Provincial funding hike to help P.E.I. municipalities, but amalgamation may be the long-term fix

The Federation of P.E.I. Municipalities says the provincial government's commitment to increasing funding for municipalities is a positive step, but a long-term solution is needed — one that could involve revisiting municipal amalgamation.

In a speech delivered Tuesday in the P.E.I. legislature, the province committed to an interim agreement to increase funding to municipalities, pending the current review of the Municipal Government Act.

Satya Sen, interim executive director of the Federation of P.E.I. Municipalities, said he welcomes the two-year funding framework, noting that municipalities had seen no increases for the past three years.

"Municipalities have been doing a lot more for a lot less. The resources they have are not adequate to provide services to Islanders and their municipal residents, so increased funding is absolutely a welcome step from the provincial government," Sen told CBC's Island Morning.

Rising costs

Stratford Mayor Steve Ogden also said the funding boost is welcome news for his town of approximately 12,500 residents, one of the fastest-growing municipalities in the province.

Ogden said essential services, such as policing and fire protection, are becoming increasingly expensive for the town. Policing costs alone now exceed $1.3 million and continue to rise.

In its 2025-26 budget, Stratford is raising municipal residential taxes by two cents. The hike is not unexpected; the town is in the middle year of a three-year plan to raise municipal residential taxes by two cents per year that was approved in last year's budget. Without provincial funding, tax increases would be necessary to maintain essential services.

"This is very welcome, to have this funding available, and it is interim, but we look forward to being able to meet the costs of fire protection, for policing," Ogden said.

In the throne speech, the Rob Lantz government also promised to create a municipal infrastructure bank, which will offer low-interest loans to build and refurbish community infrastructure.

Ogden said he is waiting for more details, but hopes that can be another funding option for municipalities to support capital projects.

He hopes it can help municipalities cover their traditional one-third contribution to project costs, noting that towns often struggle to fund capital projects since the Municipal Government Act won't let them run deficits.

Another look at amalgamation?

While the two-year interim funding agreement provides short-term relief, Sen said municipalities need a more permanent financial solution, and that could mean revisiting the idea of amalgamation.

Although the topic has been controversial on P.E.I., Sen said the province has more than 57 municipalities serving a population of just 180,000 people. In comparison, Nova Scotia has 49 municipalities that are home to a population of about one million.

"We can't have this fragmented governance system where you have, like, tiny municipalities who are doing whatever they could with the little resources they have, but they really need to, you know, expand and provide services like municipalities," he said. 

"For example, even the towns like Kensington are providing services to an area which goes far beyond their municipal boundaries."

Sen pointed to another example: North Rustico, which has faced challenges trying to pay off debt on its rink, which was built to help host the Canada Games.

"The rink is being used by a much larger population than the population of the Town of North Rustico. Now, who is paying for that?

"Somebody has to pay for that, and municipal taxpayers are in some way subsidizing the cost of the services for a much larger population."

Sen hopes the Municipal Government Act review will provide municipalities with an opportunity to address these challenges.

He said the review should take into account the need to expand boundaries to make municipalities more viable, saying the current boundaries are outdated and based on school districts from the 1800s.