As part of its plan to eliminate the city’s debt, Duluth’s common council asked district court judge Ozora P. Stearns to create legislation to reorganize Duluth as a village and compound its debt, reissuing its bonds at twenty-five cents on the dollar. To ensure the village remained motivated to pay off the remainder, its borders were retracted to its First and Second Wards—between Fourth Avenue West and Third Avenue East from the hilltop to Oatka Beach. As the village paid off its debt, Woodbridge explained, it would “take in more and more of the city in proportion to the amount of her indebtedness paid.”
The legislation passed, making city leaders both happy and anxious, as they feared retribution in the form of lawsuits brought by angry bondholders, who essentially lost 75 percent of their investment. At the final city council meeting in March 1877, city fathers set fire to a stack of cancelled bonds—an act Woodbridge described as “a burnt offering.” Stearns became receiver of the new debt, and the City of Duluth existed no more.
But it wasn’t a village yet. By the legislation’s design the community first became the District of Duluth, allowing city officials to resign their elected positions and thereby disconnect themselves from any debt-related legal battles brought against the village. They did so immediately. In October the district gave way to the Village of Duluth, whose chief executive would hold the title of president; Danish lumberman and brownstone-quarry owner Andreas M. Miller was its first.
Duluth perfectly timed its restructuring. Within a year after the Zenith City was reduced to a village, farmers in the Red River Valley began sending wheat and other grains east on the reorganized Northern Pacific Railroad. For the next three years they sent an average of 1.7 million bushels of wheat to Duluth to be shipped to mills along the Great Lakes. Starting in 1878, as Duluth’s post-panic population bottomed out at 2200, grain elevators began popping up on Rice’s Point and adjacent to elevator A on the outer waterfront.
More than grain began passing through the port. Since 1871 Duluth had been supplying coal, most of it mined in Pennsylvania and Ohio, to Minneapolis and St. Paul. In 1875 Northwestern Fuel had built the city’s first dedicated coal dock. By 1880 coal docks stretched among the elevators along Rice’s Point’s eastern shore. The St. Paul & Duluth Railroad—the reorganization of the Lake Superior & Mississippi Railroad—and the Northern Pacific Railroad helped Duluth ship coal to cities in eight states.
Much of the coal remained in the Zenith City, keeping homes and buildings warm and fueling the furnaces of steam-powered grain elevators and lumber mills. Most of these facilities had their own dedicated coal docks, and several sawmills went to work along the western shore of Rice’s Point and the river bank west of it. The lumber industry, played out in Michigan and nearing exhaustion in northwestern Wisconsin, was working its way to the pine forests of northeastern Minnesota, and within a few years lumber mills would line the St. Louis River from Rice’s Point to Grassy Point. More coal fueled the blast furnace, dormant since 1874, which was reignited in 1880 as well.
The 1880 census recorded the population at 3483, further demonstrating the village’s return to prosperity. Miller had passed the presidential baton to former mayor Drew in 1879, who in turn handed it back to former mayor Dean a year later.
Under Dean the village paid off a large portion of its debt, and after Stearns set fire to another $5000 worth of bonds, the mayor resigned midterm. St. Louis County Attorney Josiah D. Ensign stepped in to take his place and was easily re-elected in January 1881. That April the village went through yet another reorganization and began to regain more of its former shape. A new charter restructured the government to behave more like a city than a business, returning to a system led by a mayor advised by a council of aldermen. Ensign won an uncontested mayoral race, and the village boundaries were pushed west to Thirtieth Avenue West, including all of Rice’s Point, and east to roughly Eighth Avenue East along Brewery Creek.
But just as Duluth was stitching itself back together, another portion of the original city split off. In the 1877 reorganization, the strip of Minnesota Point below the canal had become the village’s First Ward, but its citizens felt disenfranchised.
Landowners had seen their property values nose-dive after the canal turned their portion of the point into an island. Each year since they had lobbied for a permanent bridge over the canal, but civic leaders had ignored them. So in 1881 the community ceded from Duluth and organized itself as the Village of Park Point.
By 1881 Duluth’s population had climbed to 7800 and so much grain passed through the village that its business leaders organized the Duluth Board of Trade to set and regulate grain prices. Founding members included some familiar names, including Charles Graves, Walter Van Brunt, Roger Munger, and Clinton Markell. The grain industry boomed throughout the 1880s. Four years after the board’s formation, Duluth boasted fourteen grain elevators, eleven of them along Rice’s Point.
That year Graves and Van Brunt installed Duluth’s first telephone system, and the next year Graves replaced Ensign as mayor. Members of the city’s old guard kept taking turns as mayor, as Joshua B. Culver returned to the office in 1883, the year the Duluth Street Railway Company began operating a mule-driven streetcar service along Superior Street between Third Avenue East and Eighth Avenue West. Culver died while visiting New York in July, and Graves served out his term. By then the population had jumped to 14,000, nearly doubling in two years.
As 1883 gave way to 1884, Ensign once again sat in the mayor’s chair, overseeing some 16,690 citizens, many of them buzzing about the opening of northeastern Minnesota’s first iron mines. As Duluth was struggling to recover in the late 1870s, George Stuntz had dusted off his Lake Vermilion iron ore samples and showed them to George C. Stone. Stone passed the news of potential iron deposits to Philadelphia’s Charlemagne Tower, who sent a doubting geologist to check things out. Stunz had to practically drag the skeptical scientist up the Vermilion Trail, but his efforts paid off: they found substantial iron deposits. By 1883 a mining company organized by Tower and Stone was ready to start digging.
Tower’s group not only opened the Vermilion Iron Range but also built the Duluth & Iron Range Railroad (D&IR) to carry ore to docks to be shipped to steel plants in Pennsylvania. But Tower bypassed Duluth and built the docks at Agate Bay, which then joined with Burlington Bay to form the village of Two Harbors. The railroad began moving ore in 1884 and two years later built a line to carry people and goods between Two Harbors and Duluth. It ran along the shore south to Duluth’s eastern border, which thanks to continued bond-debt payments now reached the western border of Endion at Fifteenth Avenue East.
The D&IR line marked the completion of Duluth’s second wave of railroad expansion. The NP had finally reached Superior in 1882. Three years later the railroad connected Duluth to the blossoming village of West Superior with the St. Louis Bay Bridge between Rice’s and Conner’s Points. Soon thereafter the Chicago, St. Paul, Minneapolis & Omaha Railway built freight and passenger depots along Duluth’s waterfront and began offering service to and from the village.