In 1880, General William Palmer built his little Denver and Rio Grande railroad west from Colorado Springs to Manitou Springs. He had once wanted to to continue the route farther west, up Ute Pass. The land had been surveyed in 1873 and some of the property purchased. The railway would have run up Ute Pass to South Park, Hoosier Pass, Blue River, White River and on to Salt Lake City. However, Ute Pass was considered too much of a gamble. The line he did build pushed from Colorado Springs through Colorado City to Manitou along Fountain Creek.
Colorado City was happy to be on a railroad, finally. The tracks ran through the streets just south of the road to Manitou. Dr. William Bell, General Palmer's close friend, had purchased large tracts of forest land west of Colorado City and supported the extension. Construction of the line went fairly quickly, except for a short delay, waiting for Colorado City's approval of the right of way. A sudden thunderstorm in the middle of July 1980 brought flash flooding along Fountain Creek. The fresh railroad grade was washed away in the low-lying stretches at Hangman's Gulch, near Arensdale. Rails, ties and the roadbed were gone. A few rails were found wrapped around trees below Colorado City.
Shortly after the flood, General U.S. Grant arrived in Colorado Springs from a trip in New Mexico. Grant and his wife rode on the first passenger train to Manitou… thanks to railroad crews who worked through the night to get the track repaired. The Grants were taken to Bell's nearby home, Briarhurst. It was Grant's second visit to the area, having visited in 1875 when the area was still under planning. He was impressed by the changes, but he never saw Colorado City!
Passenger service started to Manitou on July 27, 1880. The area was finally ready to be fully developed. The little Manitou train made the 20-minute trip between Colorado Springs and Manitou four times a day, stopping at Colorado City up into the early 1900s. The last D&RG train to Manitou was in the 1930's.