xii REPORT OF THE

tion, and preferred construction bonds were authorised to be issued
to such capitalists, which bonds were to take precedence of the lien
of the State on the revenues of the Canal, and the interest on which
was to be provided for and paid out of the income of the Company
before the State could derive any return for her immense outlay.
The State therefore occupies the position of a postponed creditor,
and her interest runs parallel and is identical with that of the pre-
ferred bondholders, who hare been already compelled from various
circumstances, to wait a long time for the fulfilment of the obliga-
tions of the Company to pay the interest on those preferred bonds.
A large amount of overdue and accumulated interest is still owing
to these bondholders, and the State can derive no revenue from tho
work until these overdue coupons are first paid. Tho Canal Com-
pany therefore, in order to do justice to the State, must make the
payment of these overdue coupons their first and paramount object,
and the decision of the Court of Appeals made in a cause involving
the status of the different liens, directs the Company to devote all
the revenues of the Canal not absolutely required in the preserva-
tion of the work, to that purpose. The Board of Public Works
representing the interest of the State, has for a number of years
inculcated and pressed upon tho officers of the Canal Company, by
every means in their power to enhance the revenues of the work
by the most judicious levying of tolls, and by husbanding every availa.
ble source of profit; and to lessen the expenses by the strictest
economy, and by lopping off all useless drains upon their resources.
The amount paid towards liquidating tho accrued interest on the
preferred honds during the past year, as appears by the report of
the President and Directors, has been $305,910. If the same
amount can be devoted to this end regularly hereafter, the whole of
the overdue coupons will be paid by the first day of July 1881, and
after that time only the accruing interest for the current year, and
the amount necessary for the sinking fund will be required, and the
balance, which at the present rates of receipts and expenditure,
would amount to $164,337.59 will be available to the State Treas-
ury. I have been thus particular iu stating these facts, because the
true interests of the State in regard to this matter, are not familiar
to all the people of the State, and misrepresentations have been
studiously made to induce discontent with what has been termed
the extraordinary devotion of the State officers to the interests of
the preferred bondholders. The people of the whole State have in-
curred the debt for the building of this great work, and are directly