Financial setback: Barricades near the closed White House visitor centre in Washington DC on Wednesday. The unconstitutional diversity, equity and inclusion principles have been cited as the reason for the funding freeze. —Bloomberg
WASHINGTON: The White House is halting US$18bil in New York infrastructure funding due to concerns over diversity and inclusion practices and as the first day of a federal shutdown grinds government work to a halt.
Russell Vought, the director of the US Office of Management and Budget, cited the unconstitutional diversity, equity and inclusion principles as the reason for the funding freeze in a post on X on Wednesday.
“Specifically, the Hudson tunnel project and the Second Ave subway,” he said.
The move comes as President Donald Trump and Republicans are pitted against congressional Democrats, including New York Senator Chuck Schumer, the minority leader, over funding.
New York governor Kathy Hochul was in the midst of holding a press conference with other elected officials in front of the Statue of Liberty to protest the government shutdown when she received news of Vought’s tweet.
“You know as I stand here, the bad news just keeps coming,” Hochul said, adding that the administration is using culture wars as a pretext for its actions.
“Culture wars, over the tens of thousands of jobs that we’ve created, with these infrastructure projects that were literally talked about for decades, that we finally could get moving, create jobs and opportunity and take care of infrastructure challenges that others were too timid to take on in the past,” she said.
In a subsequent statement, Hochul said she will use “every tool available” to restore the funding.
The US Department of Transportation (DoT) said the two major infrastructure projects were under review to determine whether any awarded funding violated a new rule that barred race and sex-based contracting requirements.
Employees working on the inquiry were furloughed due to the shutdown, causing a delay, the department said in an emailed statement, which blamed Schumer and House Democratic leader Hakeem Jeffries.
In a social media post, Schumer said the White House’s decision is “counterproductive” because both the Second Avenue Subway and the Hudson River Tunnel projects create thousands of jobs and support the local economy.
The DoT said it was changing its interpretation of its disadvantaged business enterprise programme, a Congressionally mandated requirement that recipients of federal grants set aside a share of funds designated for minority and woman-owned firms.
A newly drafted proposed rule would remove the presumption that those groups are disadvantaged and entitled to special treatment under the programme.
New York – like many cities and states across the United States – has similar initiatives that support minority and women-owned businesses when awarding contracts.
In the 2024 fiscal year, US$2.8bil or one-third of eligible state contracts were allocated to minority or women-owned business enterprises, known as MWBEs, according to state data. There are separate requirements for federally-funded projects.
New York is investing significantly in transit-related projects to ease congestion and facilitate necessary upgrades to ageing systems, with federal funding providing key support.
The Second Avenue subway project is a US$7.7bil development run by the Metropolitan Transportation Authority (MTA) that will connect the 96th Street station to 125th Street and provide subway service to East Harlem residents.
In 2023, the Federal Transit Administration gave the project a US$3.4bil full funding grant agreement.
Other funds will come from MTA debt sales repaid with revenue from a congestion pricing toll that charges motorists to drive on Manhattan’s busiest streets.
The Trump administration and the MTA are in a legal challenge over congestion pricing.
“The federal government wants to immediately ‘review’ our compliance with rules they told us about moments ago,” John J. McCarthy, the MTA’s chief of policy and external relations, said in a statement.
“It looks like they’re just inventing excuses to delay one of the most important infrastructure projects in America.”
Wednesday’s actions are “blatant efforts to punish New York,” Lisa Daglian, executive director of the Permanent Citizens Advisory Committee to the MTA, said in a statement.
“Tens of thousands of jobs hang in the balance and hundreds of billions in economic activity are at stake should these projects fail to move forward.”
Separately, the Hudson Tunnel project is meant to ease congestion underneath the Hudson River by adding a new tunnel and making upgrades to the current rail tunnel, which is more than 100 years old.
The new tunnel is expected to be in service by 2035 and the full rehabilitation of the existing tunnel will be complete by 2038.
The Gateway Development Commission, the bi-state authority created to build the Hudson tunnel project, said in a statement that it complies with all federal laws and regulations.
“We remain focused on keeping the project on scope, schedule, and budget,” said Thomas Prendergast, the commission’s chief executive officer. — Bloomberg
