The Trump administration blinked Thursday, agreeing to release $58.6 million in frozen Second Avenue Subway funds minutes before a federal judge was set to hear the MTA’s lawsuit.

The U.S. Department of Transportation sent a letter to the MTA confirming the deal just ahead of the scheduled Federal Court of Claims hearing, ending a freeze that had locked up reimbursement money for the East Harlem extension since last fall. Gov. Kathy Hochul and MTA Chair and CEO Janno Lieber both credited the legal pressure for forcing Washington’s hand.

“We took the Trump Administration to court after they illegally froze funding for the Second Avenue Subway,” Hochul wrote on X. “Today, they backed down. The freeze is over.”

Lieber didn’t soften it either.

“It shouldn’t have taken seven months and a lawsuit to get here, but with the federal government’s concession today on the courthouse steps, the MTA can now confidently forge ahead with Second Avenue Subway Phase 2,” he said.

The MTA filed suit last month after USDOT froze the funds in October, citing concerns that the transit agency’s contracting practices violated new federal rules against using a firm’s minority- or women-owned business status as selection criteria. The agency’s suit alleged USDOT breached a contract it signed with the MTA in 2023 under former President Joe Biden.

USDOT’s version of events is less triumphant for the MTA. The department said it agreed to resume processing reimbursement requests only after the MTA signaled it would stop factoring a contractor’s minority- or women-owned status into selection decisions. The letter cites specific practices it found alarming.

“DOT’s review uncovered troubling information revealing that MTA and its prime contractors appear to have engaged in contracting practices that consider race and sex as part of both the prime and subcontract bidding and contract awards, including through the use of ‘Diversity Compliance’ evaluation criteria,” the letter reads.

That’s a significant concession from the MTA, even if Hochul and Lieber are framing Thursday as a victory lap.

USDOT put the terms plainly: “In light of MTA’s agreement to take corrective actions, DOT has completed its review and is resuming the processing of reimbursement requests pursuant to normal procedures.”

Translation: The money flows again, but the MTA’s contracting approach changes.

The frozen funds weren’t the only casualty of the October review. USDOT also halted federal dollars for the Gateway rail tunnel project at the same time, subjecting it to the same scrutiny over contracting practices. Thursday’s letter addressed the Second Avenue Subway funds specifically. It wasn’t immediately clear whether Gateway funding faces a separate resolution.

For riders and construction crews, the practical consequence is movement. The MTA board approved a billion-dollar contract at its late March meeting despite the freeze, gambling that the money would eventually come through. It did. Lieber said the contract covers excavation of a new 106th Street station and structures connecting it to existing tunnels running north and south.

“The billion-dollar contract approved at our March Board meeting is being awarded, and contractors are mobilizing right away,” Lieber said.

That’s the kind of sentence that moves dirt.

Second Avenue Subway Phase 2 has been a fixture of MTA planning for years, promising to extend the Q train from its current 96th Street terminus up through East Harlem, a neighborhood that has waited generations for a direct subway connection. The Federal Transit Administration’s Capital Investment Grant program is the primary federal funding vehicle for projects of this scale, and any prolonged freeze on reimbursements threatened the MTA’s ability to keep contractors paid and schedules intact.

The October freeze put the MTA in a tight spot. Contracts were approved. Timelines were set. Then Washington pulled the reimbursement pipeline without warning, forcing the agency into court last month to demand the money it said USDOT was legally obligated to provide. The MTA’s public project tracker shows Phase 2 construction already underway at multiple sites along the corridor.

Thursday’s deal doesn’t resolve the larger policy fight over minority- and women-owned business contracting programs. That battle is playing out in federal courts and administrative agencies across the country. What it does mean for New York is that a critical infrastructure project can keep moving.

The MTA can now submit its $58.6 million in pending reimbursement requests. Contractors are, per Lieber, mobilizing now.