Budget 2025: What It Means for Municipal Leaders

The Bottom Line

Budget 2025 makes municipal infrastructure the single largest piece of the Capital Plan at $7.5 billion over three years (29% of the total). The Local Government Fiscal Framework (LGFF) gets a $138 million increase, grants in place of taxes are rising to 100% of the eligible tax amount by 2026-27, and $520 million goes to water and wastewater. However, LGFF is tied to provincial revenues that are declining, the Local Growth and Sustainability Grant is being discontinued, and the province is running a $5.2 billion deficit that could constrain future municipal support.

Top Measures That Affect You

1. $7.5 billion over three years for municipal infrastructure, the largest capital plan envelope at 29% of the total. This includes community infrastructure, transportation, and water/wastewater.

2. LGFF allocation of $2.5 billion over three years, an increase of $138 million compared to Budget 2024. LGFF provides funding to municipalities to advance local priorities. Through LGFF, municipalities share in both increases and decreases in provincial revenues.

Grants in place of taxes rising from 50% to 75% of the eligible tax amount in 2025-26, with a further increase to 100% by 2026-27. This means $19 million more in 2025-26 and an additional $24 million in 2026-27 once the full 100% is reached.

$520 million over three years for water and wastewater, including nearly $20 million in new funding for regional water and wastewater projects. This supports small and mid-sized municipalities in building or enhancing drinking water and wastewater infrastructure.

$2.9 billion for LRT projects in Edmonton and Calgary (including both federal and provincial contributions), plus $5 million for the design of the Blue Line Connector to the Calgary International Airport.

$127 million over three years for the Strategic Transportation Infrastructure Program (STIP), supporting small and medium-sized municipalities in building or repairing transportation infrastructure.

Municipal Affairs total expense at $1,388 million in 2025-26, up $76 million from 2024-25, rising to $1,475 million by 2027-28.

Direct Financial Impact

LGFF: Your municipality's allocation is formula-driven and tied to provincial revenue. With provincial revenue declining to $74.1 billion in 2025-26 (from $80.7 billion in 2024-25), LGFF allocations may grow more slowly than in recent years despite the $138 million nominal increase. The final LGFF allocation for 2027-28 will be published as part of the 2025-26 First Quarter.

Grants in place of taxes: The phased increase from 50% to 100% is worth approximately $43 million to municipalities across the province by 2026-27. If your municipality has significant provincial properties, this provides meaningful additional revenue.

Local Growth and Sustainability Grant discontinued: This eliminates $20 million per year in capital grants. If your municipality was a recipient, you will need to identify alternative funding.

Edmonton downtown revitalization: $106 million allocated over three years specifically for downtown Edmonton.

Water and wastewater: Small and mid-sized municipalities can access the $520 million pool for drinking water and wastewater infrastructure enhancement. The $20 million increase compared to Budget 2024 targets regional projects.

STIP: The $127 million over three years is targeted at small and medium-sized municipalities for transportation infrastructure. Check eligibility for your community.

Service Changes

Capital Plan structure: Municipal infrastructure support at $7.5 billion is divided roughly as follows:

• Over $3.7 billion for municipal community infrastructure projects and programs (largest portion through LGFF)
• $3.3 billion for municipal transportation projects and programs
• $520 million for water and wastewater
• Traffic safety improvements at key locations across the province ($13 million over three years)

LRT projects: Edmonton and Calgary LRT receive roughly $2.9 billion (combined federal and provincial). Capital grants for LRT did decrease by $96 million in 2025-26 compared to the 2024-25 forecast.

Roads and bridges: The province allocates $2.5 billion over three years for provincially owned roads and bridges, including $264 million in new funding for highway twinning, widening, and expansion. While these are provincial assets, they directly serve your communities.

Flood mitigation: $155 million over three years for flood mitigation projects, including $12 million in new funding for the Bow River basin.

Housing: $767 million over three years through ASHC for affordable housing, including the Affordable Housing Partnership Program goal of creating 13,000 affordable housing units. This has direct implications for municipal planning and growth management.

Jasper revenue stabilization: $3 million allocated for Jasper following the 2024 wildfire.

What's Missing

LGFF tied to declining revenue: While the LGFF increase sounds positive, the framework links municipal funding to provincial revenue. With revenue dropping $6.6 billion from 2024-25, the medium-term outlook for LGFF growth is uncertain. Municipalities share in both increases and decreases.

No new transit operating support: The capital funding for LRT is significant, but the budget does not include new provincial operating support for municipal transit systems, which face rising costs.

Local Growth and Sustainability Grant ended: The $20 million per year elimination is not fully offset by other grant increases for affected municipalities.

No municipal broadband funding detailed: While the Technology and Innovation ministry has $48 million in Broadband Strategy capital grants, the budget does not detail municipal-specific broadband expansion.

Deficit implications: The province is projecting deficits of $5.2 billion, $2.4 billion, and $2 billion over three years. Municipal leaders should consider the risk that future budgets may tighten capital grant growth to address the fiscal gap.

Emergency management: Alberta Emergency Management Agency operating expense is $84 million, only $3 million higher than 2024-25. Given recent wildfire and flood events, municipalities may find this insufficient for local emergency preparedness.

No property tax reform: The budget does not address municipal concerns about the property tax base or assessment system. Education property tax rates are rising, which competes with municipal property tax room.

Key Dates

Date	What Happens
January 1, 2025	New 8% personal income tax bracket takes effect
April 1, 2025	New fiscal year; new funding levels begin
2025-26	Grants in place of taxes rise to 75% of eligible amount
2025-26	LGFF allocations flow under revised revenue projections
2025-26 Q1	Final 2027-28 LGFF allocation published
2026-27	Grants in place of taxes reach 100% of eligible amount
2025-26 to 2027-28	$7.5B in municipal infrastructure support
2025-26 to 2027-28	$520M for water and wastewater

Where to Get Help

LGFF allocations: Contact Municipal Affairs for your municipality's specific allocation and the formula details. Visit alberta.ca/local-government-fiscal-framework.

STIP applications: Contact Transportation and Economic Corridors for eligibility and application details for the Strategic Transportation Infrastructure Program.

Water and wastewater funding: Contact Municipal Affairs or Alberta Environment and Protected Areas for the regional water/wastewater program details.

Affordable housing partnerships: Contact the Alberta Social Housing Corporation about the Affordable Housing Partnership Program and the goal of 13,000 new units.

Alberta Municipalities: Contact the advocacy organization for coordinated municipal responses to budget measures.

Budget documents: Full Capital Plan details by ministry at alberta.ca/budget-documents.