In an effort to bring European civilization and religion to the Indians, the Spanish in 1771 established a mission at San Gabriel Arcángel, 40 miles inland from San Pedro, and at San Juan Capistrano in 1776. Mission monks were the first traders to use the harbor, hauling ox carts filled with hides and tallow to the water's edge to meet ships carrying provisions from Spain.
During this colonial period, the Spanish prohibited settlers from conducting business with other countries, restricting their trade to two ships a year carrying goods from Spain's House of Trades. Foreign ships were given permission to stop only for urgent repairs or food. Despite these restrictions, San Pedro and the nearby towns and missions on the flats of San Pedro Bay prospered—largely as a result of a thriving cargo-smuggling industry.
At the same time, Spain tried to colonize the territory, sending 11 families recruited from the Mexican provinces of Sonora and Sinaloa to become the first settlers in what was called El Pueblo de Nuestra Señora La Reina de los Angeles de Porcuincula. The new town was founded on September 4, 1781.
The first American trading ship to call at San Pedro was the Lelia Byrd in 1805. Under the command of Capt. William Shaler, the trading vessel brought sugar, textiles and household goods in exchange for otter pelts and provisions. With Spain's trading restrictions still in place, this first Yankee transaction probably was not authorized by Spanish officials.
Spanish restrictions on trade continued until 1822, when an independent Mexican govern- ment lifted the oppressive restrictions, and San Pedro soon became a robust commercial center and an attractive home for new settlers. By the time California joined the Union in 1848, business at San Pedro harbor was booming. It was evident, however, that the harbor needed to be expanded to accommodate the increasing cargo volume destined for the growing Los Angeles population.
Still relatively undeveloped, the harbor did not offer deep-water access, forcing merchants to send small boats and rafts to meet cargo-carrying ships at anchor in the bay. This method was particularly cumbersome in transporting lumber which, as a result of the growing towns surrounding San Pedro, was in enormous demand. Once ashore, there was the added obstacle of expeditiously transporting the lumber to various markets in the region. Recognizing these shortcomings, one inexhaustible man was instrumental in bringing innovative changes to San Pedro Bay — changes that marked the first steps toward developing the bay into one of the great seaports of the world.
In the 1850s, a spirited entrepreneur named Phineas Banning began the first of a lifetime of ventures that would eventually earn him the name "Father of Los Angeles Harbor." These ventures included a freight and passenger transportation business that grew into a shipping firm with 15 stagecoaches and 50 wagons serving five western states. Even more noteworthy, however, was Banning's founding in 1857 of a small town adjacent to the wharf that he built to serve his business empire. He named the town Wilmington, after his hometown in Delaware. Among his other achievements, Phineas Banning provided valuable assistance to the Union cause during the Civil War and, as a state senator, introduced the first railroad bill to the California Legislature.
The Los Angeles and San Pedro Railroad began service between San Pedro Bay and Los Angeles in 1869. This 21-mile stretch of track was the first railroad in Southern California and marked the beginning of a new era of development for the harbor region. As the nation recovered from the Civil War, and with business booming, Banning led the crusade to solicit Congress for the first harbor improvements. These included dredging the shallow Main Channel in 1871 to a water depth of 10 feet and constructing a breakwater between Rattlesnake Island (now Terminal Island) and Deadman's Island (formerly located near Terminal Island). In that year alone, 50,000 tons of lumber, coal and other types of cargo moved through the Port as the railroad became the dominant mode of transportation.