What would Newtown do with an extra $1 million? What about $7.5 million?This report was updated at 4:15 pm on August 15 to include a statement from Selectman Herb Rosenthal regarding his employment with Westport Resources.

Those may be questions members of Newtown's Board of Selectmen are asking themselves as they ready for an August 15 meeting during which they could vote to adopt a new municipal pension policy, and possibly settle on retaining a new custodian for the pension investment portfolio.

According to the end-of-year statement on pension performance for the fiscal cycle that ended June 30, the fund's net value has lost about $1 million.

According to performance expectations in Newtown's current pension policy, "the Plan's overall annualized total return, after deducting for advisory, money management, and custodial fees, … should perform above the weighted average return of the indexes …"

The indexes or benchmarks are the S&P 500 index, the Barclay's Aggregate US Government Bond and Corporate Bond index, and the Morgan Stanley EAFE index.

For the last fiscal year, the desired and expected benchmark of performance comparison was 2.74 percent in earnings. But according to documentation provided by town Finance Director Robert Tait, Newtown's portfolio performance produced a negative 2.63 percent against benchmark - a total difference of negative 5.37.

"That means we effectively lost 5.37 percent in earnings," Mr Tait said. "Basically our net value experienced a loss of close to $1 million this past year."

The finance director explained that if the town invested its money in average mutual funds, the performance would have been 2.74 percent. That benchmark represents average fund performance in the same mix that Newtown uses to measure the pension investment performance.

That negative performance is substantially more evident when looking back historically to the 2001 fiscal year. If Newtown's pension investments had performed at benchmark in the last five years, the fund would have gained another $7.5 million.

Looking across an even longer history of performance, since its inception in 1999, the town pension plan has outperformed the bench marks by 0.41 percent (measuring the annualized rate of return).

For the first 11½ years the plan outperformed the benchmarks by 2.56 percent. However, in the last five years the plan has underperformed the benchmarks by 4.67 percent.

Besides losses due to investment underperformance since the fund's inception in September 1999 and its management by Westport Advisors, Newtown has compensated the firm $2,082,638 in management fees.

Westport Resources currently employs Selectman and former First Selectman Herb Rosenthal, During his tenure as first selectmen, and again as selectmen, Mr Rosenthal has filed a letter with the Town Clerk and his fellow selectmen, stating that due to his relationship with Westport Resources, he "would not participate in any matters relating to Westport Resources performance, retention, or fees."

On August 15, the BOS will be discussing and possibly approving a new pension policy. Mr Tait said he expects selectmen will also discuss choosing a new custodian for the pension portfolio and how they want pension funds invested in a new portfolio.

"The custodian receives funds and follows directives for fund investments - as well as producing reporting," Mr Tait said.

Several months ago, the town hired Fiduciary Investment Advisors (FIA) as a pension advisor, and will separate with the Westport Advisors sometime on or after October 1.

Mr Tait said that FIA's job is making recommendations on where to invest. The town can choose to follow that, or not. FIA also advises on portfolio makeup based on its research, and whether to keep or consider new funds based on performance.

He said each of Newtown's mutual funds have individual investment managers.

"We're certainly doing the right thing - it's been at least five years of this level of performance," Mr Tait said. "Losing money in the portfolio equates to a need to make increased pension contributions to the budget. We rely on earnings to offset those contributions."

In a negative investment performance situation, the finance director said the burden to keep the pension funded falls on Newtown taxpayers. The value of Newtown's pension fund as of June 30 is $34,706,794, down from $35,842,397 on July 1, 2015.