The year 1879 marked the turning point to better times. The disappearance of the grasshoppers and the building of two new lines of railroad in the vicinity were the causes of the return of prosperity and advancement. The failure of the Southern Minnesota railroad to cross the Sioux City road at Heron Lake was a disappointment, but the building of the Black Hills branch of the Sioux City & St. Paul from Heron Lake to the northwest more than offset this. While the railroads were building new settlers came to locate upon lands along the new roads, and the effect upon the town was good. A Heron Lake correspondent, writing in November 1879, said:
Twelve new buildings to represent nearly as many departments of business are now in process of reconstruction. Never in the history of this place have its merchants experienced such business activity as the past summer and present fall. Week in and week out since early spring they were taxed to their utmost to procure help and stock to supply the immense demand for merchandise.
In 1880 a census of the town showed a population of 163. The building improvements kept pace with the growth in population. It was reported in July 1880, that twenty new buildings had been erected since spring opened. One of the most important events in Heron Lake’s history occurred in the fall of 1881, when John T. Smith built the first tow mill in the state of Minnesota and established a business that added much to the town’s prosperity. The main building was 84x100 feet, and it was said to have been the largest tow mill in the world.
Although their town was yet a mere hamlet, the citizens of Heron Lake, in the fall of 1881, asked the legislature for a charter granting them municipal government. An act was approved November 17, 1881, providing for the incorporation of section 19, Weimer township, and naming T. A. Dieson, C. A. Wood and J. F. Force commissioners to conduct the preliminaries. The first village election was held January 3, 1882, and the first village council met and organized January 9, 1882.
The establishment of the tow mill and the prevailing prosperous times made the year 1882 a memorable one in Heron Lake’s history. Said a writer who visited the town in March: "We were considerably surprised at the many evidences of thrift, enterprise and go-aheadativeness displayed in Heron Lake, and we doubt if any town of like size in southern Minnesota can surpass or even equal the town in these respects. Many new buildings have made their appearance within the past year and evidences of thriving trade are plentiful." The building improvements completed during the year amounted to over $17,000.
But the amount expended in improvements gave little idea of the volume of business done. Three thousand tons of flax straw were marketed in the village, manufactured into tow, and shipped to the eastern markets, while four thousand tons of hay were baled and shipped. The volume of business done during the year (not including professional business) amounted to a quarter of a million dollars.
During the entire decade of the eighties Heron Lake prospered, as did the country at large. There was no feverish boom, but the growth was steady and of a substantial character – keeping pace with the progress of the surrounding country. In 1884 the following were engaged in business in Heron Lake: John T. Smith, general merchandise and tow mill; J.W. Benson, general merchandise and creamery; Johnson & Dieson, general merchandise; John Weir, hardware; Lammers & Wood, general merchandise; J.F. Force, drug store; C.R.J. Kellam, drug store; E.J. Graves, lumber and real estate; C.E. Marsh, Chapman house; W.S. Freer, Pioneer House; B.J. Svennes, La Crosse House; E.D. Briggs, attorney.
In 1885 the population of Heron Lake reached 280. That year there was some advance. Comparative dull times prevailed in 1886, but the next year the Heron Lake News reported the expenditure of $48,000 in new buildings in the village. The hard times period following the panic of 1893 temporarily checked the growth of the town, but the recovery was quick, and in 1895 the population had increased to 646. During the next five years there was another increase, the census of 1900 giving the town a population of 928. There has been but little increase since that census, but in a business way Heron Lake has prospered and today ranks as one of the most progressive little cities of southern Minnesota.
In the history of the town there have been two bad fires. The first of these occurred Tuesday afternoon, November 10, 1898, when the John T. Smith tow mill and a hay barn, coal sheds, stock yard and oil house burned, entailing a loss of $75,000, of which only $20,000 was recovered in insurance. The fire was a fierce one, and only the favorable direction of the wind saved the town from destruction. Some of the buildings on the north side of the track took fire from flying sparks, but the flames were extinguished before damage resulted. The second disastrous fire occurred in October 1904, when the losses amounted to about $65,000. The St. John elevator, the Benson elevator and the Western Implement Company’s storehouse were entirely destroyed with all their contents. Eighty thousand bushels of grain and sixteen freight cars were also burned.
(The History of the city of Heron Lake was obtained from the following sources: 1883-1983 Heron Lake 100 Years of Good Living, Consultation and Composition by Gary Richter, a Project of the Heron Lake Centennial Book Committee; Heron Lake, Minnesota - Centennial +5 1988; Consultation and Composition by Gary Richter, A project of the Heron Lake Centennial-Committee; and An Illustrated History of Jackson County Minnesota, Vol. I and II by Arthur P Rose.)