Gateway Development Commission Sues Federal Government Over Hudson Tunnel Funding

The Gateway Development Commission (GDC) has filed a breach of contract claim against the United States federal government in the U.S. Court of Federal Claims, seeking the release of grant and loan funding for the Hudson Tunnel Project (HTP).

GDC warned that if additional federal funding is not made available by 6 February 2026, construction on the project will be paused. The commission said this would lead to the immediate loss of nearly 1,000 jobs.

The Hudson Tunnel Project involves the construction of a new rail tunnel beneath the Hudson River between New Jersey and New York, alongside the rehabilitation of the existing North River Tunnel, which entered service in 1910. The older tunnel has long been associated with service disruptions affecting daily rail passengers.

The majority of the project’s budget is covered by federal funding agreements, including Capital Investment Grants, a Federal-State Partnership Grant, a RAISE Grant, and Railroad Rehabilitation and Investment Financing loans. These agreements were finalised in July 2024, when full funding for the project was secured. GDC stated that more than 1 billion USD has already been spent on construction and related investment.

The federal government has suspended required funding disbursements since 1 October 2025, despite existing contractual obligations. The lawsuit argues that the reasons provided by the administration for withholding funds are not consistent with federal law.

GDC said it has worked with federal agencies over recent months to address concerns related to compliance, including requirements under the Disadvantaged Business Enterprise programme. The commission stated that it supplied the requested documentation and confirmed that the project meets current regulatory standards.

The commission has relied on remaining funding sources and available credit to continue work while federal payments have been delayed. However, at its board meeting on 27 January 2026, GDC announced that these resources have now been exhausted. Without renewed federal disbursements, construction will pause later this week.

New York Governor Kathy Hochul said:

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. 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.

GDC estimates that a prolonged suspension could place approximately 11,000 current construction jobs at risk and affect broader employment and economic activity associated with the project. The commission also noted that delays could increase operational risks for the existing North River Tunnel, which carries a significant share of passenger rail traffic in the region.

The lawsuit seeks the release of 205 million USD in outstanding disbursements, as well as damages linked to any construction delays or contract terminations. GDC is represented by Milbank LLP and Mayer Brown LLP.