateway Program’s Hudson River Tunnels, New York, NY, at Hudson Yards, October 6, 2025. The Trump administration is withholding $18 Billion for New York area transportation projects, including the East Harlem Subway extension along 2nd Avenue to review contracts over Diversity, Equity and Inclusion (DEI) requirements.(Photo by Anthony Behar/Sipa USA)

Meanwhile, on Monday, more than 200 Gateway workers with Laborers’ International Union of North America (LIUNA), who lost their jobs due to the funding freeze, rallied at one of the project sites in North Bergen, NJ. The workers — joined by New Jersey Gov. Mikie Sherrill and New York U.S. Senator Chuck Schumer — called for the Trump administration to release the funds so they can get back to work.

Sherill charged that Trump is playing politics with workers’ lives.

“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,” Sherill said of Trump.

Schumer warned that if the pause drags on, it could lead to the shutdown of the existing 116-year-old rail tunnel, which serves hundreds of thousands of Amtrak and New Jersey Transit commuters every weekday, and deal a major blow to the national economy.

“If this tunnel were to collapse, and we know it will if we don’t build a new one, there’ll be a recession, a depression in New York, New Jersey and all across America,” Schumer said. “We are not going to let that happen.”

Asked why the Trump administration has yet to unfreeze the funds, U.S. Department of Transportation — the federal agency funding Gateway — spokesperson Nate Sizemore referred amNewYork to the White House. He also pointed to the Trump administration’s appeal.

The USDOT initially froze the funds around the start of the last government shutdown in October under the pretense that it needed to review the project’s compliance with newly changed rules for contracting with minority-and-women-owned businesses.

The feds have argued the states do not have the right to sue over the pause in funding, as they weren’t directly named in the funding contract for the project, and that the suit filed against the USDOT by the GDC would be enough to grant them relief.

“Plaintiffs do not point to any statute requiring DOT to fund that project or to disburse funds on any particular schedule, nor do they claim themselves to be parties to any contract with the United States,” reads a filing from U.S. Attorney for New York’s Southern District Jay Clayton.

Lawyers for Davenport’s office characterized the USDOT’s appeal as “extraordinary” and having “no prospect of success” in an opposition brief filed Monday afternoon. The filing emphasizes that the states have their own independent interests and potential harms from the lack of federal funding, such as ensuring successful rail traffic in the region and footing the bill for maintaining safety at the dormant project sites during the pause.

“DOT does not deny that its September 30 suspension was unlawful — it does not deny that the indefinite Project-wide funding freeze violated federal rules,” the brief says. “Nor does DOT deny its freeze imposes independent and profound … harms on the states.”

The states argue the Trump administration halted funding purely as an act of political retaliation against New York and Congressional Democrats, pointing to posts the president made on Truth Social.

The GDC confirmed on Monday it has not yet received any federal funding since the Friday ruling. A spokesperson said the commission was “encouraged” by the judge’s Friday order and was “continu[ing] to pursue all avenues to regain access to the funding for the Hudson Tunnel Project.”

Yet GDC officials said the continued absence of $205 million in federal reimbursements means that construction work on the $16 billion project, to replace a two-tube decaying rail tunnel connecting New York and New Jersey underneath the Hudson River, halted at 5 p.m. on Friday and remains paused. They also said that 1,000 workers were immediately laid off across the project’s five construction sites when work stopped on Feb. 6.

White House spokesperson Kush Desi did not immediately respond to a request for comment.