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Cities now manage far more than just roads, waste, and snow removal. Housing, mental health, climate adaptation, immigration – these crises are increasingly landing on city hall’s doorstep, often without the necessary resources to address them.

“Right now, out of all the money collected, municipalities only get 10 cents of that dollar,” said Denys Volkov, executive director of the Association of Manitoba Municipalities.

“The provincial and federal governments keep adding environmental regulations without any funding attached to them. Regulation is probably the biggest driving cost factor for municipalities on the environmental side right now.” 

The situation has improved over the past decade. In 2014, federal and provincial transfers to Quebec municipalities accounted for 12.9 per cent of budgets. In 2024, this proportion reached 18.9 per cent, according to a recent study by the firm Aviseo. Nationally, it stands at 21 per cent, according to the Federation of Canadian Municipalities. However, this increase is not enough to make up for the shortfall resulting from numerous unfunded responsibilities.

Downloaded responsibilities piling up since the 1960s

Local governments have been absorbing responsibilities passed from the federal government to the provinces and then on to municipalities since the 1960s, explains Fanny Tremblay-Racicot, professor and researcher at the École nationale d’administration publique (ÉNAP).

Since the provinces moved to deinstitutionalize psychiatric services, Canadian cities have been absorbing the cost through police departments, shelters, and street outreach teams.

The environmental regulations and provincial and federal climate adaptation policies cited by Denys Volkov require upgrades to sewer systems and water treatment plants. While waiting to secure funding, Quebec cities such as Lévis, Gatineau, and Longueuil have frozen development because current infrastructure already struggles to meet demand.

The share of municipalities in the Quebec Infrastructure Program has dropped from 7.9 per cent in 2016 to just 4.4 per cent in 2026, according to a report published May 11 by Tommy Gagné-Dubé and Luc Godbout, two public finance professors and researchers. 

“Infrastructure renewal is one of the three main challenges facing municipalities over the next two decades,” said Guy Caron, mayor of Rimouski, Que. This city in the lower Saint Lawrence region must invest $200 million over the next 20 years in its infrastructure, some of which is 75 years old. This is a considerable sum for a municipality of 52,000 residents.

Municipalities are becoming social actors

The legalization of cannabis has also created new municipal responsibilities in zoning, business permits, and nuisance complaints.

Immigration and refugee settlement is also starting to fall into the hands of municipalities. While the federal government sets intake levels, cities fund emergency housing and basic integration services.

And yet, Quebec’s law on municipalities is silent on social services, according to Isabelle Lizée, executive director of Espace Muni, a non-profit organization that has been supporting municipalities for 40 years. “They are responsible for the general welfare of their citizens, but the law does not define what welfare is. For a long time, it amounted to supplying water, managing waste, and removing snow,” she said.

Some provincial legislation, however, has anticipated the evolution of these responsibilities. The City of Winnipeg Charter, dating from 2002, is more explicit and better anticipates contemporary municipal challenges. It states that the City of Winnipeg must “develop and maintain safe, orderly, viable and sustainable communities; and to promote and maintain the health, safety, and welfare of the inhabitants.”

Today, 40 per cent of Quebec cities have a formal family policy. Approximately 18 per cent of Canadian municipalities have climate change adaptation and mitigation plans.

Funding the city differently

What tools do they have to fund their many unfunded responsibilities?

Property tax remains the main source of revenue for municipalities. However, in recent years, they have gained new powers to generate independent sources of revenue.

Cities can charge fees for some services. For example, residents of Mississauga, Ont., pay a stormwater charge based on the amount of hard surfaces on their property likely to discharge water into storm drains. A fee is also charged for water consumption and, in some cases, the amount of waste in bins. Toronto has approved an increase above inflation (3.75 per cent) for water consumption and waste collection.

A Toronto household pays an average of $1,118 per year for water and between $317.95 and $607.86 for waste collection, depending on bin size. The system may be effective at reducing waste, but residents often resist volume-based pricing.

Hence, Montreal studied the issue under former mayor Valérie Plante and abandoned the idea.

La Prairie: When development pays for growth

A municipality can also impose development charges or negotiate developer contributions. Contributions stem from an agreement requiring a developer to finance infrastructure needed for their specific project site, explained Fanny Tremblay-Racicot. 

Development charges, meanwhile, are used to fund municipal projects made necessary by real estate development. One example is the future wastewater treatment plant in La Prairie, Que.

In 2022, the City of La Prairie imposed a construction moratorium after an engineering report found that the municipal sewer system had reached capacity, creating a high risk of sewage overflows and regulatory fines. 

In September 2024, the moratorium was lifted after the city adopted a development-charge bylaw designed to fund infrastructure upgrades needed to support growth. Under the bylaw, developers must now pay $8,767 for each new housing unit. Revenue collected through the program will help finance a new wastewater treatment plant and the expansion of the existing filtration plant — projects with a combined cost of $126 million. 

Accelerating housing, reducing municipal revenue

While cities certainly have new powers, the path ahead is not clear. “Here in La Prairie, the process leading to the fee bylaw ended up in court,” said Isabelle Lizée, who has also served as a city councillor since the fall of 2025.

Over the next three years, collecting development fees from developers will be less lucrative. Municipalities are required to significantly reduce development fees charged to developers to access the federal government’s new Build Communities Strong Fund. Prime Minister Mark Carney sees this as a way to lower construction costs and accelerate the supply of new housing.

Under one early agreement signed March 30, Ottawa and Queen’s Park will jointly invest $8.8 billion over ten years in housing-related infrastructure in exchange for a commitment from municipalities to reduce their development fees by 30 to 50 per cent. This three-year measure targets high-growth cities, where 80 per cent of the province’s population resides.

A government without the resources of a government

Every gain is hard won for local governments, and setbacks are frequent. As these pressures grow, an increasingly important question emerges: are municipalities simply an administrative arm of other governments, or have they become governments in their own right?

The growing scope of their responsibilities points toward the latter. Cities are increasingly on the front lines of housing, infrastructure, climate adaptation and social challenges. Yet they continue to operate without many of the tools and revenue powers available to senior governments. That tension is forcing municipalities to innovate, and to test both the potential and the limits of their expanding role.