NYC Bid for US to Return $80 Million in FEMA Funds Is Denied
(Bloomberg) — A federal judge denied New York City’s request for an immediate return of $80 million that the Trump administration clawed back after the money had been awarded as reimbursement for shelter provided to migrants.
US District Judge Jennifer Rearden issued her ruling Wednesday after a hearing, saying the city hadn’t demonstrated it would be irreparably harmed by having to wait until its lawsuit against the federal government is concluded. The judge agreed with the US Justice Department that the city would have means to get the money back later if it won the case.
New York sued Feb. 21, alleging that the Federal Emergency Management Agency took the money without notice from the city’s bank account on Feb. 11. The administration said the funds were paid by mistake and were paused to ensure money wasn’t being used to facilitate criminal activity at the Roosevelt Hotel in Manhattan, where many migrants were housed.
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The government cited media reports that indicate the hotel was taken over by the violent Tren De Aragua gang, which has been designated as a terrorist organization by the Trump administration. But a lawyer for the city, Joshua Paul Rubin, said FEMA never asked the city about the alleged criminal activity and reiterated that all recipients had been approved for financial assistance by the federal government itself.
Rubin also disputed Trump administration arguments that the money had been squandered. He said the funds were spent “exactly” the way the grant required. “It’s a change in political position,” he said, adding that the administration’s actions were part of its efforts to cancel a program that reimburses local governments and nonprofits that feed and shelter newly arrived migrants.
‘Exposed’ Waste
The city’s lawyer pointed to President Donald Trump’s address to Congress on Tuesday night, when he cited the disputed New York City grant as an example of how his administration had “exposed and swiftly terminated” waste. Rubin said it was a “signal of overall intent.”
But ultimately the judge, a Biden appointee, didn’t buy the argument around what she described as “FEMA’s so-called money grab.”
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The disputed funds are part of hundreds of millions of dollars approved by Congress to reimburse cities for housing undocumented migrants who were released into the country intentionally by federal agents. All of the New York City money was approved by FEMA after a lengthy review that ensures each migrant had been released properly by federal authorities, according to Rubin.
The Roosevelt Hotel, which ceased operations as a luxury hotel at the end of 2020, served as both the literal and symbolic center of the city’s struggle to manage the influx of new arrivals under its right-to-shelter laws. The city closed the processing center and shelter housed in the hotel last month after the number of new arrivals fell to less than 10% of its peak during the migrant crisis.
FEMA’s former chief financial officer sued the agency on Tuesday, saying she was unlawfully terminated over payments to New York City under the program. The Department of Homeland Security announced her termination Feb. 11 following a social media frenzy led by Elon Musk over the grant funding FEMA provided, saying she and three other FEMA employees circumvented leadership to carry out the payment.
Corruption Case
The city’s lawsuit was filed just hours after another federal judge declined the Justice Department’s request to immediately dismiss a corruption case against New York City Mayor Eric Adams and appointed former US Solicitor General Paul Clement to review the decision to drop charges against Adams, while retaining the authority to charge him again later.
Critics have claimed the move to drop the charges against Adams, which ignited a firestorm in the Justice Department and led to the resignation of several prosecutors, is part of an improper effort to pressure Adams to cooperate with the administration on immigration issues. His lawyers have denied the existence of any such deal and said the charges never should have been brought in the first place.
Adams and mayors of other so-called sanctuary cities testified Wednesday before the House Committee on Oversight and Government.
The suit also comes as a key measure of the city’s fiscal health is deteriorating, adding to the largest US city’s financial worries in the face of billions of dollars in possible cuts from the Trump administration. The city’s Independent Budget Office projects New York’s operating surplus as a percentage of tax revenue will fall to 4.8% at the end of the current June 30 fiscal year, the lowest percentage since fiscal 2014.
The case is City of New York v. Trump, 25-cv-01510, US District Court, Southern District of New York (Manhattan).
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Bloomberg