The lower bay of Newport was formed much later by sand, brought along by ocean currents, constructed the offshore beach, now recognized as the Balboa Peninsula of Newport Beach.
In 1888, the McFadden family decided their shipping business would be more successful if they moved it from the inner shores of the bay to the oceanfront, where it was connected by rail to Santa Ana. So they built McFaddens’ Wharf at the location where the Newport Pier is today. “McFadden Wharf soon became the largest business in newly created Orange County”, California. It lasted for eight years, the McFadden Wharf area was a booming commercial and shipping center and a company town began to grow. However, in 1899, the Federal Government allocated funds for major improvements to a new harbor at San Pedro, which would become Southern California’s major seaport. The McFadden Wharf and railroad were sold to the Southern Pacific Railroad that same year, signaling the end of Newport Bay as a commercial shipping center.
In 1902, James McFadden sold his Newport townsite and about half of the Peninsula to William Collins, who saw Newport Bay’s resort and recreation potential. Collins took on Henry E. Huntington as a partner in the Newport Beach Company. Huntington had acquired the Pacific Electric railway system and used it to promote new communities outside of Los Angeles.
In 1905, the Pacific Electric “Red Cars” were extended to Newport. Collins began dredging a channel on the north side of the bay and deposited the sand and silt on tidelands that would become Balboa Island. Formerly known as Balisle, this enchanting little island was not always easy to get to. Newport Harbor was still largely undredged, and sailboats were often the only way to get around. Robert McFadden, an early Balboa Harbor developer had established a successful fishing wharf on the Balboa Peninsula.