Understanding the scope and limits of federal power
President Trump seems to believe that he has a lot of power over New York’s congestion pricing system. On Feb. 23, he triumphantly posted on Truth Social that “CONGESTION PRICING IS DEAD,” adding, “LONG LIVE THE KING!” Sean Duffy, the secretary of the U.S. Department of Transportation, backed up this confident declaration with a Feb. 19 letter to Gov. Kathy Hochul asserting that the Metropolitan Transportation Authority’s system of tolls on bridges, roads and tunnels leading into New York City was not only illegal but also not “a fair deal” for “working class Americans.” After Hochul rebuffed Duffy’s proposal for an “orderly cessation” of congestion pricing, Duffy’s tone became more threatening, with him sending a March 18 letter to MTA chief Janno Lieber expressing concern about crime on New York City’s subway system and demanding information about what the MTA was going to do about it. On April 21, Duffy took the gloves off, threatening in a third letter to terminate the federal Department of Transportation’s grants to New York unless the MTA got rid of congestion pricing.
Against these federal threats, Hochul fired back with an invocation of federalism: “This is an attack on our sovereign identity, our independence from Washington. And we are a nation of states.”
Can Duffy and Trump end congestion pricing in New York? Answering that question requires answers to three more specific questions about the obscure statutes, regulations and constitutional doctrines governing intergovernmental agreements and road-tolling programs. First, why exactly should the federal government have anything at all to say about a tolling program created by the New York state legislature, administered by a New York public authority, and financed by commuters to New York City without any federal funding? Second, does the USDOT have authority unilaterally to terminate the November 2024 agreement between New York and the feds establishing New York’s congestion pricing system? Third, does the federal government really have the power to strong-arm New York into ending congestion pricing by terminating unrelated federal grants that fund other transportation programs ranging from subway service to highway maintenance?
The short answers to these questions are that federal law generally prohibits tolling on roads constructed with federal financial assistance — but the MTA’s congestion pricing system falls comfortably within an exception to this prohibition. Moreover, the federal government may not coerce New York into eliminating congestion pricing by threatening to terminate grants unrelated to congestion pricing. Let’s talk through the questions one at a time.
1. Why does the federal Department of Transportation have any say at all in whether New York has congestion pricing?
USDOT’s power over MTA’s congestion pricing system rests on a prohibition on tolling of federally funded roads and an exception for bridges and tunnels that date back to 1916 and 1927, respectively. Congress enacted the initial prohibition on tolls as an amendment to the first bill to provide federal funding to states for roads way back in 1916. The exception for tolls on bridges and tunnels followed in 1927. This exception initially exempted bridges and tunnels from the prohibition on tolls just so long as the toll revenue was used to pay for the tolled infrastructure. (The Enos Center on Transportation has a convenient summary of this history here).
Congress modified the exception to the prohibition on tolling in complicated ways over the ensuing decades. The current version of this prohibition is now codified 23 U.S.C. § 301, which provides that “[e]xcept as provided in section 129 of this title with respect to certain toll bridges and toll tunnels, all highways constructed under the provisions of this title shall be free from tolls of all kinds.” Some of the roads and bridges within MTA’s central business district tolling plan (in particular, New York City’s and MTA’s East River bridges) were financed in part, at some point in the past, with federal funds. (For a list of New York projects currently receiving federal money, you can consult the New York State Department of Transportation’s “State Transportation Improvement Plan” or “STIP,” available here). The legality of New York’s congestion pricing system, therefore, turns on whether that system falls within any exception from the prohibition.
Congress provided the exception for “value pricing” of bridges and tunnels from the tolling ban — on which New York and the MTA are relying here — in section 1012(b) of the “Intermodal Surface Transportation Efficiency Act,” or “ISTEA” (pronounced “ice tea” by transportation aficionados) (original text available here). Section 1012(b) authorizes the secretary of USDOT to “enter into cooperative agreements with as many as 5…State or local governments or public authorities to establish, maintain, and monitor congestion pricing projects.” In 1998, Congress changed the name of the program to “value pricing” in section 1216(a) a statute entitled TEA-21 (for “Transportation Efficiency Act in the 21st Century”), but otherwise left the program mostly unchanged.
On the assumption that New York’s congestion pricing fell within this federal exception from the federal prohibition on tolls, the New York legislature enacted a congestion pricing program in 2019 that then-Governor Cuomo signed into law. Pursuant to this 2019 state statute, the MTA then entered into an agreement with USDOT in November of 2024 to create a “value pricing pilot program”
2. Does MTA’s congestion pricing system comply with relevant federal statutes?
There’s now a battle in the courts — but there is no plausible argument that MTA’s system of congestion pricing fails to meet federal standards. In his February letter, Duffy claimed that MTA’s system violated some unwritten limits in federal law implicit in “the long-standing history of the anti-tolling provision” in Title 23. As USDOT’s own lawyers conceded in an internal memo that they mistakenly filed with the federal district court, however, these claims are groundless. Duffy’s letter claimed that acceptable congestion pricing cannot be “cordon pricing,” meaning area-wide tolls that are imposed on every road leading to a central business district.
Both members of Congress and the USDOT, however, have repeatedly stated that cordon pricing is an option authorized by federal law. (See, for instance, one senator’s opening statement at this Senate Committee hearing in 1991 or the USDOT’s own primer on congestion pricing, which currently includes “Zone-Based or Cordon Pricing,” defined as “[p]er-mile charges on all roads within an area or on a roadway network that may vary by level of congestion,” as a form of acceptable “congestion pricing”).
Duffy’s February letter also asserted that the federal law in question, the Intermodal Surface Transportation Efficiency Act, does not “authorize tolls that are based on considerations separate from reducing congestion or advancing other road-related goals.” This statement contradicts the plain text of ISTEA. Section 1012(b)(3) of ISTEA, which authorizes the use of toll revenue for any “projects eligible under [Title 23],” and section 104(f) of Title 23 allows transfer of highway funds for transit projects. Again, the USDOT’s own internal documents contradict Duffy’s assertion: The USDOT’s “flexible funding process guidebook” lays out the broad discretion that states and the federal government enjoy under section 104 to use highway funds for transit purposes. A report from the Mineta Transportation Institute at San Jose State University (available here) illustrates how local governments have used tolls from roads and bridges to fund buses and light rail for decades, with illustrations ranging from the Golden Gate Bridge tolls to Los Angeles’ tolled express lanes. Duffy’s bare assertion to the contrary is pulled out of thin air.
3. May Duffy rescind the MTA’s authority to impose congestion fees because the MTA’s plan is no longer consistent with the administration’s “goals or agency priorities”?
Duffy’s claim that MTA’s congestion pricing program violates the anti-tolling provision in Title 23, therefore, is groundless. Indeed, USDOT’s attorneys from the Southern District of New York U.S. Attorney’s Office so advised Duffy in its memo that was mistakenly filed with the federal court. Duffy’s April 21 letter accordingly added another reason for terminating MTA’s program based on Office of Management and Budget (OMB) guidelines for terminating “Federal awards.” According to Duffy’s letter, OMB’s rule on termination, codified at 2 C.F.R. §200.340(a)(4), allows USDOT to terminate USDOT’s authorization for congestion pricing because MTA’s congestion pricing system “does not effectuate the goals or priorities of the U.S. Department of Transportation.”
Can Duffy rely on OMB’s rule to rescind New York’s authority to toll its bridges and roads just because USDOT now has other “goals and priorities”? Unlike Duffy’s arguments regarding the alleged illegality of MTA’s congestion pricing system, the argument based on OMB’s rule has a textual basis. The USDOT’s power to terminate, however, turns on a strained reading of the rule’s text.
OMB’s rule allows a “Federal award” to be terminated only “pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.” For this rule to authorize termination of the congestion pricing program, therefore, the USDOT’s approval of the MTA’s congestion pricing system must constitute a “Federal award” and be consistent with that award’s “terms and conditions” and “authorized by law.”
It is a stretch to describe USDOT’s waiver of Title 23’s anti-tolling restriction as an “award.” The noun “award” more naturally refers to grants of federal money or property possessed by an agency and transferred to a recipient, not to waivers of restrictions that would otherwise apply to both the agency and the state.
Even if such a waiver could be regarded as an “award,” however, USDOT has yet to point to any “term or condition” in the value pricing agreement or any other USDOT document that would authorize termination because of USDOT’s changing priorities.
Some of USDOT’s subdivisions have adopted “termination for convenience” conditions for their grants, but these “T4C” conditions still give grant recipients power to control timing of and conditions for termination. The Federal Transit Authority, for instance, issued “award management conditions” in 2017 that allow the FTA to unilaterally terminate an award, but even this guidance requires that “[b]oth parties must agree upon the termination conditions, including the effective date.” There’s no sign of any similar guidance for value-pricing agreements. Even if the Federal Highway Administration had issued a similar guidance, however, New York would still be entitled to veto any termination conditions proposed by USDOT.
Rather than adopt a strained analogy between termination conditions for federal grants and value-pricing agreements, courts would more likely look to the statutory provisions governing value-pricing programs. Section 1210(b) of (5) of ISTEA provides that
“[t]he Secretary shall monitor the effect of such [value-pricing] projects for a period of at least 10 years, and shall report to the Committee on Environment and Public Works of the Senate and the Committee on Public Works and Transportation of the House of Representatives every 2 years on the effects such programs are having on driver behavior, traffic, volume, transit ridership, air quality, and availability of funds for transportation programs.”
It is difficult to read this provision as anything other than a requirement that the USDOT maintain value-pricing agreements “for a period of at least 10 years” in order to collect data about variables like driver behavior” and “transit ridership.” The whole point of a pilot program, after all, is to observe its operations long enough to see how tolls affect traffic congestion. If this 10-year minimum term is the best reading of the statute, then OMB’s rule on termination to accommodate USDOT’s priorities would be inapplicable, because premature termination would not be “authorized by law.”
4. May Duffy terminate grants unrelated to value pricing in order to pressure New York to eliminate congestion pricing?
Even assuming that MTA’s congestion-pricing system does not satisfy some unwritten federal standard, Duffy does not have the power to withhold unrelated federal grants to ensure compliance with that standard. The U.S. Supreme Court held in National Federation of Businesses v. Sebelius that Congress may not require states to participate in an expanded Medicaid program as a condition for receiving Medicaid payments under an older and less expansive Medicaid program. The Court’s holding was based on the idea that making eligibility for federal grants turn on compliance with programs unrelated to those grants was an unconstitutional coercion of states. In the Court’s own words:
We have upheld Congress’s authority to condition the receipt of funds on the States’ complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent according to its view of the “general Welfare.” Conditions that do not here govern the use of the funds, however, cannot be justified on that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes.
Duffy’s “threats to terminate other significant independent grants” in order to “pressur[e] [New York] to accept policy changes” to its congestion pricing program fit precisely into this doctrine banning coercive conditions on federal grants. Indeed, Duffy’s April letter does not attempt to disguise the coercive purpose of his threat to withhold money for Manhattan’s roads as leverage to force New York to eliminate congestion pricing. The statutes authorizing those other grants for subways or upstate highways do not authorize extortion. USDOT can withhold them if New York violates the purposes for which those grants were awarded, not to exert pressure on New York to comply with the Trump Administration’s views on congestion pricing.
In the end, Duffy has neither a freewheeling power to rescind intergovernmental agreements at the whim of the president nor any argument that New York’s tolls violate anything in federal law. The most likely outcome of the litigation, therefore, is that the court will find that the Trump administration lacks any power to kill congestion pricing in New York.