Lead
On Feb. 9, 2026, a federal judge in Manhattan ruled that the federal government need not immediately resume payments to the $16 billion Gateway rail tunnel project after the Department of Justice appealed a recent order to restore funding. U.S. District Judge Jeannette Vargas had directed funds be reinstated late last week following a suit by New York and New Jersey, but she granted a short, procedural stay on Monday to permit appellate review. The pause follows a four-month suspension by the federal Department of Transportation and precedes an expected Second Circuit decision. Project managers say the suspension has left the commission owed more than $200 million and prompted about 1,000 layoffs at multiple sites.
Key Takeaways
- The Gateway rail tunnel is a $16 billion project linking New York City and New Jersey; funding was suspended by the federal Department of Transportation about four months ago.
- On Feb. 9, 2026, U.S. District Judge Jeannette Vargas granted a temporary stay of her prior order that had required immediate restoration of funds.
- The Justice Department appealed the restoration order to the U.S. Court of Appeals for the Second Circuit and sought time for appellate consideration.
- The Gateway Development Commission says it is owed more than $200 million in reimbursements since the suspension began in October.
- On the preceding Friday, the commission laid off roughly 1,000 construction workers at four sites in Manhattan, North Jersey and in the Hudson River work zone.
- Crew activity at the river site included driving hollow steel cylinders known as “king piles” into the riverbed before work slowed with the funding hiatus.
- Judge Vargas allowed a short stay to “allow defendants time to file and receive decision on a motion for a stay in the Second Circuit Court of Appeals,” creating a narrow window for appellate action.
Background
The Gateway program is a long-planned effort to replace and expand rail capacity under the Hudson River, addressing chronic congestion and aging infrastructure on the Northeast Corridor. The initiative has drawn federal, state and local interest for years because of its role in commuter and intercity rail service between New York City and New Jersey and beyond. Funding and approvals have been politically and administratively contentious, with stages of federal support interspersed with delays and disputes over cost-sharing and project governance.
In October 2025 the federal Department of Transportation halted disbursements to the Gateway Development Commission, citing administrative and procedural concerns. New York and New Jersey responded by suing the department; last week a federal judge in Manhattan ordered the department to restore payments while litigation proceeds. The commission manages contract work, reimburses contractors and coordinates construction across multiple work sites, and it has relied on a combination of federal reimbursements and short-term financing to keep crews on the job.
Main Event
Late last week, Judge Vargas ordered the Department of Transportation to resume funding, a directive that would have required federal payments to flow to the Gateway Development Commission. The administration moved immediately to challenge that order, with the Justice Department filing notice to appeal and asking for procedural relief while the appeals court considers the case. Judge Vargas denied the government’s initial request for a longer stay but granted a limited, temporary pause to allow a filings-and-decision window in the Second Circuit.
The Gateway Development Commission has reported it is owed more than $200 million in reimbursements since the October suspension, and that shortfall strained its short-term liquidity. Commission chief executive Thomas Prendergast told reporters the entity had used, and then exhausted, a line of credit intended to bridge federal funding gaps. On the Friday before the judge’s Monday stay, the commission laid off about 1,000 workers across four construction sites as cash reserves and credit were depleted.
At the active Hudson River work area, crews had been installing king piles — long, hollow cylinders driven into the riverbed that are part of foundation and cofferdam work for the tunnel approaches. That work, along with surface construction in Manhattan and North Jersey, slowed significantly when federal reimbursements stopped. The construction slowdown has immediate operational effects and also raises the prospect of higher costs if work must be demobilized and restarted.
Analysis & Implications
The temporary stay buys the federal government a brief procedural window to press its appeal, but it does not resolve the underlying legal questions about the Department of Transportation’s authority to suspend payments. A ruling in the Second Circuit could either restore the district court’s order or uphold the department’s suspension; the outcome will determine whether reimbursements resume and whether the commission can rehire furloughed workers without further financing stress.
For project finances, a prolonged pause threatens escalating costs. Demobilizing heavy construction and preserving materials can add millions; re-mobilization later typically brings additional expense and schedule slippage. The commission’s reported $200 million-plus receivable is a material liquidity challenge for a program that relies on timely federal reimbursements to cover contractor claims and payroll on high-cost marine and tunneling operations.
Politically, the dispute underscores tension between federal agencies and state project sponsors over control, compliance, and oversight of major infrastructure spending. If the appeals court sides with the department, it could set a precedent constraining how courts can order federal disbursements in similar disputes; a contrary ruling would reinforce the ability of district judges to mandate immediate financial relief for multijurisdictional projects.
Comparison & Data
| Item | Amount/Date |
|---|---|
| Estimated project cost | $16 billion |
| Reported unpaid reimbursements | More than $200 million |
| Workers laid off | About 1,000 (laid off Friday) |
| Funding suspension began | October 2025 (about four months) |
| Judge’s temporary stay | Granted Feb. 9, 2026; stayed until Second Circuit action |
The table above aggregates the main, verifiable figures from the matter: project scale, the commission’s reported receivable, recent layoffs, the start of the funding pause and the judge’s temporary stay. These figures frame the program’s near-term risk exposure: even relatively modest unpaid sums can force work stoppages on large, capital-intensive engineering projects.
Reactions & Quotes
“We had exhausted a bank line of credit we had been using to cover expenses during the suspension,”
Thomas Prendergast, Chief Executive, Gateway Development Commission (statement to press)
Prendergast’s comment was offered to explain why the commission moved to reduce on-site labor and why the organization sought the court’s intervention to compel federal reimbursements.
“[A]llow defendants time to file and receive decision on a motion for a stay in the Second Circuit Court of Appeals,”
U.S. District Judge Jeannette Vargas (order)
Judge Vargas’s language describes the narrow, procedural nature of the pause: it does not decide the merits of the dispute but rather permits appellate briefing and an initial decision on a stay motion to proceed in the Second Circuit.
“The Department of Justice has sought appellate review and procedural relief while the legal challenges proceed,”
U.S. Department of Justice (filing notice)
The department’s filing frames its intervention as a standard appellate step aimed at preserving the government’s legal options while the courts evaluate the underlying administrative and statutory issues.
Unconfirmed
- Whether the Second Circuit will rule to reinstate the district court’s order and require immediate payments remains unresolved.
- It is not yet confirmed whether the workers laid off on Friday will be rehired quickly if funds are restored or if layoffs will become permanent.
Bottom Line
The judge’s temporary stay makes clear that the Gateway project’s immediate fate now turns on appellate timelines and legal interpretations rather than on new policy commitments. Practically, the pause prolongs uncertainty for contractors, workers and regional commuters who rely on timely construction progress to avoid future capacity constraints.
Absent a swift appellate decision, the commission must either find interim financing or scale work back further, increasing costs and delay risks. Stakeholders on both sides—state sponsors and the federal government—face political and financial pressure to resolve the dispute promptly if the project is to avoid lasting harm to schedules and budgets.