Budget 2025: What It Means for Municipal Infrastructure
Alberta Budget 2025 allocates $7.5B for municipal infrastructure (29% of Capital Plan), with $2.5B LGFF and $2.9B for LRT transit expansion.
Municipal infrastructure support
$7.5B over 3 years
29% of total Capital Plan
LGFF allocation
$2,491M over 3 years
+$138M vs. Budget 2024
Municipal Affairs total expense
$1,388M
+$76M from 2024-25
Sector Impact Summary
Municipal infrastructure is the most generously funded sector in Budget 2025, receiving $7.5 billion over three years -- 29% of the total Capital Plan. This allocation reflects the government's recognition that Alberta's rapid population growth (2.5% in 2025, following 4.4% in 2024) is placing extraordinary pressure on municipal services, water systems, transportation networks, and community facilities. The investment flows through two primary channels: Municipal Affairs ($3,429 million over three years) and Transportation and Economic Corridors ($4.1 billion in LRT, strategic transportation, and water infrastructure).
The centerpiece of municipal funding is the Local Government Fiscal Framework (LGFF), which allocates $2,491 million over three years ($820 million, $800 million, $871 million), an increase of $138 million compared to Budget 2024. LGFF provides predictable, formula-based funding that municipalities can direct to their highest local priorities. This is supplemented by the federal Canada Community-Building Fund at $840 million over three years and the transformative $2,863 million Edmonton and Calgary LRT investment.
Municipal Affairs total expense rises to $1,388 million in 2025-26, up $76 million from the prior year. Notable policy changes include grants in place of taxes increasing from 50% to 75% of the eligible tax amount in 2025-26, reaching 100% by 2026-27, which provides municipalities with additional revenue from government-owned properties. The Local Growth and Sustainability Grant is discontinued, saving $20 million annually. Jasper receives $3 million in revenue stabilization following the devastating 2024 wildfire.
Key Budget Measures
Municipal infrastructure support: $7,511 million over three years. Represents 29% of the total Capital Plan and is the single largest capital envelope, encompassing allocations through both Municipal Affairs and Transportation and Economic Corridors. (Source: Fiscal Plan 2025-28, Capital Plan, p.101)
Local Government Fiscal Framework (LGFF): $2,491 million over three years ($820M, $800M, $871M). Formula-based funding giving municipalities flexibility to invest in local priorities. Includes a $138 million increase compared to Budget 2024. (Source: Capital Plan Details by Ministry 2025-28)
Canada Community-Building Fund: $840 million over three years ($276M, $276M, $287M). Federal funding for community infrastructure projects directed through the province. (Source: Capital Plan Details by Ministry 2025-28)
Edmonton and Calgary LRT: $2,863 million over three years ($772M, $1,095M, $996M). The largest single municipal capital investment, combining provincial and federal funding for urban transit expansion. (Source: Capital Plan Details by Ministry 2025-28)
Municipal water and wastewater programs: $520 million over three years. Supports small and mid-sized municipalities in building or enhancing drinking water and wastewater infrastructure, with nearly $20 million increase for regional projects compared to Budget 2024. (Source: Fiscal Plan 2025-28, Capital Plan, p.101)
Grants in place of taxes increase. Rising from 50% to 75% of eligible tax amount in 2025-26 ($19 million increase), reaching 100% by 2026-27 ($24 million more). This provides municipalities with additional revenue from government-owned properties within their boundaries. (Source: Fiscal Plan 2025-28, Expense, p.90)
Strategic Transportation Infrastructure Program (STIP): $127 million over three years ($33M, $39M, $55M). Supports small and medium-sized municipalities with transportation infrastructure. (Source: Capital Plan Details by Ministry 2025-28)
Funding Changes
| Item | 2024-25 Forecast | 2025-26 Estimate | Change |
|---|---|---|---|
| Municipal Affairs total expense | $1,312M | $1,388M | +$76M |
| LGFF (vs. Budget 2024) | N/A | $820M (Yr 1) | +$138M over 3yr |
| Grants in place of taxes | 50% rate | 75% rate | +$19M |
| Local Growth and Sustainability Grant | $20M | $0 | Discontinued |
| Jasper revenue stabilization | $0 | $3M | New |
(Source: Fiscal Plan 2025-28, Expense, p.90)
Capital Investment
The Municipal Affairs capital plan totals $3,429 million over three years ($1,131M, $1,102M, $1,196M):
- LGFF: $2,491M ($820M, $800M, $871M) -- formula-based municipal funding
- Canada Community-Building Fund: $840M ($276M, $276M, $287M) -- federal transfers
- Edmonton Event Park: $52M ($2M, $15M, $35M) -- new community facility
- ICIP Projects: $26M ($15M, $10M, $0M) -- final federal infrastructure program allocations
- Calgary Event Centre Community Rink: $15M (2025-26)
Additional municipal infrastructure through Transportation and Economic Corridors:
- Edmonton and Calgary LRT: $2,863M ($772M, $1,095M, $996M)
- Municipal Water and Wastewater Program: $195M ($45M, $67M, $84M)
- Regional Water/Wastewater - Water for Life: $257M ($51M, $111M, $95M)
- STIP: $127M ($33M, $39M, $55M)
- First Nations Water Tie-In: $50M ($8M, $15M, $27M)
Additional through Infrastructure ministry:
- Edmonton Downtown and Coliseum Site Improvement: $54M ($4M, $15M, $35M)
(Source: Capital Plan Details by Ministry 2025-28)
Risks
LGFF tied to provincial revenue fluctuations. Through the LGFF formula, municipalities share in both increases and decreases in provincial revenues. With revenue declining significantly in 2025-26, LGFF allocations could face pressure in future years if the fiscal situation does not improve.
Construction cost inflation from tariffs. U.S. tariffs, including 25% on steel and aluminum, will increase costs of construction materials used in municipal infrastructure projects. This could reduce the number of projects that can be completed within the $7.5 billion envelope.
Population-driven demand outpacing supply. Alberta's 2.5% population growth continues to outpace infrastructure capacity in many municipalities, creating persistent pressure on water systems, roads, transit, and community services. Even the $7.5 billion allocation may not fully address the accumulated infrastructure deficit.
Federal funding program transitions. ICIP projects are declining ($26 million in 2025-28 versus higher prior allocations) and some federal programs are concluding. Continued dependence on federal transfers for major projects like LRT creates vulnerability to federal budget decisions.
Opportunities
Record municipal infrastructure investment. At $7.5 billion over three years, this is a historic level of investment that signals strong commitment to supporting municipal growth management and service delivery.
LGFF providing predictable funding. The $2.5 billion in formula-based LGFF funding over three years gives municipalities a predictable revenue stream to plan and execute capital projects, with the $138 million increase providing additional capacity.
Transformative urban transit. The $2.9 billion LRT investment represents the single largest municipal capital project, with the potential to transform urban mobility, catalyze transit-oriented development, and reduce traffic congestion in Edmonton and Calgary.
Water infrastructure expansion. Over $520 million for municipal water and wastewater infrastructure supports community health and growth, with particular attention to small and mid-sized municipalities and First Nations communities ($50 million for water tie-in).
Grants in place of taxes reaching 100%. The phased increase to 100% of eligible tax amount by 2026-27 provides municipalities with growing revenue from government-owned properties, improving their fiscal position without requiring property tax increases.
What's Missing
The budget does not include a specific municipal infrastructure fund to address the accumulated infrastructure deficit from years of rapid population growth. There is no dedicated small municipality program beyond STIP to address the unique challenges facing communities with limited tax bases. The budget lacks a municipal climate adaptation fund despite increasing flood, wildfire, and drought risks affecting municipalities. There is no mention of municipal broadband or fiber-optic infrastructure programs. The LGFF formula does not appear to include a growth adjustment factor that would channel additional funding to the fastest-growing municipalities.
Net Assessment
Municipal infrastructure receives the strongest fiscal support in Budget 2025, with $7.5 billion representing 29% of the total Capital Plan and signaling clear government recognition of population-driven infrastructure pressures. The LGFF increase, LRT investment, and water infrastructure programs address critical municipal needs. The primary risks are tariff-driven construction cost inflation that reduces the real value of allocations, and the LGFF formula's vulnerability to future provincial revenue declines in a period of projected deficits.