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Stanly hoped to make Felton a stop on a transcontinental railroad. The new town was named for his nephew-in-law, John B. Felton, mayor of Oakland and a founder of the University of California. However, construction of the railroad from Santa Cruz was delayed until 1875 due to lawsuits and corporate takeovers. For a decade, the town boomed as millions of feet of lumber came down the San Lorenzo flume and thousands of barrels of lime, manufactured in the local hills, were shipped. When a second railroad took over the first and planned an extension to Boulder Creek, the townspeople refused to let the tracks run along Main Street, so Felton was bypassed. As the natural resources of the valley were depleted, the town remained a popular camping destination.
The San Lorenzo Valley prospered during Prohibition due to its convenient location near local wineries and the seashore. Felton's Wild West appearance made it an attractive filming location for early movies, leading several Hollywood stars to build summer homes there. Though fires in 1888, 1896, 1917, and 1946 destroyed many buildings, some historic structures still stand, such as the two-story Creamer Hotel (1875), Alcazar Hall (1891), the Covered Bridge and former Presbyterian Church (1893), now the public library. Visitors continue to be drawn to the Big Tree Grove, incorporated into Cowell State Park in 1954, and the Roaring Camp Narrow Gauge Railroad.
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