10 .

these mortgages, either by receiving payment for the.
whole interest due, or in part, and if in part, the settle-
ment to be approved by the Board of Public Works,
and it also authorized the Board of Public Works to
renew the over-due mortgages at such reduced rate of
interest, as in their judgment, would best subserve the
interest of the State.

Repeated conferences, between this department and
the representatives of said canals and their lessee, the
Philadelphia and Reading Railroad Company, have
taken place in Baltimore and elsewhere, before and
since the passage of the Act above referred to, yet,
owing to the embarrassed financial condition of said
railroad company, no settlement could be effected, and
it was not until within the past few weeks, that any-
thing of a definite character, on the part of said rail-
road company was proposed.

The financial condition of the railroad company, un-
der the management of its receivers, has recently im-
proved. Reorganization, we are told, is assured, and
the railroad company's ability, under such circum-
stances, to pay a portion of these arrearage's at least,
can hardly be questioned. Indeed, the railroad com-
pany now expresses a readiness, to adjust the arrear-
ages which it owes the canal companies as lessee of
said canals. While it would be very gratifying to me
after my effort to effect a settlement, to exercise the
authority conferred in and by the Act of Assembly
hereinbefore referred to, but in as much as the said
railroad company does not propose to pay the arrear-
ages in full, nor is it willing to agree that the mort-
gages shall be renewed, at the rate of six per cent,
interest per annum, but insists that the interest for the
future shall be greatly reduced; I have concluded
that as the Legislature is now in session, to refer back
to your honorable bodies the question of settlement,
between the State and the Philadelphia and Reading
Railroad Company, that you may determine what shall
be the terms and basis of that settlement.