Needham commissioners and Rockland staff discuss spending rules for trust funds and reference UPMIFA guidance
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Summary
Commissioners pressed Rockland on how expendable and nonexpendable balances are tracked, whether spending rules exist, and how long‑term spending rates (4–5%) are recommended; Rockland discussed UPMIFA‑style flexibility for income‑only trusts.
Town of Needham trust fund commissioners and Rockland Trust staff reviewed how Rockland classifies expendable versus nonexpendable balances and recommended establishing spending rules to smooth distributions.
Barbara, the Rockland Trust representative, explained the terms on Rockland’s quarterly allocation spreadsheet. She said nonexpendable balances represent principal donations the donor stipulated cannot be spent, while the expendable balance consists of accumulated earnings—dividends, interest and net market gains—available for spending. “The expendable balance is just the growth in the earnings that have accumulated over time as that can be expended,” Barbara said.
Commissioners asked whether Rockland enforces a spending rule. Barbara said that the spending rule—commonly 4 percent to 5 percent—should be set by the town, not by Rockland, but Rockland can calculate rolling‑average valuations to support a spending rule. She described a rolling three‑year average approach to smooth market swings: “If you use a more smoothing mechanism, it keeps it pretty within that 5%.”
The group discussed how to treat “income only” trust documents. Barbara noted a statutory regime she referenced by acronym and explained how a reasonable spending rule and documented rationale can justify limited principal drawdowns where necessary. (Transcript used the acronym UPMEFA; Barbara’s meaning aligns with the Uniform Prudent Management of Institutional Funds Act, commonly abbreviated UPMIFA.)
Commissioners raised overdraft scenarios: Rockland confirmed that if disbursements exceed the expendable balance during a quarter, the expendable account can temporarily go into overdraft and later be restored by earnings or subsequent donations; Rockland does not automatically draw on nonexpendable principal absent legal authority. Barbara said, “There are instances where money has been paid out… the expendable balance … ends up in an overdraft, but then eventually money comes back in and it replaces it.”
Participants agreed to ask the treasurer’s office to compile existing trust‑document spending rules into a single reference spreadsheet and to consider whether a standard spending rule should be adopted for suitable funds. Barbara offered to run rolling‑average spending calculations for the town if the commissioners decide to adopt a formal rule.