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Reserve eight miles fifteen chains from the Christchurch Station. The land to be bought
in this case will be twenty-one acres two roods, as against sixty-six acres unpurchased on
the Western line. The total distance from Christchurch, following the surveyed line to the
same point is nine miles and sixty chains. Should it be found possible to purchase the land
on either line for such a sum as would leave a sufficient balance to justify proceeding with
the line, it would be my duty at once to call you together to obtain your authority to
initiate the work on such plan as may be determined by you.

With regard to the appropriation of £15,000 towards the continuance of the Southern
Line, I may observe that there are no difficulties in the way of proceeding with the work on
the principle I have indicated, at such a rate of progress as will secure the opening of the
line to the Rakaia simultaneously with the completion of the bridge over that river.

The appropriation for the present year will suffice to complete at least one-half of the
work, which might be advantageously put in hand during the five months preceding the
month of October next year.

With regard to the Tramway from Selwyn to Southbridge, I may state that the
district which it is proposed to connect with the Railway by this means is one which,
considering the large amount of land sold within it and the extent of its grain products, and
the comparatively small expenditure which has taken place in it, deserves your most careful
and favourable consideration in the appropriation of the funds at your disposal. Should
you accede to the appropriations I have recommended, I am led to believe that there will
be little difficulty in inducing private capital to embark on the construction of the Tramway
on a similar principle to that adopted in the contract for the Rakaia Bridge. The Tramway
would be constructed with iron rails on the side of the highway and the Tramway Reserve, and
tenders for its construction would be invited, offering to the contractors the sum of £5000,
and guaranteeing to them the receipt of the Tolls for a period of years at a fixed rate. It
is believed that this and other similar works would act as feeders to the Railway and largely
increase its traffic, and it is reasonable to expect that the Province will be able year by year
to devote a considerable proportion of profits arising from its Railways to the gradual
extension of our Railway system.

In speaking of railway profits I may state that hitherto this term has signified the
difference between receipts and working expenses. This, however, is not what should
properly be understood by profits. No account has been taken of the fact that the stock
of plant will ultimately require renewal, and accordingly it is proposed to set aside annually
5 per cent. on the gross earnings as a fund which will provide for renewal of rolling stock
and plant as they become necessary. The receipts from the railway are estimated at
£49,048 6s. 8d., and the expenditure, including £2450 to the credit of the Renewal Fund,
and a sum necessary to carry on repairs in the tunnel, which have been put in hand, at
£37,681 2s. 10d., showing a net profit of £11,362 3s. 10d. On the completion of the sheds
now in progress, the capital account of the present lines may be deemed to be closed, and
all expenses incident to working the lines will henceforth be charged on earnings. A sum
of £1920 appears on the Estimates for new works, including additional shed-room at
Templeton and North Selwyn.

By an Act of the General Assembly, passed during its last session, the right of the
Provinces has been recognised to what has been termed the released portion of the Sinking
Funds of their loans.

Correspondence, including a letter from Mr Selfe to Lord Granville, with the remarks
upon it by the Comptroller of Public Accounts and by the Colonial Secretary, as laid upon
the table of the General Assembly, will be placed before you. My letter to Mr Selfe of