"Tenth report.—Flagler & Reilley's pending contract at Fort Plain.

"Eleventh report.—Jordan level contracts.

"Twelfth report.—The auditor's traffic in canal certificates.

"A copy of these several reports, together with the testimony taken before the commission, covering together 2927 pages, are submitted with this report.

"Several other reports are in course of preparation. One on the Glen's Fall feeder, a second on the Canal Appraiser's ice awards at Rochester in 187 , and a third on the W. C. Stevens contract assigned to Denison, Belden & Co., for dredging the Albany basin, dated December 31, 1866, will be submitted at an early day.

"Though we have given this investigation our most unremitting and exclusive attention, we not only have not exhausted the subject, but there are many matters falling within the range of our inquiry which we have only been able to touch incidentally. Among these we regret that the subjects of 'ordinary repairs,' the lateral canals, and the present system of appraising canal damages are included.

"As we have been able to examine only a limited portion of the work done on the canals since 1868, of course we have found it impossible to extend our inquiries beyond that year, though we have abundant evidence that the mismanagement of the canals dates from a much earlier period. But the results of our investigation—incomplete as any investigation made in so short a time must necessarily have been—will, we think, suffice to indicate with tolerable distinctness what have been the more mischievous errors in the management of our canals, and some of their more obvious correctives.

"We propose to-day to submit to you such of the conclusions as we have reached, with all the testimony we have taken, reserving for a later day some further recommendations which are under consideration.

"Introductory to such conclusions as we are now prepared to submit to you, it is proper that we first invite your attention to the character of our canal property as an investment, and show precisely how it stands upon the books of the State.

"This sum of $28,000,000 and upwards represents the premium which the people of this State have paid in taxes during the last fifty-odd years to secure and encourage the use of these waterways for purposes of transportation, the equivalent of an annual subsidy of over $560,000.

"If to this be added the interest on the canal debt, the cost of collection, and the difference between miscellaneous expenses and receipts, as set forth in detail in Exhibit B, the loss to the State from the canals during the last fiscal year will be found to amount to the enormous sum of $1,412,470.79.

"The cost of repairs and maintenance is so obviously out of all proportion with the necessities of a system of completed structures like our canals, which have little that is complicated or perishable about them, that we are forced to seek the explanation of it in their administration.

"Our investigation was not long in revealing the fact that the canals have not been managed upon the principles which would govern any man in the administration of his private estate. The interests of the public have been systematically disregarded. The precautions with which the Legislature has attempted to defend this property from peculation and fraud, and secure for it faithful and efficient service, have been deliberately and persistently disregarded; while the responsibility of its agents has been so divided and distributed as to leave the State comparatively remediless and at the mercy of the predatory classes, who have been, if they do not continue to be, a formidable political power.

"The more conspicuous evidences of mismanagement which our investigation has disclosed may be divided into three categories:

"First, as to the modes of letting contracts.

"Second, as to the modes of measuring and estimating work to the contractors.

"Third, as to the facilities for procuring legislative relief.

"First, as to the mode of letting the contracts:

"It seems to have been the practice for years to let contracts upon conditions which exclude honest contractors and confine this business, at least as to what are termed 'extraordinary repairs,' almost exclusively to large capitalists. The large deposits required from contractors discouraged bidders with small means, while the encouragement offered to unbalanced bidding, by a neglect to enforce the faithful performance of the provisions of the contract, have a tendency to exclude all who bid fair prices, with the honest intention of giving the State fair work for them. Till since the commencement of this investigation we do not know of a single instance in which any forfeiture of his deposit had been enforced against any contractor; while we believe we do no one any injustice in saying that no contract has been let since 1868 the provisions of which have been properly complied with.

"There has been a corresponding disregard of all the provisions of law regulating the letting of the contracts. The law wisely required a preliminary survey, with maps, specifications, and estimates to be made by the division engineer, approved by the State Engineer and by the Canal Board, before a contract could be let. The purpose of these precautions was to ascertain the amount and probable cost of the work as a means of determining the relative merits of the respective bids, and to serve as a protection against false or erroneous estimates of engineers. These precautions have been almost universally neglected. The result has been that the amount of work and materials required in the actual construction varied so widely from the quantities let that in nearly every instance the person receiving the contract proved in the end to have been the highest instead of the lowest bidder;[4] and we cannot resist the conclusion that these precautions in many instances were neglected with the intent to afford greater facilities for