2-03-2026 1:23pm

Gateway Commission Sues to Unlock Hudson Tunnel Funds Before Feb. 6 Work Stop

Chris Connors Editor

GDC Sues U.S. DOT, Seeking Release of $205 Million for Hudson Tunnel Project as Feb. 6 Work-Stoppage Deadline Nears

The bi-state commission says federal agencies are breaching signed grant-and-loan agreements tied to the region’s busiest rail link; the U.S. DOT’s review has focused on disadvantaged-business rules and contract compliance.

NEWARK/NEW YORK — The Gateway Development Commission filed a breach-of-contract lawsuit in the U.S. Court of Federal Claims on Feb. 2 seeking to compel the release of more than $205 million in federal funds it says are contractually owed for the Hudson Tunnel Project, a major rail construction effort meant to expand and modernize the rail link between New Jersey and New York. The commission warned that without additional federal disbursements by Feb. 6, it will have to pause construction, a move it said would trigger the immediate loss of nearly 1,000 jobs.

The Hudson Tunnel Project, a core component of the broader Gateway Program, involves building a new two-track tunnel under the Hudson River and rehabilitating the existing North River Tunnel, which has carried rail traffic since 1910 and has been cited as a key source of delays along the Northeast Corridor. Project leaders say the work is intended to reduce chronic disruptions, add redundancy to the region’s rail network, and enable long-deferred repairs to aging infrastructure.

What the lawsuit claims

In its complaint, GDC frames the dispute as a breach of multiple federal funding agreements, arguing the U.S. Department of Transportation and related federal entities have withheld payments despite contractual obligations to reimburse eligible project costs. GDC alleges that federal agencies have suspended reimbursements and disbursements since late September 2025, and that the pause has continued without the contractual findings, notices, and cure opportunities that the agreements typically require before funds can be withheld.

GDC says the federal government owes $205,275,358 in past-due and near-term reimbursements and disbursements tied to work already performed. The commission is also seeking additional damages it says will be incurred if construction must be paused or contracts must be terminated, including significant monthly carrying costs associated with demobilizing crews, securing sites, and storing equipment.

The commission is asking the court to move quickly, seeking an expedited schedule to resolve payment-related counts through summary judgment.

The funding structure at issue

GDC’s lawsuit centers on a federal funding package assembled in 2024 that includes several major grant programs and federally backed rail loans.

The complaint references a mix of agreements, including a Full Funding Grant Agreement under the Capital Investment Grants program, a Federal-State Partnership grant, a RAISE grant, and Railroad Rehabilitation and Improvement Financing loans. Together, these commitments make up the bulk of the project’s budget, with federal grants described as the dominant source of funding.

The complaint also describes three RRIF loan agreements associated with project partners, including New York State, NJ Transit, and the Port Authority of New York and New Jersey.

Why payments were paused, according to GDC

GDC alleges the Department of Transportation tied the funding suspension to a review of the project’s compliance with Disadvantaged Business Enterprise requirements and related contracting rules. DBE programs are federally required initiatives intended to ensure that small businesses owned by socially and economically disadvantaged individuals have meaningful opportunities to compete for DOT-assisted contracts.

According to the complaint, DOT issued information requests in early October 2025 seeking details about how the project’s DBE program was being administered and whether characteristics such as race or sex played a role in awards. GDC says it responded with documentation and program revisions it believes satisfy current federal requirements, and that it has repeatedly worked to address each federal request as the review continued.

GDC contends that even if the department had concerns about DBE administration, it did not have lawful grounds to suspend contractually owed payments in the manner it did.

What a construction pause could mean

GDC says it has used available cash and credit to keep contractors working while reimbursements were paused, but told its board on Jan. 27 that it had exhausted available sources and would need to order a construction pause by Feb. 6 without restored disbursements.

A pause, the commission says, would immediately eliminate nearly 1,000 jobs and could jeopardize a much larger number of jobs tied to current project work if the stoppage persists. Beyond employment impacts, GDC argues that a prolonged disruption would raise project costs and deepen risks associated with the existing North River Tunnel, which remains a critical single point of failure for rail traffic into and out of New York Penn Station.

Political statements and public messaging

In a press release announcing the lawsuit, New York Gov. Kathy Hochul called the tunnel project “essential” and 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.”

New Jersey Gov. Mikie Sherrill said, “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.”

Senate Majority Leader Chuck Schumer said, “As this lawsuit makes clear, President Trump has illegally frozen congressionally appropriated and contractually obligated funding for Gateway,” and described the project as “the most important infrastructure project in the country.”

GDC CEO Tom Prendergast said, “Our goal has always been to work with our federal partners and get funding flowing again. 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 complaint also includes a quoted response attributed to a White House spokesman after GDC’s Jan. 27 board meeting, asserting that Democrats were “standing in the way of a deal” and arguing that “there is nothing stopping Democrats” from negotiating to restart the project.

What happens next

The Court of Federal Claims will decide whether it has jurisdiction over the dispute and, if so, whether the federal government’s payment pause violates the agreements GDC says are binding. In the near term, the practical question may be whether federal reimbursements resume quickly enough to avoid a work stoppage and the costs that would come with securing sites, terminating or suspending contracts, and remobilizing crews.

For commuters across North Jersey and the wider region, the case is the latest flashpoint in a long-running effort to expand and harden a rail corridor that has few alternatives. If the dispute extends and construction is paused, the commission warns it will not only slow a marquee infrastructure project but also increase the risk that the existing century-old tunnel continues to serve as the system’s most consequential vulnerability.