COMPTROLLER OF THE TREASURY. xiii

money the State lias expended on it. Notwithstanding-
the strictest economy has been practised by the present
management, and the affairs of the Canal conducted upon
the best business principles, I doubt, from the informa-
tion which I have been able to gather, whether we have
any reason to hope for a prosperous future for this great
public work.

THE SUSQUEHANNA AND TIDE-WATER CANALS
on which the State has a lien by way of mortgage-
amounting to $1,000,000.00 in principal and $474,000.00 in
interest, is a case similar in character and only differs
from the other in the amount of money involved.

The mortgage on this last named Canal was, until
within a few years, one of the productive investments
of the State, and annually paid into the Treasury in-
terest at the rate of six per cent.

By an Act of the General Assembly of 1884, Chapter
160, it was agreed on the part of the State to reduce the
interest on this mortgage to 4 1/2 per cent., on payment of
the interest then in arrears by the Philadelphia andi
Reading Rail Road Company, the lessee of the said
Susquehanna Canal, arid depositing by said Railroad
Company with the Pennsylvania Company, for Insur-
ance on Lives and Granting Annuities, $1,000,000.00 of its
second series 5 per cent, consolidated mortgage bonds as
collateral security for the payment henceforth semi-
annually of the interest at the reduced rate.

I regret to state, that almost immediately after the-
passage of that act, the affairs of the Philadelphia and
Reading Railroad Company became unexpectedly em-
barrassed, and it was unable to comply with the pro-
visions of the act.

Proceedings are now pending, which will probably
result, at an early day, in the rehabilitation of that com-
pany.

I recommend the re-enactment of the Act of 1884,
Chap. 160, with such changes in its terms as the lapse of
time has made necessary, in order that another oppor-