Federal payments for the $16 billion Gateway rail tunnel between New York City and New Jersey, paused for more than four months, began moving again after the Justice Department informed a federal judge on Feb. 13, 2026 that the administration would comply with her order. The suspension, which began at the end of September, had halted construction and forced the Gateway Development Commission to report roughly $205 million unpaid and about 1,000 union workers laid off. The project has received a federal pledge of more than $11 billion and is widely described by officials as the country’s single most urgent rail-infrastructure priority. The judge’s directive, and the administration’s subsequent commitment, allowed payments to restart and work to resume on Friday.
Key Takeaways
- Federal funding for the Gateway tunnel, a $16 billion project linking New York and New Jersey, was paused for over four months before resumption on Feb. 13, 2026.
- The suspension left roughly $205 million owed to the Gateway Development Commission and led to layoffs of about 1,000 union construction workers.
- The federal government has pledged more than $11 billion to the tunnel, which is considered a top U.S. infrastructure priority for the Northeast corridor.
- Officials said the pause began at the end of September as the Department of Transportation reviewed contract compliance with revised federal rules.
- States of New York and New Jersey sued the U.S. Department of Transportation; Judge Jeannette Vargas ordered funds to be released by 5 p.m. on Feb. 12.
- Reports indicate President Trump discussed releasing funds in return for renaming two transportation hubs after him; Senator Chuck Schumer said he rejected the proposal.
- The administration’s press secretary responded to questions about the renaming suggestion with a terse public remark, intensifying political scrutiny.
Background
The Gateway program, a multi-decade effort to expand rail capacity under the Hudson River, has been framed by state and federal officials as essential to the Northeast’s economic health. Its centerpiece is a new tunnel connecting Manhattan and New Jersey, with an estimated total price tag of $16 billion and a federal funding pledge exceeding $11 billion. Construction schedules and contractor agreements were negotiated under prior federal guidance; the current administration has said it needed time to review those contracts against updated federal regulations issued after the pledge was made.
Tensions escalated when the administration paused payments at the end of September 2025, triggering immediate financial strain for project managers and contractors. The Gateway Development Commission — the regional authority overseeing planning and construction — warned that a prolonged halt would force work stoppages and layoffs. New York and New Jersey officials pressed the Department of Transportation for clarity and filed suit in federal court, arguing the suspension was unlawful and causing immediate economic harm.
Main Event
On Feb. 12, 2026, the Southern District of New York judge Jeannette Vargas ordered the federal government to end the suspension and resume payments by 5 p.m. that day. By Feb. 13, Justice Department lawyers notified the court they would comply with the order, and federal disbursements started to flow again that Friday. Project leaders reported that the backlog had left about $205 million in unpaid obligations to the Gateway Development Commission and that crews had already halted some activities pending funds.
The states’ lawsuit outlined consequences including layoffs of roughly 1,000 union workers and delays to procurement and contractor schedules. The immediate effect of the judge’s order — and the administration’s concession to follow it — was to unblock payroll and vendor payments, enabling teams to return to active worksites near Hudson Yards and other locations along the route. Local officials emphasized that resuming payments would not erase schedule slippage but would prevent a deeper pause in construction.
In private discussions with Senator Chuck Schumer, according to people familiar with the talks, President Trump suggested he might condition the release of funds on political concessions involving renaming two major transportation hubs — Washington Dulles International Airport and Pennsylvania Station in Manhattan. Senator Schumer publicly said he rejected that idea; the administration’s press secretary later responded to questions about the remark by asking, in short form, ‘Why not?’
Analysis & Implications
Restarting federal payments relieves immediate financial pressure on a project whose delays carry outsized regional and economic risk. The Gateway tunnel is expected to sustain and expand inter-state rail service on one of the nation’s busiest corridors; prolonged interruptions risk higher future costs, contractor claims, and a loss of skilled labor. Even a temporary shutdown can produce cascading procurement and scheduling conflicts that are costly to remedy.
The dispute highlights how administrative reviews of contract compliance can become politically salient when they intersect with major infrastructure projects. Federal review of contracts under revised regulations is a legitimate oversight function; however, using funding pauses as leverage — whether for compliance questions or other aims — increases legal and political exposure for the executive branch. The court challenge by New York and New Jersey underlines that states have legal tools to contest funding interruptions that produce concrete economic harm.
Politically, the episode has broadened scrutiny of how high-profile projects are managed and whether executive branch discretion can be exercised without creating uncertainty for workers and taxpayers. If reports that the administration discussed renaming public facilities in exchange for funds are substantiated, that would raise ethical and political questions about conditionality in federal grant-making. For now, the priority for project managers is to stabilize cash flow, mitigate schedule slippage, and renegotiate lost contractor time where possible.
Comparison & Data
| Item | Amount/Timing |
|---|---|
| Estimated total project cost | $16 billion |
| Federal pledge | More than $11 billion |
| Payments suspended | End of September 2025; paused >4 months |
| Amount reportedly owed when pause cited | ~$205 million |
| Reported layoffs | About 1,000 union workers |
The table summarizes core numeric data cited by project managers and officials. Those figures show that while the federal pledge covers a majority of the program’s cost, an interruption of even a portion of the scheduled disbursements — here roughly $205 million in outstanding payments — can have disproportionate operational impact. Restarting funds reduces immediate disruption but does not erase schedule impacts accrued during the pause.
Reactions & Quotes
State officials and the Gateway Development Commission framed the restart as necessary to protect jobs and keep the project on a workable timeline, stressing that legal action forced the administration’s hand. Their comments emphasized the economic consequences for regional supply chains and union workers who had been put on temporary leave.
“The courts have ordered the funds released, and today we are beginning to see that happen — too late for some, but necessary to protect the project and workers.”
Gateway Development Commission (official statement)
Senator Schumer characterized the reported conversations about renaming landmarks as unacceptable and said he would not trade support for such a deal. The administration’s communications team sought to downplay controversy while defending the need for contract reviews.
“I rejected any quid pro quo involving the renaming of public facilities; that is not how our state will operate.”
Senator Chuck Schumer (public statement)
The White House press office offered brief, clipped remarks that signaled a willingness to proceed with the judge’s order while declining to elaborate on internal deliberations. Legal and ethics experts note that if naming proposals were used as leverage, they would prompt separate lines of inquiry about executive conduct and grant conditions.
“We will comply with the court order and ensure project payments are processed while we continue our review of contract compliance.”
U.S. Department of Justice counsel (court filing)
Unconfirmed
- Reports that President Trump explicitly conditioned funds on renaming Washington Dulles Airport and Penn Station are based on accounts from people familiar with discussions and remain unverified in public records.
- Internal Department of Transportation assessments detailing the exact contract compliance issues prompting the review have not been publicly released.
- The full schedule impact to the Gateway program from the months-long pause has not been finalized and remains subject to ongoing contractor claims and remediation plans.
Bottom Line
The immediate legal victory and the administration’s agreement to resume payments avert abrupt further layoffs and allow work to restart on a project the region regards as critical. However, the interruption exposed vulnerability in how large federal commitments translate into steady, predictable cash flow on multi-year construction programs. Project managers must now reconcile lost time, renegotiate schedules, and guard against future funding shocks.
Politically and legally, the episode underscores the limits of executive discretion when state and regional economies face demonstrable harm. Watch for additional court filings, public disclosures from the Department of Transportation about its contract review, and any congressional or inspector general inquiries that could follow if allegations about conditionality of funds are substantiated.
Sources
- The New York Times (media report)
- Gateway Development Commission (official project authority)
- U.S. Department of Transportation (federal agency)
- Senator Chuck Schumer Office (official statements)