``We're still have to work out the details,'' Colton said. ``This is simple a statement of principles. It's an important step, but it's only the first step in the process.'' It could take months to devise a tax credit program that would produce the desired revenue, he said.

Pataki and lower Manhattan business leaders such as Bank of New York President Thomas Renyi have said that linking lower Manhattan with Long Island's 100,000 daily rail commuters, and providing a nonstop connection to Kennedy, are critical to the district's economic future.

Since the 1950s, financial firms like J.P. Morgan Chase & Co. and Citigroup have migrated to midtown Manhattan, which has direct commuter rail service from Long Island, New Jersey and the city's northern suburbs.

The terrorist destruction of the World Trade Center only accelerated the trend, as Lehman Brothers Holdings Inc. and Morgan Stanley Inc. moved operations to midtown.

Funding Sources

Together with $650 million already set aside by the Port Authority of New York and New Jersey, plus another $400 million expected from New York's Metropolitan Transportation Authority, which runs the city's subways and the Long Island Rail Road, the state would be more than halfway toward fully funding the project, said Deputy New York Mayor Daniel Doctoroff, who oversees economic development for the city.

``We took a very important step today. For a major transportation project like this one, having that amount of money up front is almost unheard of,'' Doctoroff said in an interview. ``You wouldn't need the rest of the money until something like eight years from now.''

Last week, Doctoroff and American Express Co. Chairman Kenneth Chenault led a delegation of lower Manhattan business leaders to a White House meeting with Joshua Bolton, Bush's budget director, to urge support for the rail link. Chenault and 17 other business leaders, including Goldman Sachs Group Inc. Chief Executive Henry Paulson and J.P. Morgan Chase chief William Harrison, also co-wrote a letter to Bush on the project's behalf.

Diversion Opposed

Good Jobs New York, a foundation-funded group that advocates government and corporate accountability, criticized Bush's support for the fund diversion. ``This is the epitome of what's been wrong'' with the rebuilding process, said Bettina Damiani, the group's project director. ``Where does it say that $2 billion cash going into a rail link that many question the need for is better than addressing affordable housing and creating new jobs?''

The $2 billion comes from what was originally $5 billion of tax credits made available to businesses that located or rebuilt in lower Manhattan following the attack. The city devised a proposal late last year to find an alternative way for the unused tax credits to be spent, said Jordan Barowitz, a spokesman for Mayor Michael Bloomberg. Pataki proposed the switch for the rail link in a June 28 letter to Bush, and today, the president agreed to ``refine the initial estimate of these tax incentives'' in a way that ``will allow the city to cash in on any underutilized portions of the aid package,'' Barowitz said.

Transit Projects

The $21 billion also included $4.55 billion specifically for transportation projects, including $1.7 billion for a new World Trade Center terminal for the Port Authority Trans-Hudson trains to New Jersey and another $750 million for a subway center at Fulton Street that would connect 12 subway lines.

Funds left over from that grant could be diverted to the Long Island rail link, Doctoroff said. Also, some of the $800 million set aside to submerge West Street, a six-lane boulevard just west of Ground Zero, could be used should the state decide to shelve that project, he said.