US DOT must comply with district court ruling lifting disbursement suspension
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Updated 11:32 AM EST, Feb. 13, 2026
Federal funding for the $16-billion Hudson Tunnel Project resumed late Feb. 12 after the U.S. Court of Appeals for the Second Circuit declined to issue a stay, allowing a district court order restoring disbursements to take effect. Gateway officials confirmed that approximately $200 million in previously suspended federal reimbursements have now been released.
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The five-day pause was a compromise by U.S. District Court Judge Jeannette A. Vargas, who on Feb. 9 denied the federal government’s request to halt her Feb. 6 temporary restraining order but permitted a brief administrative delay until Thursday at 5 p.m. to allow the government time to seek emergency appellate relief. No stay was issued, so the TRO remains in effect.
The Feb. 6 TRO ruling prevents the U.S. Dept. of Transportation from continuing its months long suspension of federal disbursements tied to the $16 billion rail megaproject—a halt in reimbursements that began Sept. 30 and that New York and New Jersey argued would force work to shut down without immediate funding. With the appellate court declining to intervene, USDOT has begun releasing back payments owed under existing grant agreements.
The project includes construction of a new two-tube rail tunnel under the Hudson River and rehabilitation of the 116-year-old North River Tunnel, a key passenger rail link between New Jersey and Manhattan.
As of late Feb. 12, the Second Circuit docket (No. 26-282) showed no order granting a stay.
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«This is good news for the Hudson Tunnel Project,» the Gateway Development Corporation said in a late-day statement Feb. 12. «While this is a positive step, we need consistent, reliable access to the Hudson Tunnel Project’s federal funding moving forward,» it continued.
The commission said it would «pursue all avenues» to regain access to the agreed-upon amount obligated by USDOT and underscored its confidence that the project stands on firm legal ground to prevail.
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Gateway spokespersons said the payment covers previously submitted reimbursement requests and restores near-term liquidity to active construction contracts but does not resolve the broader dispute over continued federal obligations tied to the project’s grant and loan agreements. Reimbursement requests are submitted monthly under the project’s existing funding structure.
In weighing the government’s request, Vargas acknowledged federal claims that as much as $200 million could be disbursed before appellate review but concluded that the balance of harms and public interest favored allowing relief to proceed. The court cited evidence that work had already been suspended, layoffs had begun and prolonged delay could inflict severe regional economic harm.
«The States have shown limited ability to continue a critical infrastructure project from their own coffers,» the court wrote in its order denying USDOT’s request despite the short reprieve for appeal review. «Plaintiffs will be unable to recover imminent and “overwhelming” monetary loss if GDC is forced to shut down its operations.»
The federal government has argued that the dispute belongs in the U.S. Court of Federal Claims, contending the states’ claims amount to contract enforcement outside the scope of the Administrative Procedure Act.
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Meanwhile, the commission has filed a separate breach-of-contract case in that court seeking payment of allegedly past-due amounts.
While the TRO remains in effect, the underlying litigation over the funding suspension continues in both the Southern District of New York and the U.S. Court of Federal Claims.
