Local governments across Canada are advancing how they use data and artificial intelligence (AI) to better serve their communities. By addressing resource needs, improving data accessibility, and developing internal capabilities, municipalities are poised to drive more consistent outcomes across the country.

According to MNP's latest Municipal Report, developed in partnership with Leger, 23 percent of Canadian municipalities are currently using AI, though over half are actively exploring or planning adoption. What's driving this momentum? A push for more efficient service delivery, better decision-making, and stronger community connections.

Building on the insights from MNP's 2024 and 2023 Municipal Reports, this year's edition reflects responses from 282 local and regional governments. The report highlights the changes in priorities, persistent challenges, and emerging tools influencing the municipal landscape today.

"Municipalities aren't interested in technology for technology's sake. They're looking for practical solutions that help them solve real problems for real people," says James Richardson, Partner and National Leader of MNP's Municipal Community of Practice. "This report provides insights on the issues and priorities that can help them craft their local approach to making pragmatic, sustainable progress even in the face of limited budgets or complex systems."

What are the top priorities for local governments?

This year's study shows local governments remain focused on core responsibilities like cyber security, customer service, and technology modernization. However, emerging priorities like AI, data analytics, and smart city initiatives have surged in importance.

Key municipal priorities in 2025 include:

• Cyber security and privacy (78%)
• Citizen experience and service delivery (65%)
• Technology modernization (63%)
• Artificial intelligence (48%, more than double from 2024)
• Smart cities and digital infrastructure (47%, up 12% in 2023)

"Across Canada, we're seeing a shift toward data-driven decision making, but it requires more than just new tools," Wendy Gnenz, Partner and National Municipal Digital Leader at MNP. "Municipalities need to embrace a new way of providing programs and services capitalizing on the vast amounts of data that they have at their fingertips.

What's standing in the way of progress?

While priorities are clear, implementation remains challenging. Municipalities report persistent barriers, including:

• Insufficient resources (50%)
• Complicated decision-making processes and outdated procedures (44%, double from 2023)
• Legacy technology systems (43%)
• Lack of subject matter expertise (36%)

Although overall resource constraints have declined slightly since 2023, issues tied to legacy policies, systems, and risk aversion are becoming more prominent blockers to progress. Nearly one-third of municipalities still lack formal guidelines for using AI, and nearly half rely primarily on Excel for analytics, limiting their ability to extract deeper insights or make predictive decisions.

Another challenge lies in cyber security preparedness. While 83 percent of respondents say they feel prepared to manage data privacy and cyber threats, fewer than 35 percent consider themselves very prepared. In response, roughly three out of four identified cyber security training as one of their top internal needs signaling the growing importance of capacity-building alongside new technology investments.

How are municipalities using AI today

Among those using AI, the most common applications focus on practical, people-first outcomes:

• Customer service chatbots and citizen engagement tools
• Public safety and environmental monitoring
• Internal HR functions like scheduling and recruitment

At the same time, municipalities are prioritizing self-service platforms to improve access and convenience for citizens. These tools include mobile apps and online portals for taxes, permits, issue reporting, and other services. These investments are helping reduce administrative pressure while improving the overall customer experience.

Why MNP leads this work

As the pace of change accelerates, municipalities don't need a complete overhaul. They need clarity, confidence, and the right resources to keep moving forward. That's why MNP continues to lead this national study. We're committed to being a reference point and thought leader for Canadian local governments providing relevant insights to help communities navigate challenges and seize new opportunities.

Whether they're implementing developing technologies, rethinking service delivery, or building internal capacity, we believe every community deserves a roadmap tailored to its unique needs and realities. This report is one way we support that mission, offering grounded, data-driven perspectives that leaders can use to make informed, people-focused decisions.

• For survey data, analysis, and expert insights, download the full report here: 2025 Municipal report