Trump backs down after New York sues him over Second Avenue Subway funding freeze

The Trump administration has agreed to resume funding a key Manhattan subway project after New York officials sued.

The U.S. Department of Transportation said in a federal court filing Thursday that it has completed its review of the Second Avenue subway line project, and will begin reimbursing state transit officials again for construction costs.

Janno Lieber, MTA’s CEO, said the reversal means “long-awaited transit justice” will soon come to neighborhoods in upper reaches of Manhattan. The Second Avenue subway project is building new stations northward along Manhattan’s Upper East Side, bringing subway service to parts of the Harlem neighborhood.

“It shouldn’t have taken seven months and a lawsuit to get here,” he said in a statement.

The federal Department of Transportation said the agreement means taxpayers’ “hard-earned dollars will not fund unconstitutional DEI initiatives,” referring to diversity, equity, and inclusion principles. The administration argued that use of DEI principles has led to soaring costs on federal projects and is unconstitutional.

“This has always been about securing the best deal for the American taxpayer and ensuring their dollars are spent efficiently and fairly,” the agency said in a statement.

Lieber, addressing reporters later Thursday, called the dispute “an “unnecessary waste of the public’s time and money” since the state agency was complying with the administration’s new rules regarding minority and women-owned businesses in federal projects.

“The whole point was they sent us a letter saying we didn’t make the standards of the new rules before they even issued the new rules,” he said. “It was just a bunch of gamesmanship.”

The USDOT had withheld roughly $60 million from the Second Avenue project as it launched its review. Overall, the project is supposed to cost $7.7 billion, with the federal government covering around $3.4 billion.

The dispute over the Second Avenue subway was among a number of major transportation projects in New York and New Jersey that Trump has sought to scuttle as he feuded with Democratic leaders in those states.

The administration in October also halted billions of dollars in funding for a massive new rail tunnel between New York and New Jersey. A federal judge in February, however, ordered federal officials to resume payments for the tunnel project under the Hudson River.

Last year, the USDOT rescinded approval for New York’s first-in-the-nation congestion fee and threatened to pull funding from the state if it did not abandon the toll, which is imposed on drivers entering the busiest part of Manhattan.

But a federal judge ruled last month that the agency lacked the authority to unilaterally rescind approval of the $9 fee.

This story was originally featured on Fortune.com