The city sued after the administration said it would claw back FEMA funds designated by Congress for costs associated with providing shelter to migrants.
The suit claims the federal government removed the funds from the city's bank account on February 11, that were paid out by FEMA.
In response, the administration said it should not allow the city to use federal money to pay for a hotel that had been "taken over" by the street gang Tren De Aragua.
"According to media reports, Tren De Aragua has 'taken over the Roosevelt Hotel and is using it as a recruiting center and base of operations to plan a variety of crimes,' including 'gun and drug sales as well as sex trafficking, which can reasonably be presumed to be conducted in the hotel itself,'" the administration wrote in opposition to the city's request for a temporary restraining order.
"On its merits, this case involves a question of whether, if a federal grantee providing housing for illegal aliens allows that housing to be taken over by a terrorist organization and used as a base of operations for serious illegal activity, the federal government may pause that grantee's funding until it assures itself that the funds are not being used for or facilitating illegal activity."
There is a hearing Wednesday in Manhattan federal court.
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