Erin Lanahan 
Construction on the $16 billion Hudson Tunnel Project could be coming to a halt due to a lack of federal funding. In 2025, federal funding for the project, aiming to expand train service between New Jersey and New York, was frozen due to a federal review into whether any unconstitutional practices were occurring on site. As of January 2026, the commission leading construction announced it cannot continue construction until the Trump Administration resumes funding the majority of the project. The freeze puts thousands of jobs and the construction timeline at risk. In February 2026, the commission filed a lawsuit against the federal government looking to release funding and continue construction. A judge has ordered the administration to disburse the funds, meaning that the work can continue. As of February 18th, the Gateway Commission reports the full funds that were withheld have been repaid by federal agencies. Here’s what we know about the Hudson Tunnel Project, the lawsuit, and what’s happening now.
About The Hudson Tunnel Project
Preliminary construction started on the $16 billion, 2.4-mile Hudson Tunnel Project in 2023. The project aims to build a new tunnel and railroad infrastructure for passenger trains under the Hudson River, creating four tracks in and out of New York, while the existing tunnel is being rehabilitated. The overall goal is to improve and expand train service in the Northeast Corridor, the most heavily traveled passenger rail line in the United States. The tunnel currently carries Amtrak and NJ Transit trains between New Jersey and New York.
In 2019, New York and New Jersey established the Gateway Development Commission (GDC) to coordinate the Gateway Program. GDC is the primary borrower for the loans funding this project. Port Authority of New York and New Jersey, NJ Transit, and New York State backed $1.9 billion, $703.1 million, and $1.5 billion, according to the Department of Transportation (DOT). The remaining 70% of the project’s budget, totaling around $12 billion, is funded by federal grants.
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During the planning stages in 2022, the GDC assumed the role of National Environmental Policy Act (NEPA) Sponsor for the Hudson Tunnel Project. The NEPA requires federal agencies to assess the environmental impacts of major projects and ensure it meets all federal requirements.
Both the new tunnel and the existing tunnel were estimated to be completed by 2038.
Federal Funding Frozen
The federal funding freeze for the Hudson Tunnel Project coincided with the 43-day US government shutdown in October of 2025. On October 1, 2025, the DOT said it would withhold project reimbursements to conduct a review of disadvantaged business enterprise practices.
That review included both the $7.7 billion Metropolitan Transportation Authority’s Second Avenue Subway Phase 2 and the Hudson Tunnel Project. In a statement, the DOT said the projects “are under administrative review to determine whether any unconstitutional practices are occurring.” Days later, President Donald Trump said he was terminating “Democrat projects,” including the Hudson Tunnel Project, because of opposition to a GOP federal budget bill.
Just because federal funding was frozen didn’t mean construction came to a complete halt. Since October 1, the GDC has:
- Procured two tunnel boring machines.
- Finished the Tonnelle Avenue bridge and made progress on the portal launch box, setting the stage for tunnel boring to begin in New Jersey.
- Completed two major concrete pours for HYCC-3, totaling more than 7,200 cubic yards, and broke through the bulkhead, connecting to the completed sections of the concrete casing.
- Mixed 84 primary columns and 112 secondary columns of reinforced earth in the Hudson riverbed, bringing the total number of finished columns to 838.
- Installed 29 slurry wall panels for the Hudson County Access Shaft and 15 panels for the 12th Avenue Access Shaft. The Hudson County Shaft slurry wall is now more than 75 percent finished.
On January 27, 2026, the GDC announced that the construction of the Hudson Tunnel Project will pause if federal funding does not resume.
The GDC told contractors working on the project that funding for construction will run out on February 6th. Now those contractors will spend the next two weeks winding down work at the active construction sites in New York, New Jersey, and the Hudson River.
Looking Ahead
Four major procurements that make up the remaining construction packages for the project are impacted by the federal funding pause. Construction was planned to begin in 2026 for two of those packages, the Hudson River Tunnel Project and the NJ Surface Alignment Project, but contracts cannot be awarded until funding resumes.
“Since federal funding was paused in October, we have done everything in our power to keep construction moving forward as planned, but we cannot fund this work on credit indefinitely,” GDC CEO Thomas Prendergast said in a statement. “Pausing construction is the absolute last resort, and we will continue working around the clock to secure funding so that the workers who are counting on this project to pay their bills can stay on the job and we can continue delivering the reliable, 21st-century infrastructure America needs.”
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More than one billion in taxpayer dollars have been spent on the construction of the Hudson Tunnel Project as of January 2026. Per the organization, the GDC utilized available funding sources and credit to keep the project moving forward as planned since the federal funding freeze in October of 2025, but has drawn down nearly all available sources and can no longer continue funding construction.
The loss of funding has put thousands of jobs at risk. Pausing construction will result in the immediate loss of 1,000 jobs. An extended pause could impact 11,000 construction jobs on current jobs, as well as the 95,000 jobs and over $19 billion in economic activity the construction is anticipated to generate, according to the GDC.
The GDC adds the pause “increases the risk that the 116-year-old North River Tunnel – already a leading cause of delays that impact hundreds of thousands of riders – will shut down, severing the most heavily used passenger rail line in the country and leading to billions of dollars in lost time and productivity.”
The Lawsuit
On February 3rd, 2026, The Gateway Development Commission filed a lawsuit against the Trump Administration that would release contractually-obligated funds for the Hudson Tunnel Project.
The GDC says that despite the contractual commitment to fund the project, the federal government has suspended the release of funds for the Hudson Tunnel Project since October 1, 2025. Most of the budget is funded by federal grants, which the DOT and the GDC have reportedly been legally bound to since July 2024. More than $1 billion worth of construction and investment has already been spent on the Hudson Tunnel Project.
“I made a commitment to fight for Gateway and New Jersey’s economy, which is why we’re taking action to hold the Trump Administration accountable for breaching its contract.” New Jersey Governor Mikie Sherrill said in a statement. “When it comes to fighting for jobs and opportunity in New Jersey, I’m all in.”
“Our goal has always been to work with our federal partners and get funding flowing again,” GDC CEO Tom Prendergast said in a statement. “At the same time, we must hold the federal government to its contractual obligations so that construction is not halted. It’s our responsibility to fight for the nation’s most urgent infrastructure project and the nearly 1,000 workers whose jobs are threatened.”
On top of the $205 million in disbursements due to the GDC, the complaint seeks damages that will be incurred if construction pauses or existing contracts are terminated.
GDC is represented by Milbank LLP and Mayer Brown LLP.
Work Stoppage + Reversal
As of Friday, February 6th, work on the project has come to a standstill. Per a press release from the GDC, “Pausing construction results in the immediate loss of nearly 1,000 jobs. An extended pause would put at risk approximately 11,000 construction jobs on the current projects, as well as the 95,000 jobs and $19.6 billion in economic activity that construction is anticipated to generate overall.”
A federal judge ordered that the funds must be released to the project. Per a press release from the New Jersey Attorney General, “The order issued this evening should ensure that nearly 1,000 workers will be able to keep their jobs and continue their work on the Tunnel, preserving the investments New Jersey and New York have made in this project and preventing further economic damage to our states, while next steps in the case play out.”
Funds Repaid
As of Wednesday, February 18th, the Gateway Commission reports that the full $205 million withheld by federal agencies since October 2025 has been repaid. Construction is slated to resume as early as next week. Read the full statement from the GDC below.
“Gateway Development Commission (GDC) received the full reimbursement owed to us from the federal government and now has more than $205 million available to fund work on the Hudson Tunnel Project. We are working with our contractors to deploy these funds to resume work as soon as possible. Letters will be sent to contractors today, and construction activities are expected to resume next week. We continue to pursue all avenues to secure access to the full amount of federal funding for the Hudson Tunnel Project, including our lawsuit.
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