MANHATTAN (CN) - President Donald Trump engaged in "political retribution" by withholding federal funding for the construction of a $16 billion rail tunnel under the Hudson River, according to a new lawsuit filed by New York and New Jersey against the administration.

In their 29-page complaint, filed Tuesday in the Southern District of New York, the states accuse the government of breach of contract for its sudden decision to pull $205 million in payments for the tunnel's construction.

Without that cash, the states say work will be halted and laborers laid off as early as this week.

"All work on the project must pause on Feb. 6, 2026, unless federal funding resumes," the states claim in the lawsuit. 

The Hudson Tunnel Project is a massive infrastructure effort aimed at increasing reliability for Amtrak and NJ Transit riders. Set to be completed by 2035, its supporters say the tunnel becomes more critical with each passing day, as the existing 116-year-old Hudson River rail tunnels continue to deteriorate following severe damage from Hurricane Sandy in 2012. 

Under President Joe Biden, the federal government in 2023 committed to pump more than $6 billion in funding into the initiative. 

But the Department of Transportation abruptly announced an indefinite freeze on federal funding for the tunnel in September, claiming the contracts were under review for potential violations of the federal ban on diversity, equity and inclusion initiatives. The states claim the project executives complied with the government's review process, yet the funding remains iced. 

The lack of cash risks not just stopping the Hudson Tunnel project - which would leave a pair of massive holes on either side of the river - but also future railway initiatives under the so-called Gateway Program that project intended to kickstart. 

"From 2023 to 2060, the construction and operation of the full Gateway Program is expected to generate and sustain 90,000 jobs and $19.6 billion in economic activity generated by the construction," the states claim. "The success of all these other projects depends on the [Hudson Tunnel].

"Also hanging in the balance are the livelihoods of thousands of people who are working on the project and the futures of the numerous businesses contracting with [Gateway Development Commission] to complete the project," they added.

The decision was an arbitrary and capricious violation of the Administrative Procedure Act, the states say, because it was not based on legitimate matters of federal law but rather "the president's desire to punish political rivals."

They say this has been evidenced by Trump's numerous boasts to social media that he has squashed it and other "Democrat projects" to stick it to Senate Minority Leader Chuck Schumer, a New York Democrat. 

"We're cutting a $20 billion project that Schumer fought for 15 years to get, and I'm cutting the project," Trump said on social media this past October. "The project is gonna be dead. It is pretty much dead right now."

Last week, it appeared as if the administration was using the project as a bargaining chip to pressure Democrats into accepting a budget deal to fund widespread and controversial immigration enforcement efforts.

"It's Chuck Schumer and Democrats who are standing in the way of a deal for the Gateway tunnel project by refusing to negotiate with the Trump administration," White House spokesperson Kush Desai said in a statement amid congressional budget negotiations. 

The states say statements like this demonstrate that the funding freeze was merely a "politically motivated attempt to punish and coerce those with whom the president disagrees."

"Allowing this project to stop would put one of the country's most heavily used transit corridors at risk," New York Attorney General Letitia James said in a statement Tuesday. "Our tunnels are already under strain and losing this project could be disastrous for commuters, workers and our regional economy."

James is suing alongside acting New Jersey Attorney General Jennifer Davenport.

Their lawsuit is the second this week over the White House's withholding of Hudson Tunnel Project funds. On Monday, the Gateway Development Commission filed a complaint in the U.S. Court of Federal Claims, similarly accusing the administration of unfairly jeopardizing the yearslong project to the detriment of workers and commuters. 

Source: Courthouse News Service