US pauses New York transit funding in shutdown jab at Democrats

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By David Shepardson and Jonathan Allen

WASHINGTON (Reuters) -The U.S. government said on Wednesday it has paused some funds for major transit projects in New York, including the Hudson Tunnel and the Second Avenue Subway, while the Department of Transportation reviews whether any small-business contractors are engaged in improper diversity initiatives. 

The Department of Transportation’s sudden announcement on Wednesday was based on a new agency rule that has yet to go into effect, but was intended in part to pressure Democratic lawmakers in Congress over the partial government shutdown that began hours earlier.

Senate Minority Leader Chuck Schumer, a Democrat from New York, has championed both projects and is leading the Democratic opposition in the showdown with President Donald Trump and other Republicans over the federal budget.

In its unusual announcement, the USDOT invoked partisan political discord and personally blamed Schumer, House Minority Leader Hakeem Jeffries and other Democrats for any delays in reimbursements to New York for the projects.

New York Governor Kathy Hochul, a Democrat, said in a statement that Trump was “intent on using his reckless government shutdown to hurt the American people.”

“This is political payback and an attack on New York and its residents,” Hochul said.

The immediate impact of the announcement was unclear beyond a pause to a $300 million reimbursement for the subway project.

Any substantive delays in federal funding over partisan political squabbles are almost certain to face swift legal challenges from New York and New Jersey.

The department said its forthcoming rule changed how it approached decades-old programs enacted by Congress to help small businesses run by “socially and economically disadvantaged individuals.” Following a district court ruling in its favor last year, women and some people belonging to minority racial groups will no longer be “presumed” to be economically disadvantaged when bidding for contracts.

USDOT sent letters to New York transit leaders on Tuesday saying both the Second Avenue Subway extension and the Hudson Tunnel reconstruction project would now need to be reviewed to “ensure nondiscrimination.”

“Thanks to the Chuck Schumer and Hakeem Jefferies shutdown, however, USDOT’s review of New York’s unconstitutional practices will take more time,” the department said in Wednesday’s announcement, misspelling Jeffries’ surname. “Without a budget, the Department has been forced to furlough the civil rights staff responsible for conducting this review.”

TRUMP AIMS AT BIG TARGETS

USDOT said it had focused on the two projects in New York, which is governed by Democrats, in part for their symbolism: “they are arguably the largest infrastructure initiatives in the Western Hemisphere, and the American people want to see them completed quickly and efficiently.”

It said the remaining federal funding earmarked for the projects was $18 billion, but it was unclear how much of that was through Disadvantaged Business Enterprise programs now under review.

The $17.2 billion Hudson River tunnel project, which received more than $11 billion in federal grants, involves repairs to an existing tunnel, and the building of a new one for passenger railroad Amtrak and state commuter lines between New Jersey and Manhattan.    

Any failure of the current Hudson tunnel, which was heavily damaged by 2012’s Hurricane Sandy, would hobble commuting in the metropolitan area that produces 10% of the country’s economic output.

Representative Frank Pallone, a Democrat from New Jersey, said in a statement that Trump was engaged in a “fabricated culture war” that could cause havoc for tens of thousands of commuters.

In 2023, the administration of U.S. President Joe Biden, a Democrat, awarded $3.4 billion to extend the Second Avenue Subway up into Harlem.

Amtrak declined to comment, while Schumer and Jeffries did not respond to requests for comment. The Hudson Tunnel project has always been in compliance with federal laws and rules and would cooperate with any reviews, Thomas Prendergast, the CEO of the Gateway Development Commission, said in a statement. Trump, a former New York City real estate developer, refused to approve funding for the projects in his first term.

USDOT has repeatedly threatened New York transit funding.

In August, the department said it may withhold 25% of federal transit funding for New York state’s Metropolitan Transportation Authority if the agency does not improve safety for subway track maintenance workers.

The Trump administration is also trying to kill Manhattan’s congestion pricing program introduced early this year, designed to reduce traffic and raise billions in funds for mass transit.

(Reporting by David Shepardson in Washington and Jonathan Allen in New York; Additional reporting by Doina Chiacu; Editing by Chizu Nomiyama, Chris Sanders and Diane Craft)