U.S. District Judge Jeannette Vargas permanently blocked the Trump administration from withholding federal funding for the $16 billion Gateway Tunnel project, ruling that the Department of Transportation's funding freeze was arbitrary, capricious, and a clear violation of the Administrative Procedure Act. The Monday ruling, reported by the Washington Examiner, converts a temporary February order into a permanent injunction, and it leans heavily on President Trump's own public statements to make its case.
The project would build two new rail tunnels under the Hudson River between New Jersey and Penn Station in Midtown Manhattan, a stretch of the Northeast Corridor used by more than 200,000 daily riders. Planning began in 2010. Major construction started in late 2023. Completion is projected for 2035.
What makes the ruling notable is not just its outcome but its reasoning. Judge Vargas did not merely find a procedural defect. She pointed to the president's own words as evidence that the real motive behind the freeze had nothing to do with regulatory compliance, and everything to do with punishing political opponents.
In her ruling, Judge Vargas quoted Trump's contemporaneous public statements to undercut the administration's stated rationale for halting the money. The ruling states:
"The ostensible reason for the suspension of funds was to allow DOT to conduct a review of GDC's compliance with federal nondiscrimination laws. President Donald J. Trump, however, made contemporaneous statements indicating that he had personally made the decision to 'terminate' funding for the Project 'because the Democrats are so foolish, what they've done to the country.'"
That language, drawn from Trump's own remarks, formed the backbone of the court's conclusion that the DOT's official justification was pretextual. The New York Post reported that the 59-page order also cited Trump's appearance on Fox Business Network, where he said: "We're cutting a $20 billion project that Schumer fought for 15 years to get, and I'm cutting the project. The project is gonna be dead. It's just pretty much dead right now."
That quote tied the funding freeze directly to Senate Minority Leader Chuck Schumer (D-NY), not to any finding of noncompliance with civil rights law.
Judge Vargas wrote bluntly that "defendants make no attempt to justify their actions as consistent with the governing federal regulations." She also found, as the Post reported, that "defendants do not dispute that the suspension of federal grants flagrantly violates federal law."
Transportation Secretary Sean Duffy announced in October that roughly $205 million in federal funding for the Gateway Tunnel would be frozen. The DOT said it would conduct an administrative review of the project to ensure compliance with a rule barring race- and sex-based contracting requirements from federal grants. Duffy expressed concern that the project was using "unconstitutional" diversity, equity, and inclusion practices tied to the Disadvantaged Business Enterprise program.
In a statement, the department said: "Secretary Duffy's position on the [Disadvantaged Business Enterprise] program is clear, subsidizing infrastructure contracts with taxpayer dollars based on discriminatory principles is unconstitutional, counter to civil rights laws, and a waste of taxpayer resources."
That position has a legitimate policy foundation. The administration has faced judicial resistance on several fronts as it has moved to dismantle race-conscious contracting and other DEI-adjacent programs across the federal government. But in this case, the judge found the DOT never actually completed an investigation to determine whether any violations occurred, a gap that made the compliance rationale look like a convenient excuse rather than a genuine regulatory action.
Trump also complained publicly that the project "cost many BILLIONS OF DOLLARS more than projected or anticipated" and declared the federal government would not cover any excess expenses beyond existing commitments. That cost concern is not frivolous, the project's price tag has ballooned, but the court found it was not the basis on which the DOT formally acted, and the administration did not argue otherwise.
The Biden administration in July 2024 provided a $6.8 billion federal grant to the Gateway Tunnel project, described as the most money ever provided to a mass transit infrastructure project in the United States. When the Trump administration froze roughly $205 million of that funding months later, it triggered a construction crisis.
AP News reported that construction was set to halt entirely, threatening approximately 1,000 immediate jobs and thousands more down the line. New York and New Jersey filed a joint lawsuit in February challenging the freeze.
Judge Vargas responded with a temporary restraining order requiring the administration to begin releasing the money. The administration complied in stages, first releasing $30 million, then the remaining $127 million on February 18. The Second Circuit declined to block that lower court order when the administration sought a stay, forcing compliance to continue while the legal fight played out.
Monday's ruling converts that temporary order into a permanent one. The administration can no longer freeze the funds under the rationale it offered.
The core tension in this case is one that has surfaced repeatedly during the Trump administration's second term: the line between legitimate executive authority and the use of federal funding as a political weapon.
There is nothing inherently wrong with reviewing whether a $16 billion infrastructure project complies with federal contracting law. Taxpayers have every right to expect that their money is spent lawfully and efficiently. But the administration's problem here was not the policy goal, it was the execution. The DOT launched a review, froze the money, and then never completed the review or produced findings to justify the freeze. Meanwhile, the president told the country on television that he was personally killing the project to punish Chuck Schumer.
That is not how the Administrative Procedure Act works. Courts have long held that agencies must follow their own rules when suspending or revoking grants. When an agency's stated reason does not match the decision-maker's public explanation, judges notice.
The administration has had better outcomes in other legal battles. The Supreme Court cleared the administration to end Temporary Protected Status for certain countries, for example, in cases where the legal groundwork was more carefully laid. The difference matters. Process is not just a technicality, it is the mechanism that keeps executive power accountable and defensible in court.
Trump has shown repeatedly that he is willing to use the full weight of presidential authority to advance his agenda, whether through major legislation or executive action. That willingness is often a strength. But when the stated justification for an action collapses under the weight of the president's own contradictory public statements, it hands opponents an easy win in court, and it weakens the broader effort to rein in wasteful and ideologically driven federal spending.
The ruling does not resolve every question surrounding the Gateway Tunnel. The project's cost trajectory remains a legitimate concern. Whether the Disadvantaged Business Enterprise program as applied to this project raises constitutional issues is a question the DOT could still pursue, if it actually conducts the review it claimed to be conducting. And the administration has not yet indicated whether it will appeal Monday's permanent ruling.
Newsmax reported that the ruling adds to a growing pattern of courts pushing back against Trump administration funding freezes. That pattern is worth watching. The administration has used funding leverage in other contexts to pressure Congress and advance policy goals, sometimes effectively. But each judicial loss on procedural grounds makes the next fight harder and gives opponents more ammunition to paint legitimate oversight as political overreach.
New York Governor Kathy Hochul said after the earlier appeals court decision: "Donald Trump needs to follow the law and get the project back on track immediately." Schumer called the administration's stated rationale an "absolute lie," adding: "Only one man can restart the project and he can restart it with the snap of his fingers."
Those are political statements from political actors. But the court's own findings tracked uncomfortably close to the same conclusion.
Conservatives who want to reform federal contracting, eliminate race-based preferences, and hold bloated infrastructure projects accountable should pay attention to what went wrong here. The policy instinct was sound. The legal execution was not. You cannot freeze billions of dollars, claim a compliance review as your justification, skip the review entirely, and then expect a federal judge to look the other way, especially when the president is simultaneously telling the country on cable news that the real reason is to settle a score with a Democratic senator.
Good government requires good process. When the process is sloppy, the courts fill the gap, and taxpayers are left watching judges, not elected officials, decide where their money goes.
