The Yukon government is raising the overall amount of money it gives out to municipalities by almost 10 per cent.

The new funding deal is also changing the formula for how the money is shared by the eight incorporated communities in the territory. Municipalities used to have to share a fixed sum of money, meaning that if one community received more money, another would get less.

Elaine Wyatt, the mayor of Carmacks, Yukon, said the new system won’t penalize a community.

"It makes a lot of sense and believe me, we were one of the communities that always seemed to get penalized, so we're really glad to see it open-ended, and it doesn't mean communities are competing for the same amount of money, and it makes really good sense," she said.

The territorial government also promised to spend $2 million over the next five years to upgrade municipal fire departments.