When the Highway Trust Fund was created in 1957 to pay for the interstate highway system, taxing gasoline and diesel seemed a fair and logical funding mechanism. The economy was booming and oil was a seemingly endless resource.

But with technology improving and fuel consumption declining, the formula is reaching the end of its service life. Nationwide, fuel taxes represent less than half of the revenue generated for highway expenditures.

Last month, the Federal Highway Administration (FHWA) announced the sharpest 8-month decline since 1942 in vehicle miles traveled. Congress is trying to transfer general revenues to the Highway Trust Fund to avert an anticipated $3.2 billion shortfall next year, but stop-gap measures don't provide a long-term solution to the fundamental challenge.

"As Americans begin to migrate to alternatively fueled vehicles, gasoline sales are going to decline," says FHWA spokesperson Doug Hecox. "We need to figure out some other way to pay for our roads, because the gas tax is starving to death."

To that end, the U.S. DOT announced a Metropolitan Innovation Fund that--if adopted by Congress and President Bush's successor--would reward states and cities based on their success in setting and meeting performance-based goals that focus on Washington's priorities for the nation's transportation network: safety, innovative technology, and the environment. The highest performers would receive bonuses.

State and metropolitan transportation departments would be expected to use benefit-cost analysis to justify funding requests, a decision-making tool that monetizes benefits such as improved safety, travel time, and environmental impacts against project design, construction, and operating and maintenance costs. The results can be used to assess how projects will affect a city, state, or region's employment, business sales, land values, and tourism.

According to the U.S. DOT, of the 20 states that use the technique, six use it regularly.