Bristol council approves broader maturities for water fund to shore up income

An investment adviser told the Bristol Borough Council on July 13 that the borough’s pension portfolios have outperformed benchmarks, and urged a more flexible approach to the borough’s $24,000,000 water‑system fund so officials can lock in higher yields.

Tim, the investment adviser (speaker 5), told council members the borough’s pension allocation is roughly 60% equities and 40% bonds and said that since inception the police pension plan has averaged about 8.4% versus a 7.6% benchmark. He said the funds have produced strong recent returns — “year to date so far at 9%” and three‑year averages above 13% — and that BlackRock, the current portfolio manager, is meeting expectations.

The adviser warned that the water fund faces reinvestment‑rate risk under the current policy’s limits. He said the policy caps the portfolio’s weighted‑average duration at about 2½ years and limits individual investment maturities to five years, which can force the borough to continually reinvest at lower rates and risk losing income. As he put it: “We have a lot of reinvestment rate risk…we just lost $700,000 in income if we go back to where we were in 2014.” (speaker 5)

Council President (speaker 1) and other members pressed for specifics about benchmarks, liquidity and safeguards for principal. The adviser proposed language that would remove strict duration and maturity caps for the water‑system portfolio and give the borough manager, treasurer and any duly appointed adviser discretion to select maturities and durations consistent with liquidity needs, preservation of capital and long‑term objectives.

Council member (speaker 6) moved to accept the manager’s July 10, 2026 memorandum and amend section 11 (maturity and duration) of the investment policy for water‑system proceeds to permit broader maturities and durations. The motion passed by voice vote.

What changed: the council approved a policy update that, as described in the memorandum and by the adviser, removes hard duration limits and allows the borough to hold investments to maturity or sell early “when deemed prudent,” with an explicit emphasis on preserving capital and matching liquidity needs to cash‑flow requirements. The change is intended to allow the borough to lock into higher current rates instead of repeatedly reinvesting at short maturities.

Officials stressed safeguards. The adviser said investments must still be authorized under the policy and applicable law, and the borough will continue to require diversification of maturities and disciplined portfolio management.

Next steps: the policy amendment was approved for the borough; staff and the investment adviser will implement the revised language and monitor outcomes. The council did not provide a projected dollar estimate of additional annual income from the change beyond the adviser’s examples referencing past returns and reinvestment losses.