Gloucester utilities project $788,000 shortfall; supervisors weigh 14% rate increase and reserve options

Gloucester County's utilities director reported a deteriorating FY26 outlook and urged the Board of Supervisors to consider a range of options including higher user rates, transfers, and borrowing to shore up the utility fund.

"I am projecting a $788,000 shortfall," Katie Legg told the board in a detailed presentation that covered revenue, operating costs, capital needs and several specific projects. She attributed much of the shortfall to large contract repairs, well and equipment failures and to the department's ongoing staff shortages, which have led to increased contractor costs.

Legg and staff outlined options to balance the budget: delay or slow compliance projects, hold certain restricted funds (including $249,000 of Vipties funds tied to a DEQ consent order), pursue grants (one application could cover up to $500,000 but awards come later in the summer), and use unassigned fund balance. For capital priorities she noted Forest Hill Avenue waterline work would be phased and Main Street waterline replacement was estimated at roughly $4 million.

Board members pressed staff on rate options. Legg presented a multi‑year approach previously recommended (13% for FY27) but said a 14% increase would be likelier to allow the utilities fund to break even and to build needed reserves; multiple supervisors said 13% alone would not be sufficient. Several also urged the board to craft a utility reserve policy (staff recommended a target of about 180 days of operating expenses) and to consider whether some countywide revenue could be used so the entire burden would not fall only on utility customers.

Separately, in the midyear financial update the deputy county administrator/CFO, Maria Callaway, reported stronger than‑expected interest earnings and described fund balances and capital funding sources. The board approved several midyear appropriations, including a $300,000 appropriation for the Children's Services Act with a local match funded from higher interest earnings and other sources.

Next steps: staff will return with options for rate increases, reserve policy language, and more detailed project‑level cost estimates and grant applications to present during the March budget discussions.