A federal judge has permanently prohibited the Trump administration from withholding federal funds designated for a $16 billion rail tunnel project connecting New York and New Jersey beneath the Hudson River. U.S. District Judge Jeannette Vargas, appointed by President Joe Biden, issued the ruling on Monday in favor of the two states, which had filed suit in February.

New York and New Jersey challenged the administration’s decision to freeze the funding, arguing that the move was politically motivated and lacked a legal basis. The Trump administration initially announced last year that it would withhold funds to review whether the project incorporated policies related to diversity, equity, and inclusion. However, Judge Vargas cited public statements by former President Donald Trump, who indicated he had personally decided to terminate funding, attributing the move to political opposition. In an October statement, Trump said, “It’s terminated because the Democrats are so foolish,” and added, “Right now, there is no funding—because it’s up to me.”

The tunnel project, considered critical infrastructure for the region, relies heavily on federal support. Approximately $12 billion in funding comes from federal grants, while an additional $4 billion is provided as federal loans to be repaid by New York, New Jersey, and the Port Authority of New York and New Jersey. Project officials had warned in January that construction work would have to be canceled without the necessary funds.

Following the lawsuit, Judge Vargas had initially issued a temporary injunction preventing the administration from withholding the funds during the legal proceedings. Her latest decision permanently blocks the administration from continuing the freeze.

In her ruling, Vargas stated that the administration failed to demonstrate that the suspension of funds complied with federal regulations. “Defendants make no attempt to justify their actions as consistent with the governing federal regulations,” she wrote. The White House directed inquiries to the U.S. Department of Transportation, which affirmed its commitment to responsible spending of taxpayer dollars but did not elaborate on the ruling.