The ruling came down June 29. It doesn’t just reverse the funding freeze on the Hudson Tunnel Project. It forecloses it.
Judge Jeannette Vargas of the U.S. District Court for the Southern District of New York vacated the U.S. Department of Transportation’s September 30, 2025 suspension of federal funds to the $16 billion project, and permanently barred the agency from blocking money over the Gateway Development Commission’s Disadvantaged Business Enterprise program.
The procedural failure at the center of the ruling
DOT suspended payments pending a review of GDC’s DBE program. It did not first find that GDC had violated anything, and it gave GDC no route to object.
Vargas was direct about it. “The September 30 Suspension skipped right to payment suspension without any finding that GDC had violated the law,” she wrote. “This was clearly contrary to Section 200.339 of the Uniform Grant Guidance.” Grantees, she noted, must get “an opportunity to object and provide information challenging the action.” She also observed that the defendants “do not dispute that the suspension of federal grants flagrantly violates federal law.”
On the stakes, she wrote that the project was “on the cusp of a suspension-induced work stoppage that would have eliminated hundreds of jobs, left active construction sites abandoned, and wreaked havoc on the Project’s timeline and budgets.”
Where the work actually stands
Seven of the project’s 10 construction packages are in progress or complete, including all required tunnel boring. In June 2026, GDC awarded a $711.7 million contract to a Skanska Creamer Sanzari JV for the New Jersey Surface Alignment package.
Catherine Rinaldi, GDC’s executive vice president, said the project “was on schedule and on budget” before the freeze and that the commission has “made significant progress since federal funding for the project resumed in February.”
DOT’s response was unmoved: the agency “remains committed to ensuring hardworking taxpayer dollars are being spent responsibly and do not fund unconstitutional, discriminatory contracting practices.”
The precedent contractors should care about
Set aside the politics. The operative holding is administrative: a federal agency can’t shut off an executed grant agreement without process, and a permanent injunction on one theory of suspension is a real constraint on a funder that has used suspension aggressively.
That matters to anyone carrying a bonded backlog on a federally funded megaproject, because a payment freeze on a job already under contract lands on the contractor’s balance sheet before it ever reaches a courtroom. Amtrak’s East River Tunnel rehabilitation sits in the same funding ecosystem. The tunnel is still targeted to open in 2035, a date the ruling itself flags as already fragile.