Washington Territory was created in 1853 with Olympia as the capital and stretched east to include the mining regions. Politicians along the Snake River agreed that the boundary should reach to the Bitterroot Mountains with Lewiston as the capital. The 700 to 800 mile trip from Olympia to the eastern boundary proposed a problem because of differences in geography and climate. Something had to give. The Washington Territorial Legislature in Olympia decided to forgo asking for the mining camp area and draw the state line north to Canada from Lewiston. The U.S. Congress, after lengthy debate, approved this plan. Idaho Territory was born, stretching east from Lewiston to Laramie, Wyoming and north through Montana.
President Lincoln signed the organic act on March 4, 1863, creating the Idaho Territory with William H. Wallace as first governor. The territorial legislature met in December, which created a problem for the eastern area delegates getting to Lewiston. A more reasonable size for the Idaho Territory was advocated and Montana and Wyoming were cut off in 1864.
Idaho have a new governor, Caleb Lyon of New York State, who was appointed by President Lincoln to succeed William H. Wallace.
North Idaho began losing population with the closing of many mines and had only about 2,970 people, whereas, the population around the Boise area was about 15,000.
After many debates, the Idaho House voted to move the territorial capital to Boise and the council (the upper chamber) followed suit. Lewiston citizens were outraged and had an attorney go to court alleging the action illegal and prohibited anyone from moving the territorial property out of town. A warrant was issued for the arrest of Lyon and acting secretary Silas D. Cochran. The governor, with two of his southern Idaho legislator friends decided to go hunting downriver. They kept going until reaching Walla Walla.
Meanwhile let Lewiston, the arrest for it was served on territorial secretary Cochran, who was ordered to box up the seal and archives. In Portland, Lyon was delivering lectures on his travels in the Holy Land and had no intention of returning to Lewiston. The territorial government was in helpless disarray, no governor, no secretary (as he had left), no marshal, Supreme Court, or a capital.
Clinton DeWitt Smith of Maryland was appointed as the new territorial secretary. He borrowed funds to pay off the federal debt in Lewiston area, which had been operating for two years in arrears. The welcome was warm. One morning he left on one of his frequent horseback rides and upon his return was confronted by a detachment of U.S. Troops and a U.S. Marshal. They had confiscated the Idaho's seal and all the records they could carry. Crossing the ferry into Washington, they were out of the jurisdiction of Lewiston officially. The capital records were finally on their way to Boise.
Smith, who was appointed the Idaho Territorial Secretary and acting Governor, was received with rejoicing in Boise, while in the north he was reviled as a villain. His replacement as territorial secretary in Lewiston was Horace C. Gilson, who soon dropped from sight with $14,000 in territorial funds.
Lyon, after an absence of 10 months, returned to his old job now at Boise. His term in office was soon over and he decided to return to the east. Newspaper reports claim governor Lyon leaves Idaho, "the most thoroughly despised by all parties of any man who ever came here." While enroute to his old home in the state of New York, he reported the theft of $46,000 from his money belt. Coincidentally, this was the exact amount reportedly missing from the Indian Funds account in his office. He died in New York in 1875.
In 1890, a German Syndicate investigated the resources of the Payette Valley and decided to invest in real estate, placing $200,000 in various enterprises. They were incorporated under the name of The Payette Land and Improvement Company and are credited with the building of numerous downtown brick buildings. One of their young agents, Frank Marguedson found out that a 40 acre plot of land, where the city of Payette now stands, had never been filed on. W. F. Masters had filed one 200 acres of sagebrush around the area. Marguedson sped to the Boise land office and filed on the 40 acres. When Masters found out what had happened, he went to the Boise land office and had the deed set aside asserting the man did not qualify as a landowner because of his age and citizenship. Thus, Masters owned the entire Payette town site.