Extensive development of the island began after it was bought by William W. Eastman and John L. Merriam in 1865. In 1866, Eastman and Merriam tried to sell the island to the city of Minneapolis, to be a park, but the proposal was rejected in a referendum. Eastman and Merriam began building mills on the south side of the island and the Hennepin Island tunnel, and residential buildings on the north side. The Hennepin Island tunnel extended from Nicollet Island to the south end of Saint Anthony Falls via Hennepin Island. The tunnel collapsed in 1869, and almost destroyed Saint Anthony Falls, necessitating the building of an artificial apron for the waterfall. After the failure of the tunnel, Eastman built a system of turbines and cables to provide hydropower to factories on the south end of the island, including the Island Power Building (razed in 1937, it contained a variety of shops), a plant of the Cedar Lake Ice Company, and the Island Sash and Door Company (now the Nicollet Island Inn).