A federal appeals court on Thursday declined to block a lower court order requiring the Trump administration to restore funding for the Gateway tunnel project linking New York and New Jersey, allowing construction support to restart as litigation continues.

The decision by the U.S. Court of Appeals for the 2nd Circuit means the funding directive issued by a federal district judge can take effect for now, even as a lawsuit filed by the Democratic-led governments of New York and New Jersey moves forward. The appellate court indicated it will revisit the matter after hearing oral arguments scheduled for later this month.

“The Trump administration’s legal stay to avoid funding the Gateway Tunnel has expired,” New York Gov. Kathy Hochul (D) wrote on social media. “Donald Trump needs to follow the law and get the project back on track immediately.”

The dispute centers on the $16 billion Gateway initiative, which would construct two additional rail tracks beneath the Hudson River, connecting New Jersey to Penn Station in Manhattan. The Transportation Department suspended its financial support for the project last fall.

Federal officials have maintained that the pause is tied to a broader review of whether the project complies with federal requirements. President Trump reportedly told Senate Democratic Leader Chuck Schumer (N.Y.) last month that he would lift the funding hold if Schumer agreed to rename Penn Station and Washington Dulles International Airport in his honor.

Earlier this month, U.S. District Judge Jeannette Vargas directed the administration to restart funding after the Gateway Development Commission instructed contractors to halt work pending the return of federal payments.

Vargas, who was appointed by President Biden, sided with New York and New Jersey, finding that the funding freeze likely violates federal regulations and describing the move as arbitrary and capricious.

Government attorneys argued that complying with the order would require the immediate release of approximately $200 million and asked the 2nd Circuit to temporarily block the ruling.

“The government will be forced to disburse those sums without any obvious mechanism for recovering them later if the government prevails on appeal,” the Justice Department cautioned in court filings.

The district judge had agreed to delay enforcement of her order until late Thursday afternoon to give the appellate court time to act. She acknowledged that the administration raised substantial questions about whether she has jurisdiction to hear the case, noting that it might belong in a specialized court that handles federal contract disputes.

As the deadline approached, the 2nd Circuit issued a short order setting oral arguments for the week of Feb. 23 but declined to pause the lower court’s directive in the interim, effectively allowing funding for the project to resume for now.

{Matzav.com}