NATCHEZ — A new financial investment venture approved by the Natchez-Adams School Board intends to provide the public school district with more cash to invest in the classroom.

The district recently hired a Madison-based investment firm to manage nearly $18 million in royalties — mostly from oil — earned from the district’s 16th Section land.

The district can legally only spend interest earned from the $18 million principal. And the district currently has $1.7 million cash in interest earnings, NASD Business Manager Margaret Parson said.

Since a contract with Britton & Koontz Bank expired in June, the district has only been earning 0.25 interest on the principal.

Parson said the district was earning 2.25 percent prior to June with B&K, which was 10-times more money than they are earning now.

Unable to get good rates in local banks, the district was open to hiring someone to manage their money, she said.

Alan Leach, a sales manager from the investment firm Smith Shellnut Wilson, who pitched his company’s services to the school board, said he believed his company would earn the district more than what it earned at the local bank using his company’s investment strategies.

“They’ll try to get best (rate) we can, certainly more than before,” Parson said.

The district will pay Smith Shellnut Wilson one-eighth of percent of the principal.

“We’d get $22,000 a year. We work for you and nobody but you,” Leach said. “Nobody on Wall Street is telling us what to do.”

Some board members asked Leach if the firm would ever make more money than the district by using their services.

“If we earn more than you do, we expect to be fired,” Leach said.

Leach said his company would provide the board with monthly updates and quarterly reports in how much money is being generated through investments.

Natchez-Adams County’s 16th section land probably has the second or third highest value among districts statewide, Leach said.

He said 16th section lands in the southern part of the state tend to have more oil.

“It’s the oil that makes the difference,” Leach said.

Board Attorney Bruce Kuehnle said royalties earned from oil or mineral rights are not expendable but are added to the principal.

The $17,998,141 in the district’s 16th section fund is a result of oil exploration that was started in the late 1930s and early 1940s, Kuehnle said.

The district’s 16th section land includes several parcels scattered across Adams County on Giles Island and even in a neighboring county, Kuehnle said.

While the principal amount is not expendable, 16th section earnings from hunting leases and timber sales are expendable and are added to the interest.

Wary school board members were assured by Leach that the investment firm will not be taking too many risks with the district’s money, especially because they legally cannot.

Kuehnle said state laws require banking institutions secure any public monies to be backed by U.S. Treasury, so if the bank fails the treasury can cover the loss.

Parson said the district received pitches from approximately four investment companies, including at least one local company.

“We’re trying to be creative and find better interest rates for our money,” Parson said.

Kuehnle advised the board to choose Smith Shellnut Wilson because the company had experience managing other school districts’ 16th section funds.

“(Smith Shellnut Wilson) certainly has more contacts than I do or the school district does,” Parson said.

The board approved execution of the contract at its Nov. 10 meeting pending some changes to the contract recommended by Kuehnle.

Kuehnle said the contract is ready, but it has not yet been executed.

Kuehnle’s revisions, which he said the company agreed to, sped up the process of terminating the deal should the district want to stop the services.