Less than a week after federal funding for the $16 billion Hudson River Tunnel between New Jersey and New York was frozen by the Trump administration, the building agency has sued the government, challenging its withholding of contractually obligated grant and loan funds for the critical megaproject.
The Gateway Development Commission filed its lawsuit on February 2 against the government in the US Court of Federal Claims, saying it will be forced to halt the project if funding is not restored by February 6.
The commission estimates that the construction pause could increase the total cost of the project by $2 billion, according to media reports. The scope of the project, which relies on about $12 billion in federal grants, includes building a rail tunnel connecting New Jersey and New York City under the Hudson and rehabilitating the 116-year-old North River Tunnel, which was damaged during Superstorm Sandy. The remaining $4 billion of the project is being financed through loans repaid by New York, New Jersey and the Port Authority of New York and New Jersey.
The commission said federal disbursements for both the grant and loan programs have been halted since Oct. 1, 2025. “Our goal has always been to work with our federal partners and get funding flowing again,” commission CEO Tom Prendergast said in a statement. “At the same time, we must meet the federal government’s contractual obligations so that construction does not stop. It is our responsibility to fight for the nation’s most urgent infrastructure project and the nearly 1,000 workers whose jobs are threatened.”
The White House press office had no immediate comment in response to the lawsuit.
The complaint shows that the administration’s explanations for breaching its contract are illegal, says the commission, which notes that for months it has promptly responded to government requests for documents showing that the project complies with regulations. This includes providing information about the Disadvantaged Business Enterprise Program of the federal regulatory project.
The lawsuit says the US Department of Transportation’s “sole explanation for its withholding of funding” has focused on concerns about the DBE program. The suit says the DOT has not identified or alleged any specific violations or defaults by the commission in connection with the program, and that the project’s grant and loan agreements do not allow funding to be withheld absent such findings. The lawsuit contends that “in any event, DOT’s concerns are completely unfounded.”
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The department approved the commission’s DBE program in January 2024 and it has been “consistently administered … in full compliance with DOT regulations.”
According to the lawsuit, approximately $1.8 billion has already been spent on the tunnel project, with about 150 contractors and subcontractors working on the project for more than two years. “This work has produced substantial progress,” the lawsuit says. “Workers have completed more than 75 percent of the concrete shell for the new tunnel that will pass under Hudson Yards on its way to Penn Station, putting this tunnel on track for completion in 2026.”
The tunnel boring machine components await installation in New Jersey, where excavation will begin in the spring. The commission says it has already exhausted available funding sources and credit to try to keep the project on schedule while federal funding disbursements are on hold.
A further delay will result in the loss of nearly 1,000 construction jobs in the short term and could jeopardize as many as 11,000 in the long term, the suit claims. The commission also says the North River Tunnel, which already causes daily traffic delays, could be closed entirely.
“If federal funding is not promptly restored,” the lawsuit says, the commission “may be forced to terminate construction contracts for convenience to mitigate ongoing suspension costs.” The developer says the termination will “result in significant additional costs” for the tunnel project.
