The U.S. Department of Transportation (USDOT) has paused federal reimbursements for several major transit projects in New York, including the Hudson Tunnel and Second Avenue Subway extension, pending a review of small-business diversity programs. The move coincides with a partial federal government shutdown, intensifying partisan tensions between the Trump administration and Democratic lawmakers.
The department said the pause stems from a forthcoming rule revising how it evaluates programs designed to assist “socially and economically disadvantaged” small businesses. The new rule, not yet in effect, removes automatic presumptions of economic disadvantage for certain minority and women-owned firms — a change prompted by a recent court decision.
USDOT’s announcement explicitly blamed Senate Minority Leader Chuck Schumer, House Minority Leader Hakeem Jeffries, and other Democrats for delays, calling it a consequence of their opposition during the shutdown standoff.
New York Governor Kathy Hochul condemned the action, describing it as “political payback and an attack on New York and its residents.”
The freeze includes a $300 million reimbursement for the Second Avenue Subway project. The $17.2 billion Hudson Tunnel Project, which has secured over $11 billion in federal funding, remains under review. Any prolonged suspension of funds could disrupt critical infrastructure connecting New Jersey and Manhattan, potentially affecting tens of thousands of commuters and regional economic activity.
Thomas Prendergast, CEO of the Gateway Development Commission, said the project “has always been in compliance with federal laws and rules and will cooperate fully with any reviews.”
Democrats, including Representative Frank Pallone of New Jersey, criticized the move as part of a “fabricated culture war” that risks undermining vital transportation projects.
The dispute marks the latest in a series of funding threats from USDOT toward New York’s transit system, following previous warnings tied to worker safety compliance at the Metropolitan Transportation Authority (MTA).
