Methods of financing roadway improvements have undergone significant changes since the early 1970s. For a variety of reasons, traditional sources of highway revenues have not kept pace with transportation needs. Alternative financing methods that have been implemented in various areas of the country are reviewed. The Texas legislature recently passed two new approaches for state and local highway finance: transportation corporations and road utility districts (RUDs). Transportation corporations provide private land owners and developers an opportunity to expedite highway _projects by conducting preliminary engineering studies and accepting right-of-way donations. RUDs, which are similar to municipal utility districts, are given the authority to issue bonds supported by property tax levies for local roads. These two methods provide an alternative infrastructure for the development of transportation projects and give state and local agencies additional sources for revenues.

The 1970s may be characterized as a period of transition for the transportation industry, particularly with regard to highway finance and development. The muscle flexing of the Organization of Petroleum Exporting Countries (OPEC) and a refined US energy posture had serious implications for federal, state, and local transportation agencies. The cost of highway development, mainly maintenance and construction, is inextricably linked to fuel costs. The rising fuel costs during this period significantly reduced the purchasing power of highway dollars. This problem was magnified by a decline in highway revenues. The principal source of revenue for most state agencies is the fuel tax, which is dependent on the level of fuel consumption. As fuel prices rose, the rate of fuel consumption declined. Coupled with this was the trend toward more fuel-efficient vehicles and an altering of travel behavior. The result of the rising highway development costs and reduced revenues was a funding dilemma. Transportation agencies were forced to reevaluate and downscope many projects, and legislators were forced to consider new sources of funding.