Although I'm no fan of mass transit, that's generally because it's a publicly-funded debacle. Mark Aveyard points me to a City Journal article that explains some of the problems New York is having with its bus system and how those problems are the result of a corrupt public financing system.
Responding to complaints about poor service on the private lines, the mayor has demanded that the Metropolitan Transportation Authority take over the routes—which in one stroke would absorb them into one of the most expensive, heavily subsidized public transit systems in the nation. But the problem isn’t that private firms run the routes, as the left-dominated City Council and other anti-privatization critics have charged and as the businessman mayor seems to believe. The problem is that the city hands out those transportation contracts under a no-bid system that breeds inefficiency and cronyism. ...A "genuine privatization" scheme would eliminate subsidies entirely, and I'm not sure that's what's being proposed here. Nevertheless, it's a step in the right direction.
To lower costs, genuine privatization is necessary—and that means setting up real competitive bidding for transportation contracts. Denver, Houston, Los Angeles, and San Diego have all realized sizable savings by turning to competitive bidding in this area. In Denver, bid-out routes cost 46 percent less to run than those the city still runs directly; in Los Angeles, which now contracts out more than half its bus service, the savings amount to roughly 40 percent.
Light rail could work in the same way, although building a line would require a massive capital investment by the developers. Such an investment could be financed with bonds, though, in the same way municipalities pay for public works projects.