PEI Municipal Funding Framework

What is the PEI Municipal Funding Framework?

The PEI Municipal Funding Framework is a provincial funding program for municipalities. The framework will be implemented over 2 years, beginning April 1, 2025.  Pending completion of the Municipal Government Act review and the Statistics Canada 2026 Population Census data release, the funding arrangement will be re-evaluated.

The 2025-2027 framework is similar to the previous MOU funding agreement. This replaces the 2017-18 MOU on municipal funding which expired in 2023. 

What are the components of the PEI Municipal Funding Framework?

Provincial funding is distributed to municipalities through four components:

1. Service Tax Credits (based in the Real Tax Property Tax Act Regulations)

Service tax credits are determined by multiplying service tax credit rates by municipal non-commercial taxable property tax assessment.

The new framework increases the Base Credit in years 1 & 2 for towns and cities and doubles the Planning Credit in year 1. The Police Credit and Streets Credit continue at existing rates. The new tax credit rates are outlined in the chart below:

2. Equalization Grant

Equalization is a formula-based calculation that increases with annual assessment growth.

Under the new framework there were no changes to the current formula, but changes may come after the next Statistics Canada 2026 Census of Population data release.

There was a 7.59% growth in equalization payments in 2025-26 due to increased assessment values.

In 2026-27, there was a 7.6% increase in equalization due to increased assessment values. 

3. Municipal Capital Expenditure Grant (MCEG)

MCEG is an application-based funding program for 10% of capital expenditure run by the Department of Transportation and Infrastructure. As part of the new framework, the program will be reviewed.

4. Other Grants

The purpose of the grants is funding to meet new commitments.

The new framework provides four grants to eligible municipalities:

1. Rural Municipality Grant (NEW) - provides $15,000 for each rural municipality.
2. Land Use Planning Grant (NEW) - tops up the Planning Service Tax Credit to ensure every municipality that provides land use planning services receives a minimum of $25,000 in funding.
3. Police Grant - continues existing funding for cities (other policing programs continue to be administered by Justice and Public Safety).
4. Hospital Grant - provided to municipalities with a hospital.

What other funding is available to municipalities?

Municipalities are eligible for other provincial funding under programs such as: 
•    Rural Growth Initiative
•    Municipal Infrastructure Fund
•    Community Grant for the Retention of Health Professionals
•    Seniors' Secretariat Grant
•    Community Leadership Program
•    Student Summer Employment Programs
•    Special Projects Program
•    Reception Centre Resiliency Fund
•    Climate Challenge Fund
•    Community Renewable Energy Generation Fund

Municipalities are also eligible for federal infrastructure programs such as: 
•    Canada Community-Building Fund (CCBF)
•    Canada Housing Infrastructure Fund (CHIF)
•    Green Municipal Fund
•    Canada Building Communities through Arts and Heritage

The Federation of PEI Municipalities provides links to various municipal funding programs on their Funding Programs webpage.