Key Takeaways:
- Who: City managers, municipal finance officers, and Public Works leaders seeking sustainable funding
- What: Innovative revenue strategies beyond traditional property taxes (vacancy taxes, ride-sharing fees, linear-property levies)
- Benefit: Diversifies municipal revenue, reduces financial pressure, and supports expanded service delivery without increasing operating deficits
Municipal revenue generation in Canada has relied heavily on property taxes for nearly 250 years. Yet as service demands grow—from roads and water to libraries and parks—municipalities face increasing pressure to find new, sustainable revenue sources.
According to the Canadian Tax Foundation, property taxes average 47.6% of municipal revenue across Canada, but significant variation exists by province. British Columbia generates 33% of revenue from user fees, while Saskatchewan municipalities rely more heavily on user fees due to small population bases. Government transfers also play a role but fluctuate based on federal allocations.
To address financial constraints, researchers and policymakers are exploring innovative taxation strategies that both generate revenue and influence behavior. This guide outlines three emerging approaches—vacancy taxes, ride-sharing fees, and linear-property levies—and explains how municipalities can implement them strategically while leveraging municipal asset management software to track costs, compliance, and outcomes.
How Can Municipalities Diversify Revenue Beyond Property Taxes?
Municipalities can diversify revenue by implementing targeted taxes and fees (e.g., vacancy taxes, ride-sharing surcharges, linear-property levies) that capture value from emerging economic activities while encouraging behaviors that support long-term fiscal sustainability.
While property tax remains the dominant source of municipal revenue, provinces show notable differences in revenue mix:
Source: Slack et al., “Funding the Canadian City,” Canadian Tax Foundation, 2019
These variations reflect structural differences in how regional districts and rural municipalities finance services.
What Is a Vacancy (Empty Homes) Tax and How Does It Generate Municipal Revenue?
A vacancy tax imposes an additional levy on properties left unoccupied for more than six months annually, generating revenue while encouraging vacant units to return to the rental or purchase market.
How It Works:
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Homeowners declare whether a property is vacant >6 months/year
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Vacant properties face an additional tax (0.5–2% of assessed value)
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Validation occurs via tax audits, driver’s licenses, and insurance records
Vancouver’s Empty Homes Tax (EMT) Results:
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$30 million generated in Year 1
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8,500 vacant units identified; 5,000 exempted
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Tax rate adjusted in 2018: 0.5% for BC resident second homes, 2% for foreign/satellite families
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Exemptions made harder to obtain, improving administration
Vacancy taxes are increasingly viewed as behaviour-change tools rather than pure revenue sources. Revenue should fund targeted initiatives (e.g., affordable housing) rather than operating budgets due to annual variability.
How Do Ride-Sharing Taxes Capture Revenue from the Sharing Economy?
Ride-sharing taxes impose per-ride surcharges or upfront fees on platforms like Uber and Lyft, capturing revenue from unregulated transportation activities that increase infrastructure usage.
North American Adoption:
Source: Canadian Tax Foundation Municipal Tax Symposium
Calgary’s initial fee structure created barriers for drivers. The updated model blends per-ride charges with scaled platform fees, improving adoption while capturing revenue.
What Are Linear-Property Levies and Why Do Municipalities Need Them?
Linear-property levies are fees charged to pipelines, power lines, telecommunications systems, and cable distribution infrastructure for access to municipal rights-of-way, offsetting emergency response costs, environmental liability, and maintenance expenses.
What Is Linear Property?
Linear property refers to infrastructure that crosses municipal boundaries, including:
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Pipelines and well developments
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Electric power systems
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Telecommunications systems
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Cable distribution networks
Why Do Municipalities Need Linear-Property Levies?
Currently, no linear-property taxation system exists in Canada that accounts for the liability municipalities face. This creates three critical challenges:
Local governments face significant costs related to emergency-response systems, including:
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Specialized response teams
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Training and certification
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Equipment and maintenance
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Environmental cleanup operations
Lindsay Tedds’ Two Proposed Solutions
Lindsay Tedds, Professor of Economics at the University of Calgary, proposed two approaches to account for municipal liability and effectively charge for associated costs:
1. Right-of-Way Access Fee (Regulatory Charge)
A local right-of-way access fee functions as a regulatory charge that allows municipalities to recoup costs including:
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Permits
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Coordination
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Inspections
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Administration
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Repair and damage
Advantage: Simple, “one-size-fits-all” approach applicable across all linear-property owners.
2. Franchise or Access Agreement
A franchise agreement allows municipalities to negotiate individual agreements with each linear-property owner seeking access to municipal rights-of-way.
Key Features:
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Sets specific charges and conditions for public land use
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Enables municipalities to shift most or all costs onto the consumer
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Tailored to each property owner’s specific circumstances
Advantage: More flexible than regulatory charges, allowing customized cost allocation.
Current Implementation Status (Updated June 2026)
While Tedds’ specific levy proposals (right-of-way access fees and franchise agreements) remain untested, Alberta has implemented linear property taxation with strengthened collection powers:
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Bill 77: Municipal Government (Restoring Tax Accountability) Amendment Act proclaimed in force December 2021
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Special Lien: Restored a “special lien” giving Alberta municipalities priority to collect unpaid linear property taxes over other claims
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Amount Owed: In 2021, Rural Municipalities of Alberta members were owed $245 million in unpaid property taxes (42% increase from 2020), with unpaid linear property taxes being a significant portion
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Joint Liability: Owners AND operators are now jointly and severally liable for arrears
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Revenue Share: Taxes on machinery/equipment and linear property represented 58% of property tax revenues for Alberta municipalities
Key Takeaway: While Tedds’ proposed levy models are not yet implemented, Alberta’s strengthened linear property tax collection demonstrates municipalities are actively addressing this revenue challenge.
Which Revenue Strategy Delivers the Best Balance of Revenue and Behaviour Change?
Vacancy taxes offer the strongest dual benefit—generating immediate revenue while addressing housing affordability—though all three strategies should fund targeted expenses rather than operating budgets.
How Should Municipalities Use New Revenue Sources Strategically?
New taxation methods should fund targeted expenses (e.g., affordable housing, infrastructure) rather than operating budgets, since revenue can vary significantly year to year.
Key Principles:
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Avoid operating budget reliance: Revenue is unpredictable
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Target specific expenses: Affordable housing, infrastructure maintenance
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Prevent deficit operations: Many Canadian municipalities cannot operate at a deficit
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Alleviate burden, not expand services: Use funds to reduce existing costs
Key Terms to Know
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Municipal Revenue: Funding sources for local government services, including property taxes, user fees, and government transfers
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Property Tax: The primary source of municipal revenue in Canada, averaging 47.6% of total local government revenue
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Vacancy Tax (Empty Homes Tax): Tax on properties vacant >6 months/year to encourage rental/purchase availability
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CMMS (Computerized Maintenance Management System): Software automating work orders, asset tracking, and compliance—critical for monitoring revenue-related infrastructure costs
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Asset Management: Holistic approach to managing physical asset lifecycle, costs, and performance
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By implementing vacancy taxes, ride-sharing fees, and linear-property levies, municipalities can diversify municipal revenue beyond property taxes while addressing critical challenges like housing affordability and infrastructure costs.
Ready to track costs, compliance, and outcomes for new revenue strategies? Request a demo of Citywide Maintenance to automate municipal finance and asset management workflows.
