Fellow businessman Sheldon Smith persuaded Phelps to invest in the growing town of Derby, Connecticut, in an area that came to be known as Birmingham. Unable to grow his business farther north, Phelps selected a location on the east bank of the Naugatuck River in what is now downtown Ansonia. Ansonia was first settled in 1652 and named in honor of Anson Phelps. The state chartered Ansonia as a borough of Derby in 1864, and later as a separate town in 1889. In 1893, Ansonia incorporated as a city, consolidating with the boundaries of the town.