Alberta Budget 2025: Municipal Government Stakeholder Brief

Executive Summary

Budget 2025 provides municipal governments with $3.4B in capital funding over three years through the Local Government Fiscal Framework ($2.49B), Canada Community-Building Fund ($840M), and other programs. A significant positive development is the increase in grants in place of taxes from 50% to 75% of eligible amounts in 2025-26, reaching 100% by 2026-27. However, the discontinuation of the Local Growth and Sustainability Grant ($20M reduction), declining federal ICIP funding, and tariff-driven construction cost inflation challenge municipalities' ability to close the infrastructure gap created by rapid population growth.

Top 5 Relevant Budget Measures

1. LGFF allocation at $2,491M over three years -- $820M in 2025-26, $800M in 2026-27, and $871M in 2027-28. Calculated under the Local Government Fiscal Framework Act, this provides the primary formula-based capital funding for municipalities.

2. Grants in place of taxes rising to 75% in 2025-26 -- with $19M added in 2025-26 and an additional $24M by 2026-27 when grants reach 100% of the eligible tax amount. This addresses a long-standing municipal advocacy priority.

Municipal water and wastewater programs at $520M -- including the Municipal Water and Wastewater Program ($195M), Regional Water/Wastewater Projects ($257M), First Nations Water Tie-In ($50M), and Capital Region Wastewater Treatment ($10M).

Edmonton and Calgary LRT funding at $2,863M -- the single largest item in the Transportation capital plan, with $772M in 2025-26, $1.095B in 2026-27, and $996M in 2027-28. This combined provincial and federal investment supports major transit expansion.

Municipal Affairs total expense at $1,388M -- an increase of $76M from 2024-25, including capital grant increases under LGFF, $3M for Jasper revenue stabilization, and rising to $1,475M by 2027-28.

Risks

Infrastructure cost inflation. Tariffs of 15% on imported construction materials increase the cost of every municipal infrastructure project. The purchasing power of LGFF allocations and other grants is reduced when steel, pipe, concrete additives, and mechanical equipment cost more. A project budgeted at $10M before tariffs may now cost $11-12M, creating unfunded gaps.

Growth outpacing funding. Population growth continues at 2.5%, adding approximately 125,000 people per year. Municipal infrastructure -- water, sewer, roads, recreation -- must expand to serve this growth. While LGFF is formula-based and responds to economic growth, the lag between population arrival and infrastructure construction creates service deficits.

Discontinuation of Local Growth and Sustainability Grant. The $20M reduction from eliminating this grant removes a funding stream that smaller and growing municipalities relied upon. The budget explicitly notes this reduction.

Declining federal programs. ICIP funding at $26M is declining as the program winds down. The New Building Canada Small Communities Fund is down to $1M. Municipalities that counted on stacking federal and provincial funding for projects face reduced leverage.

Jasper recovery costs. While $3M is provided for Jasper revenue stabilization, the broader costs of wildfire recovery for affected municipalities may exceed available provincial support.

Opportunities

Grants in place of taxes to 100%. The increase from 50% to 100% of eligible tax amounts represents a significant new revenue stream for municipalities with substantial government-owned property. This addresses a decades-long advocacy priority and provides predictable, growing revenue.

LRT capital investment. The $2.86B for Edmonton and Calgary LRT represents transformative transit investment. Municipalities benefit from reduced traffic congestion, transit-oriented development opportunities, and improved mobility for residents.

Water infrastructure funding. The $520M in water and wastewater programs supports municipalities in upgrading aging systems and expanding capacity for growth. The Regional Water/Wastewater Projects under Water for Life at $257M support collaborative regional infrastructure solutions.

Assessment base growth. Population growth drives residential and commercial development that expands the property tax assessment base. While growth creates service demand, it also provides the tax base to fund those services over time.

Affordable housing support. The ASHC Affordable Housing Partnership Program at $655M creates opportunities for municipalities to partner with provincial and private sector developers on housing projects that address local affordability challenges.

Likely Government Intent

The government views municipalities as essential delivery partners for managing growth while maintaining fiscal discipline. The LGFF formula approach provides predictability while linking funding to economic conditions. The grants in place of taxes increase signals recognition of municipal revenue challenges. The emphasis on water infrastructure and transportation reflects the government's understanding that these are capacity constraints for growth. The discontinuation of the Local Growth and Sustainability Grant suggests the government prefers formula-based mechanisms over discretionary grants.

Immediate Questions to Ask Ministries

1. Municipal Affairs: What is the projected LGFF allocation for our municipality in 2025-26, and what formula changes affect the calculation?

2. Municipal Affairs: What is the implementation timeline for grants in place of taxes at 75%, and what verification process applies to eligible property amounts?

3. Transportation and Economic Corridors: What is the application timeline for Municipal Water and Wastewater Program grants, and what matching requirements apply?

4. Infrastructure: How will tariff-driven construction cost increases be managed in evaluating municipal infrastructure project bids?

5. Treasury Board and Finance: What contingency funding is available for municipalities facing unanticipated costs from tariff-related economic disruption?

48-Hour Action Checklist

• Calculate estimated LGFF allocation for own municipality under the budget formula
• Assess revenue impact of grants in place of taxes increasing to 75%
• Review priority infrastructure projects against available provincial grant programs
• Contact Municipal Affairs regional advisor for post-budget briefing
• Brief council on budget implications, highlighting both opportunities and funding gaps
• Assess tariff impact on currently planned municipal construction projects
• Identify water and wastewater project priorities for provincial application

30-Day Monitoring Checklist

• Track LGFF allocation notices and reconcile with internal projections
• Monitor grants in place of taxes implementation guidelines and eligible property lists
• Prepare water and wastewater project applications to Transportation ministry
• Engage AUMA/RMA on collective advocacy positions for next-phase municipal engagement
• Review capital plan project cost estimates under tariff-adjusted material prices
• Monitor population growth data for service demand planning updates
• Assess community building fund allocation and application timelines

Suggested Message Frames

Frame 1 -- Growth Partners: Municipalities are the front line of managing Alberta's population growth. Every new Albertan needs water, sewer, roads, and community services. LGFF funding and infrastructure grants are investments in Alberta's capacity to absorb growth while maintaining quality of life.

Frame 2 -- Front-Line Services: Municipal governments deliver the services Albertans interact with daily -- safe water, maintained roads, emergency response, parks, and recreation. Adequate provincial funding ensures these essential services keep pace with the growing demand from new residents and businesses.

Frame 3 -- Value for Investment: Municipal infrastructure generates returns for generations. Every dollar invested in water systems, roads, and community facilities creates construction employment, attracts private investment, and improves the quality of life that makes Alberta attractive to workers and businesses.

Opposition Narratives to Anticipate

"Municipal governments waste provincial grants." Counter with transparent reporting on grant spending, project completion rates, and the municipal budgeting process that ensures accountability for every dollar.

"Property taxes should fund municipal infrastructure, not provincial grants." Respond that municipalities cannot tax their way out of an infrastructure deficit created by provincial-level population growth policies. Provincial grants recognize the shared responsibility for managing growth.

"Grants in place of taxes are a windfall." Clarify that these grants compensate municipalities for services provided to government-owned properties that would otherwise pay property taxes. Reaching 100% simply achieves fairness.

Data Points to Monitor

• LGFF allocation notices and formula calculation details
• Grants in place of taxes eligible property assessments and payment schedules
• Municipal water and wastewater program application deadlines and approvals
• Population growth data by municipality and census division
• Construction cost indices for municipal infrastructure projects
• CCBF allocation and project approval timelines
• LRT project milestones for Edmonton and Calgary
• Tariff implementation details affecting municipal procurement
• Provincial quarterly fiscal updates for changes to municipal grant funding
• ICIP program wind-down timeline and remaining funding availability