There's nothing in particular to prohibit term limits, but that may not matter.
According to a recent piece on the New Haven Politics blog, it appears that municipalities can't monkey with election-related issues unless state law specifically allows it.
But "state law is silent on the subject of term limits for municipal elected officials," according to a 2001 Office of Legislative Research paper by Mary M. Janicki.
She said that "it neither imposes a ban on enacting term limits; nor does it expressly authorize towns to do so." A 1985 law review article -- The Myth and Reality of Home Rule Powers in Connecticut, by Timothy Hollister - said that "despite home rule authority granted in the state's Constitution and statutes, the Connecticut Supreme Court has held that the General Assembly, by its specific enumeration in the statutes of the powers delegated to municipalities, has implied that town cannot exercise powers not expressly delegated to them," as Janicki summarized it.
A 1985 Connecticut Supreme Court ruling in Simons v. Canty determined that towns did not have the power to enact provisions allowing the recall of elected officials because the state never explicitly backed the idea in its home rule legislation.
At the first meeting of the current charter revision panel in New Haven, an outside counsel told commissioners that "term limits were probably unenforceable under state law" because New Haven has never been given the authority to enact them, according to a story in New Haven Politics blog.
Just because term limits may not be legal in Connecticut, though, doesn't mean the charter issue can't go on the ballot.
Bristol could move forward with the idea in the hope that it would not be challenged or that state lawmakers might endorse the concept before a court ever ruled on the matter.
In any case, it's an issue that might well come up before the measure lands on the general election ballot in November.