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HE settlers of Otago manifested from the outset a determination to establish and maintain a liberal and comprehensive system of public school education. When the settlement was founded in 1847–48 by the Otago Association under an agreement with the New Zealand Company, the price of land in the Otago block was fixed at forty shillings per acre. Only one-fourth of the proceeds of the land sales was to be retained by the Company; the balance was to be expended on various public purposes in certain fixed proportions. It was part of the agreement that one-eighth of the entire proceeds should be set apart for "religious and educational uses," under the control of Trustees acting on behalf of the Presbyterian Church of Otago. Instead of this proportion of the proceeds being paid to the Church Trustees in cash, it was invested in the purchase of land within the settlement, so as to form an endowment for the maintenance of churches and schools. When the New Zealand Company's scheme came to an end in 1852, the Trustees had acquired in this way 22 properties of 60½ acres each, viz., 22 quarter-acre town sections; 22 ten-acre suburban sections; and 22 rural sections of 50 acres each; making in all, 1325½ acres. The original aggregate price of these properties was £2651. For some years the annual revenue from them was trifling, the average for the six years 1852–57 scarcely reaching £34. Of late years, however, the revenue has been considerable, the amount of rental received for the year 1887 having been returned at £4,892 13s 3d.

In the year 1852, the Imperial Parliament passed the New Zealand Constitution Act, by which the original Otago block was greatly enlarged, and was constituted one of the seven Provinces