Inflated federal funding for the capital costs of transit projects brings about wasted spending, poor planning and poor service for transit riders in the United States.
Exhibit A: San Francisco’s T-Third line. At a capital cost of nearly $1 billion, this abomination of low-speed transit stupidity reminds the city of its pitiful existence every year like a recurring herpes sore. The federally inflated project bred its present operating costs which are significantly higher than most other alternatives for this corridor (including the 15 bus line it replaced).
Exhibit B: Pittsburgh’s planned North Shore Connector LRT Line. Without a doubt, Pittsburgh needs more transit (and, gasp, maybe even expanded personal auto capacity on its roadways). But, the Pitt wants to be a world-class city and, of course, world-class cities have subways! 80% of the nearly $500 million in capital costs will be borne by the federal guv. Let’s not consider other alternatives with lower capital costs, lower operating costs and equal levels of service (BRT, surface LRT) and instead vouch for the priciest option in the book – digging!
Here’s the problem: Why go for an efficient, low-cost option when you have so much federal money to spend? It’s hard to turn money down. The easy availability of federal funding for unnecessarily costly capital intensive projects breeds severe shortsightedness. High capital cost projects are almost always associated with high operating costs.
Federal funding should address transit’s REAL need: bleeding operating budgets. Instead of funding a T-Third disaster, MUNI could have used the $500 million in federal funds much better if it were allowed to invest them in a “MUNI Operating Foundation.” Returns of about 10% each year would yield $50 million per year, almost all of MUNI’s operating shortfall in the past few years and projected into the future (Source).
We need federally funded transit. I’m not arguing for less total funds, in fact, I think we need a significant increase in government transit spending. We simply need a system that rewards efficient transit systems, instead of the present financing model that encourages exorbitant capital spending with poor future planning and insufficient funding for recurring operating costs.
kfarr 
The T-Third was screwed up from day one, and most transit advocates were skeptical of it. Run slowly, on the surface, through the crowded high-traffic part of town — then continue into a low-population industrial district?!? Not a recipe for immediate success. North of the Caltrain station it needs to be higher capacity, and south of it it needs to be lower capacity!
Pittsburgh’s North Shore Connector is quite the opposite. Pittsburgh’s entire structure is divided by two rivers. Local light rail service crosses one of them but not the other. Connecting to the North Shore will suck up vast numbers of auto drivers because the chokepoint in that area was the bridges which are about to be paralleled by tunnels. It serves both people coming from the north, who will park (at *privately built* parking garages) before crossing the bridges, and people coming from the south and east to the major attractions on the North Shore.
BRT? For a high-volume application, that’s a joke. It costs twice as much to operate every year as light rail and carries fewer people. Exhibit A: Pittsburgh’s busways!
Surface LRT? Across a RIVER? Starting from underground in the most expensive part of town? The light rail is already underground downtown, it has to either bridge or tunnel to cross the river, and for once the tunnel would be cheaper and more effective (lower operating costs, faster service) than a new bridge, thanks to the existing structure.
They knew what they were doing with the alternatives analysis on this one. If the existing light rail hadn’t been run underground back in 1981, a different scheme might have made sense, but with it already in a cut-and-cover tunnel through downtown Pittsburgh, pulling it to the surface at steep grades in order to run it across a new bridge over a wide river (the Alleghany) river would have cost more than the bored tunnels. A backtracking route reusing the unused lower deck of the Fort Wayne Railway Bridge might have worked, but the deck was too deteriorated.
The line comes to the surface as fast as possible on the North Shore. It’s really only underground because of the river and the existing downtown structure. When finished Pittsburgh will have a “T-shaped” grade-separated core light rail network, at the surface on all three ends and pointing outward in the three logical directions for extension. But the short, expensive subway connection had to be built before the future, cheaper surface extensions can be built.
The fact that it will have substantial immediate benefits even as a short stub line makes it even more sensible.
They’re not building tunnels just to be cool.