Battle is joined among the settlers, the Company, and the State which enacts its first Water Code. The railroad from the north reaches Bend, bypassing Laidlaw. The settlers hang the Company s resident partner in effigy and begin calling their town Tumalo, now increasingly overshadowed by Bend. Strong leadership emerges among the settlers and at the State, which assumes an increasingly active role. The Company fades.
Expectations reach a new high.
The project is completed within budget and on schedule, the dam holds, but Tumalo Reservoir fails to hold water. The Tumalo settlers, irrigating 5,000 acres, form the Tumalo Irrigation District. They believe they need more water, a right and a place to store water, and more settlers to help pay for improvements, operation and maintenance. They resist paying the State for its failed investment. They buy a storage right on the Deschutes at Crescent Lake and build an impoundment structure.