The Trump administration filed an appeal on 28 August challenging a federal court judgment protecting $16 billion in Hudson Tunnel Project funding. The Department of Justice thus sought the U.S. Court of Appeals for the Second Circuit to reverse U.S. District Judge Jeannette Vargas’ June 30 decision. The funding dispute for the Hudson Tunnel Project is about the federal Department of Transportation’s suspension of federal grant disbursements. Meanwhile, work is underway on the vital New York-New Jersey rail link that connects Manhattan and New Jersey.

In September 2025, Federal DOT suspended payments due to concerns with the Gateway Development Commission’s disadvantaged business enterprise program compliance during a review. In particular, the agency had not detected any actual violations in its review of the Hudson Tunnel Project, which is why it suspended disbursements. Judge Vargas found that the suspension was in violation of federal regulations on withholding of obligated grant funds. So she lifted the freeze and permanently blocked DOT from future payments to the Hudson Tunnel Project based on that argument. Despite hurdles, other rail projects such as the Frederick Douglass Rail Tunnel project in Baltimore are moving smoothly. A joint venture between US-based AECOM and Jacobs was selected to serve as delivery partners for the project. The companies were appointed by Amtrak, which is overseeing the development.

Outlook on the Hudson Tunnel Project

The commission suspended operations on 6 February when it had used up its funds and credit to operate the Hudson Tunnel Project, due to the funding freeze. The construction stoppage affected almost 1,000 workers on this vital infrastructure project, remarkably. However, Vargas temporarily blocked the suspension in February, prompting federal DOT to release approximately $205.3 million in withheld funds.

In addition, the construction was resumed soon after the funding of restoration in February 2026. The Gateway Development Commission confirmed 6 September that reimbursements continue uninterrupted since funding resumed. In addition, the commission is responsible for receiving all payments as per the payment schedule set forth in federal funding agreements with government partners.

Advancements Despite Legal Challenges

The $16.04 billion Hudson Tunnel Project involves building a new two-tube rail tunnel under the Hudson River and rehabilitating the existing North River Tunnel. In particular, six of the project’s 10 construction packages are finished or in progress. The commission in April gave a $1.29 billion contract to a Traylor Bros.-Walsh Construction-Skanska USA joint venture for boring work on the Hudson River. After the ruling in June, New Jersey Governor Mikie Sherrill and New York Governor Kathy Hochul vowed to defend the Hudson Tunnel Project.

Project Overview

• Project Name: Hudson Tunnel Project
• Project Value: $16.04 Billion
• Location: Hudson River between New Jersey and Manhattan
• Client: Gateway Development Commission
• Status: Construction underway, funding appeal filed August 28, 2026

Scope

• New two-tube rail tunnel beneath Hudson River
• Rehabilitation of existing North River Tunnel
• Ten total construction packages
• Rail connection between New Jersey and Manhattan

Project Highlights

• Six of ten construction packages completed or underway
• Nearly 1,000 workers on active construction phases
• Critical infrastructure linking New York-New Jersey region
• $1.29B Hudson River boring contract awarded April 2026

Key Developments

• DOT suspended federal funding September 30, 2025
• Construction halted February 6, 2026 due to funding freeze
• Judge Vargas ruled suspension violated federal regulations June 30
• Federal funding resumed February 2026 with $205.3M release
• Trump administration appeal filed August 28, 2026

Key Challenges

• DOT funding suspension citing DBE compliance review concerns
• Court of Federal Claims found DOT violated six grant agreements
• Withholding affected nearly 1,000 construction workers
• Ongoing legal dispute between administration and states

Outlook

• Second Circuit Court of Appeals will review the judgment
• Federal reimbursements continue on established schedule
• Gateway Commission committed to maintaining construction pace
• Governors pledge continued project defense and support