Local governments are transforming. And AI is at the centre of it.
Across Canada, municipalities are under pressure to do more and to do it better. Citizens want fast, reliable access to services. Employees need efficient systems that work. Communities expect adaptability, security, and results.
To meet those expectations, local governments are turning toward artificial intelligence (AI) and data analytics.
In our 2025 Municipal Report, developed in partnership with Leger, we explore how local and regional governments from across the country are using AI to improve outcomes, streamline operations, and strengthen their connection with the communities they serve.
This year’s research takes you inside the priorities, challenges, and opportunities shaping digital transformation in Canadian municipalities.
Between February 6 and March 6, 2025, we surveyed 282 municipal leaders from across Canada — from urban hubs to rural townships. These responses form a nationwide snapshot of how local governments are thinking about AI, data, and service innovation.
Here’s what we found.
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Municipalities are ready, but face real barriers
Many local governments are eager to harness the potential of AI, but modernizing systems and associated policies, practices, and procedures is not that easy. Not to mention, it can be a costly undertaking for tight budgets. Our survey asked leaders what they anticipated their top technology challenges to be. The top four stood out above the rest: cyber security and privacy (73%), protecting data (57%), replacing existing legacy systems (49%), and determining the appropriate use of AI (47%).
These top priorities reflect the ongoing need to operate within certain parameters that meet public accountability expectations while satisfying the strong interest to leverage available technologies to enhance efficiency and efficacy in day-to-day business operations.
But despite these challenges, the momentum is clear: Municipalities are investing in technology, capacity, and collaboration.
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Cyber security and data privacy are paramount
As digital services grow, so do concerns about data protection. Local governments handle large amounts of sensitive information, from the personal data of citizens to financial records and details about critical infrastructure. This information is leveraged by AI for things like improving service delivery, enhancing community engagement, and driving innovation. And citizens need to know this information is safe.
Effective cyber security and privacy practices foster public trust and confidence in local government. This trust, in turn, is vital for the successful implementation of AI-driven initiatives and digital transformation.
To keep cyber threats at bay and to ensure sensitive data is managed and used in a way that still maintains citizen privacy, municipalities are focused on these top three measures: employee training and awareness (71%), access controls (62%), and data protection and privacy policies (62%). Still, risks remain.
Efficiency is a top priority over the next three to five years
Over the next three to five years, respondents are aiming to enhance their operational efficiency. The top three ways they hope to do this are through automation of processes (25%), real-time data access (24%), and data quality management (24%).
Reducing manual work is one of the most common reasons municipalities are adopting AI and automation tools. From processing permits to managing records, technologies like robotic process automation (RPA) help to streamline routine tasks, improve accuracy, and allow staff to focus on more strategic work.
Reshaping the citizen experience
Citizens increasingly expect 24/7, self-directed access to services. Local governments are meeting these external demands with AI-powered chatbots, self-service portals, and mobile apps. These tools empower citizens to book appointments, report issues, and get answers to common questions on their own schedule, leading to improved customer satisfaction, stronger community engagement, and more personalized public services.
This year’s survey respondents continue to rank citizen experience and customer service as a key strategic priority, second only to cyber security and privacy. When it comes to which external services are using AI to improve their operations and service delivery, customer service tops the list at 55 percent, followed by public safety (49%) and environmental monitoring (48%).
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AI needs a framework — and many don’t have one
While AI adoption is growing, nearly a third of survey respondents said their municipality has no formal polices or guidelines in place for AI or generative AI. Without these structures, governments risk inconsistent or unsafe use of new technologies. Developing clear, ethical frameworks will be essential to implement and scale AI responsibly.
This is about more than technology
Data and AI are not just digital tools; they are reshaping the citizen experience.
The findings in the 2025 MNP Municipal Report point to a shift in how local governments plan, operate, and connect with their communities. They are equipping themselves with modern systems, data-enabled insights, and, in turn, the confidence they need to serve their citizens in more effective and efficient ways.
Whether you are just beginning your digital transformation journey or looking to take your strategy further, this report offers a glimpse into what’s working for Canadian municipalities, what’s challenging, and where the opportunities lie.
How does your organization measure up?
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