In 1849 there was a gold rush which took place, amongst other locations, around San Diego that also brought many new settlers into the area looking for wealth. Although the bulk of the Californian gold rush was towards the north of the state near San Francisco this did also cause some movement south from those who initially settled there.
The authorities started to demand evidence of land ownership and the cost of surveys bankrupted many rancheros. High taxation also meant that the land wasn’t worth keeping with a property tax introduced in California in 1850 which charged $1 for every $100 of land owed, with 50 cents to the state, 25 cents to the county and 25 cents to fund a new courthouse.
In 1850 California formally became part of the United States as the 31st state with the city becoming part of the new San Diego County. The Constitutional Convention had been held the year before which started to work out where the state capital would be and after a few years of debate the city of Sacramento was chosen although it was initially located in San Jose. There was no real chance of San Diego becoming the capital because of its southern location within the state but there were queries why it had such a strong representation in the new constitutional plans given its low population.
Part of the reason why San Diego was seen as important in the state of California was its position as a potential commercial centre. This prediction started also to be met in reality when in 1851 the steamship Goliath started service to the city. Soon after this the Pacific Mail Steamship Company also started a mail service to San Diego and international trading began to expand.
The new commercial status didn’t though provide immediate economic fortune for San Diego. In 1852 the city had to declare bankruptcy although much of this was down to the cripplingly high costs of a new jail which the authorities had undertaken to build. The jail had been a debacle with the first expensive jail being destroyed as soon as it rained and the next jail being seen as useless when a prisoner simply dug his way out. The state repealed the city’s charter because of this bankruptcy and a new system of governance was forcibly introduced.
In 1853 the new city committee started to prepare a survey which might encourage a railroad to be built which ended at San Diego. Residents and merchants started the San Diego and Gila Railroad Company in 1854 and started to issue stock to fund the plans. Land was given by the city to ensure that the railway could access the centre of San Diego and extensive surveys were completed. Despite this initial positive progress it wasn’t though until much later that work on the railway line would actually began.
San Diego at this time started to slowly move away from the Old Town area and into the New Town – which is today’s heart of the city – with land purchased by William Heath Davis. Davis spent $60,000 on a wharf for New Town which was much more than he had anticipated. The construction work began in 1850 but was a financial disaster and it was hit by the steamer Los Angeles in 1853. In 1862 the army demolished the pier to use as firewood and it took over 20 years until Davis was compensated just $6,000 for it. The New Town didn’t though grow as expected and some traders and residents left the area to return back to Old Town.
John Ames started the San Diego Herald in 1851 which was the city’s first newspaper but it had a traumatic beginning and was closed a few years after when the owner moved to San Bernardino. The San Diego Union newspaper began in 1868 and in 1895 the Evening Tribune started publication with these two papers remaining in publication until 1992 when they merged together.
In 1855 the first Point Loma lighthouse opened at the entrance to San Diego Bay which helped aid the development of the harbour. Despite the lighthouse moving to a location nearer the sea because of visibility problems with the original site the 1855 building is still open to visitors and is situated next to the Cabrillo National Monument.
Although the city wasn’t directly involved in the action, the American Civil war divided the opinions of the locals and in June 1861 two large guns were placed into position to guard the harbour. The population by this time remained at just over 500 and the development of the railway was delayed both due to the civil war and also more localised political disagreements.
Alonzo Erastus Horton agreed with William Heath Davis that the future of the settlement would be at the bay and not up the hill. He purchased 900 acres for $265 when he saw the potential that the San Diego area had. He spent money on organising new elections to allow a Board of Trustees to allow the sale of the land and it went to auction where it cost even less to purchase than Horton had expected.
Although slow there was progress and more settlers came to the area including investors and some who were tempted by cheap land. In January 1868 Horton gained permission to build a new wharf which encouraged further development and he was able to sell plots in what was known as “Horton’s Addition”.
Horton started to plan a new hotel on D Street, now named Broadway, and work started on this on New Year’s Day in 1870. The hotel was called Horton House and it had 100 rooms and was completed within nine months at a total cost of $150,000. Although initially popular after it opened in October 1870 the lack of the railroad reaching San Diego meant that visitor numbers weren’t as high as expected. This caused Horton serious financial issues which meant that the hotel was demolished in 1905 and it is now the site of the US Grant Hotel after it was bought by the family of the former President Grant. The new hotel opened in October 1921 as the US Grant Hotel and was designed by Harrison Albright to a high specification.
The debate continued on where the centre of San Diego should be and there were prolonged arguments in 1871 on whether the supreme court building should be in the new or old area of the city. A fire in 1872 destroyed much of Old Town, including the largest hotel, and it was this that ultimately meant that the move to the downtown area was inevitable. Over the following few decades the Old Town area started to decline whilst investment moved south.
Work on the railway had been heavily delayed because of the civil war and political arguments. The owners of the Big Four railroads opposed the new route but in May 1872 the Texas and Pacific Railroad Company was given permission to build a new route from Marshall in Texas to San Diego. The new route had some tough deadlines to meet including completion within ten years and with work to start at both ends and for sections of the route to open during the period. In compensation 16 million acres of federal land were to be offered. The terms were too tough but were negotiated and work began in April 1873 although with limited finances and materials. The financial panic of 1873 took place shortly afterwards and the work was further delayed. It did though give hope of connecting San Diego to the First Transcontinental Railroad which had opened up the state of California in 1869.
The infra-structure of the city improved during the early part of the 1880s with gas reaching the city in 1881 and the first telephone lines were connected in the following years. Work on the railroad into the city had commenced once again during the same year and after decades of delay it was finally completed by November 1885.
The period following the railway’s arrival in the city led to an increase in the number of new businesses which meant more offices and hotels were needed and the population of the city increased to around 35,000. An economic crash then hit the city in 1888 and the population fell sharply almost as fast as it increased and by 1890 it had fallen once again to 25,000.