Trump administration must make New York tunnel payments, appeals court rules

By David Shepardson

March 11 (Reuters) - The U.S. federal government must keep making payments on the $16 billion New York Hudson Tunnel after an appeals court on Wednesday rejected the Trump administration's bid to halt paying for the project.

The Hudson Tunnel Project aims to build a new commuter rail tunnel connecting Manhattan and New Jersey and repair a century-old tunnel used by more than 200,000 travelers and 425 trains daily. The existing tunnel, heavily damaged by Hurricane Sandy in 2012, needs frequent emergency repairs that disrupt travel on the nation's most heavily used passenger rail line.

A three-judge panel of the 2nd U.S. Circuit Court of Appeals rejected the government's argument. The court said if they agreed to lift a temporary restraining order issued in the suit brought by New York and New Jersey, the U.S. Transportation Department would be free to suspend future payments and "tunnel construction sites will become inactive, posing serious risk of injury and deterioration that the states, at considerable expense, will become responsible to safeguard against."

The court added the states have "an interest in the efficient completion of a major public works project and in the avoidance of health and safety threats around inactive construction sites."

U.S. District Judge Jeannette Vargas ordered the federal government to release funds for the project in February, and the Justice Department had asked to put her ruling on hold pending its appeal.

Construction was halted on February 6 but began resuming last month after the Trump administration released $235 million in funding it had withheld since October 1. It has since released another $19 million.

After the appeals court ruling, the U.S. Transportation Department said on Wednesday it was "committed to ensuring hardworking taxpayer dollars are being spent responsibly. We are considering all legal avenues on their behalf."

New York Governor Kathy Hochul praised the ruling. "Another loss for Trump. Another win for New Yorkers," Hochul said on X.

The Gateway Development Commission, which oversees the project for New York and New Jersey, said on Tuesday that workers have returned to all construction sites impacted by the pause, and all construction activities that were suspended started again. But it warned it would have to pause construction again in two to three months if federal funding disbursements do not continue.

The commission has separately sued the Transportation Department in the U.S. Court of Claims to ensure the funds are not frozen.

Trump offered in January to unfreeze the funds in return for support from Democrats to rename Washington Dulles Airport and New York's Penn Station after him, Reuters reported. Democrats strongly criticized the suggestion.

Trump last month said on social media he opposed the Gateway project, raising concerns about billions of dollars in potential cost overruns.

The project was allocated about $15 billion in federal support under then-President Joe Biden, a Democrat. Nearly $2 billion has been spent so far.