USDOT Funding Freeze for Rail Mega-Projects Drags On

by Sean Jeans-Gail, VP of Gov't Affairs + Policy

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The Trump Administration’s freeze of federal funds for rail projects in Democratic-led cities and states continued this week, increasing uncertainty for the contractors, workers, and transit agencies. However, the agencies have promised to keep the work moving, expressing optimism that a resolution can be reached in time to avoid any meaningful disruptions.

On October 3rd, the U.S. Department of Transportation (USDOT) announced a freeze on the disbursement of $2.1 billion in federal funding designated for two projects—the Chicago Transit Authority (CTA) Red Line Extension and the CTA Red and Purple Modernization Program. The USDOT stated that the funding freeze will allow it to review how the CTA is implementing the federal Disadvantaged Business Enterprise (DBE) program.

This follows on the heels of an October 1st announcement that the USDOT would freeze funding disbursements for two megaprojects in New York—the 2nd Avenue Subway and new Hudson River Tunnel—to review how the Metropolitan Transportation Authority (MTA) and the Gateway Development Commission are implementing the DBE. Together, these two projects represent a combined $18 billion in allocated federal funding.

The USDOT was unusually explicit in drawing a connection between the funding freeze and the political disagreement driving the government shutdown, laying blame at the feet of Democratic leaders from New York.

“Thanks to the Chuck Schumer and Hakeem Jeffries shutdown, however, USDOT’s review of New York’s unconstitutional practices will take more time. Without a budget, the Department has been forced to furlough the civil rights staff responsible for conducting this review,” said Secretary Sean Duffy in a press release announcing the freeze. “This is another unfortunate casualty of radical Democrats’ reckless decision to hold the federal government hostage to give illegal immigrants benefits.”

In an interview this week with CNBC, Sec. Duffy did make a point to say that President Trump is not against the projects, per se, instead framing the freeze as an issue of fairness.

“These are the largest projects in the Western Hemisphere, they’re massive, and we have constitutional rules on disadvantaged businesses and how you give that money out… you can’t base it on race and sex,” he told the reporter.

The program at the center of the USDOT’s inquiry aims to ensure fair participation of minority- and women-owned businesses in federally funded transportation projects. It is also an unlikely flashpoint, given its history. Congress first enacted the DBE in 1983, and it has been largely uncontroversial during the life of the program. Successive Congresses have reauthorized it in every subsequent surface and aviation authorization in the intervening 42 years.

Another unusual element is the timing of the announcements: the interim final rule barring race- and sex-based contracting requirements from federal grants that the USDOT based its administrative review upon wasn’t actually published in the Federal Register until two days after the USDOT announced it was suspending the New York projects.

“The federal government wants to immediately ‘review’ our compliance with rules they told us about moments ago," MTA spokesperson John McCarthy wrote in a statement to reporters. “We’re reviewing their tweets and press releases like everyone else."

Work Continues… For Now

In spite of the funding freeze, early indications from the contractors involved in the affected projects suggest that work will continue as planned—at least in the short term. Tutor Perini, a contractor managing construction work for the Gateway Program, reported no immediate changes to its operations.

“We do not anticipate any significant impact on our work on the Manhattan Tunnel project, a component of the Gateway Tunnel project,” Jorge Casado, senior vice president of investor relations told Construction Dive. “Because we do not anticipate any significant impact, we are currently not making any special adjustments to schedules or our workforce.”

Chicago transit leaders made similar statements of support for the projects under review.

“I want to be very clear that CTA is fully and entirely committed to the Red Line Extension project,” CTA Acting President Nora told the agency’s board of directors.

Ultimately, a substantive conversation between the USDOT and the agencies in question will have to wait until the government shutdown is resolved—yet another transportation casualty of our nation’s growing political dysfunction.