Local tax dollars is fine, if the taxpayers in the local jurisdiction agree to it. But for federal dollars to be used for this is criminal.
I'm not sure why you think that local tax dollare are any better than federal. The exact same logic applies to both. A large number of people who will derive absolutely no benefit from the expenditure are being forced to pay. On just has a smaller geographic area.
It depends upon the source of the tax dollars...it is far too easy for a segment of the population to agree to local referendums for increasing taxes that do not hit their wallets. 2 examples of that which are very blatant are property taxes (usually for education) in locations where renters are also able to vote and increased cigarette taxes when the majority of non-smokers will always say yes for the minority to get hit with the bill.