Most Canadian municipalities already have AI on their radar, and the number that consider it a strategic priority has more than doubled in just the past year. That’s according to the 2025 MNP Municipal Report, which surveyed nearly 300 professionals across local and regional governments to better understand how they’re approaching AI today.
One year later, that momentum hasn’t slowed. It’s intensified. What was emerging in 2025 is now becoming operational reality, with municipalities under increasing pressure to move from exploration to execution.
Here are five key takeaways from their report.
1. AI Is the #1 Strategic Priority for Municipalities Right Now
In 2024, 22% of Canadian municipalities ranked AI as a top strategic priority. By 2025, that figure had risen to 50%. It’s a larger year-over-year increase than any other organizational priority, including cybersecurity and smart city initiatives. It reflects a clear shift in awareness and a growing urgency to respond as AI becomes part of everyday business.
That urgency has only increased. In many municipalities, AI is no longer a future-facing initiative, it’s an active line item tied to service delivery, resident experience, and internal efficiency.
And this interest is more than aspirational. More than half of respondents are already using AI or actively evaluating it, with another 21% reporting concrete plans to do the same. Where adoption has taken hold, municipalities are applying AI internally (in communications and HR functions like recruitment) and externally in customer service and public safety. Early use cases are now moving beyond pilots, with real deployments starting to show what responsible, practical AI adoption looks like at the local level.
2. Reducing Manual Work Is a Top Anticipated Benefit
When asked what they hope to gain from AI, 61% of respondents said reducing manual work, followed by optimizing resources (59%) and improving decision-making (51%). Nearly half also expect AI to enhance the digital experience for the residents they serve.
These expectations are increasingly being tested against real outcomes, as leadership teams look for measurable returns on early AI investments.
That’s a harder bar to clear than it sounds — and most organizations aren’t there yet A March 2026 KPMG analysis found that while 93% of Canadian business leaders are now using or piloting AI – up from 61% just one year earlier – only 2% say they are realizing measurable returns on investment. The challenge isn’t adoption – it’s integration. Many organizations have introduced AI through AI pilots or standalone tools, but only 31% have embedded it across operations and workflows. For municipalities, this is the gap worth closing.
These priorities reflect the ongoing pressure Canadian municipal staff often face to deliver high-quality services despite tight budgets and limited resources. In practice, this is where AI is gaining the most traction, supporting lean teams by automating repetitive tasks and freeing up capacity for higher-value work.
3. One in Three Municipalities Has No AI Policy
In 2025, 32% of municipalities reported having no formal AI policy or employee guidelines in place. Among municipalities with populations under 100K, that figure rose to nearly half. This isn’t surprising given how rapidly AI has moved up the priority list; policy infrastructure doesn’t always keep pace with organizational interest.
That gap created real risk. In the past year, many municipalities have started to feel the impact, particularly around data governance, privacy, and procurement decisions.
The stakes are concrete. A September 2025 KPMG public sector survey found that of the public servants already using AI at work, half are doing so with publicly available tools, meaning sensitive government data may be flowing into systems with no formal privacy guardrails. An overwhelming 94% of public servants surveyed said that citizen data must remain stored within Canada. Informal tool adoption makes that standard very difficult to guarantee.
However, that gap is beginning to close. At the time of the survey, 32% of municipalities were developing an AI policy, and 27% were working on procurement guidelines addressing data ownership and AI. Together, these efforts reflect a growing sector-wide push to establish the practical frameworks needed for responsible AI deployment. What’s emerging now is a clearer understanding that governance isn’t a blocker to AI adoption, it’s what enables it to scale.
The federal government has set a useful direction here. The Government of Canada’s AI Strategy for the Federal Public Service 2025–2027 establishes a national framework for responsible AI adoption. While it applies directly to federal institutions, it offers a practical model that municipalities can reference as they build their own governance structures. It gives municipal leaders a foundation to build from, rather than starting from scratch.
4. Lack of Expertise Is the Number One Barrier to Adoption
For 63% of municipalities, the biggest challenge to effective AI implementation is a lack of in-house expertise (even more so than budget constraints and privacy concerns). The data suggests that while interest in AI is high, many municipalities still don’t have enough people with the skills and confidence to move projects forward.
This continues to be the biggest factor separating municipalities that are experimenting with AI from those who are successfully operationalizing it.
The report also highlights broader training needs in areas such as data, analytics, and technical tools, reinforcing that building internal capacity remains a key part of municipal AI readiness.
As a result, many organizations are now investing not just in tools, but in training, partnerships, and external support to bridge that gap.
5. Operationalizing AI Is the Defining Challenge of the Next Five Years
Looking ahead, 47% of respondents identified determining the appropriate use of AI as a top technology challenge over the next five years. More than a third also cited the challenge of actually implementing AI within their organizations. It suggests the conversation amongst teams continues to move beyond whether to adopt AI and toward how to use it responsibly and effectively in day-to-day operations.
That shift is now well underway, and for many municipalities, the focus has moved from exploration to accountability, with increasing expectations to demonstrate impact.
One example of this shift is the growing focus on citizen self-service, from online portals for permit applications to AI-powered search tools with instant, 24/7 responses. Efforts like these allow residents to access key services more easily and quickly find the information they need, while freeing municipal staff to focus on higher-impact work for the communities they serve.
The municipalities seeing the most success are those that are embedding AI directly into existing workflows, rather than treating it as a standalone initiative.
The takeaway is clear: Canadian municipalities didn’t just start exploring AI in 2025, they accelerated it. Now, the challenge is turning that momentum into meaningful, measurable outcomes.
The question is no longer whether to adopt AI. It’s whether your organization has the tools, governance, and internal capacity to use it well.
For municipalities, the website is one of the most immediate and high impact places to start. It’s the front door to city services, often the first (and sometimes only) touchpoint residents have with local government. An AI-powered search and self-service layer built directly into your municipal website can reduce call volumes, extend service hours, and help residents find what they need without waiting for staff.
It doesn’t require a complete digital overhaul. It requires the right tool, embedded in the right place, with the right governance behind it. That’s exactly what municiPal AI is designed to do.
