Gates became influential in the development of the city of Port Arthur, Texas when he took over the Kansas City, Pittsburg and Gulf Railroad in December 1899 after he forced it into bankruptcy along with its previous owner and Port Arthur founder Arthur Edward Stilwell. Gates built a winter home in the city and contributed much to its development. After Gates became the owner of the Port Arthur Canal and Dock Company, he held the asset for a time; in 1906 he gave the canal to the US government under the condition that Port Arthur would be named an international port of entry. Gates founded the first bank, built a rice mill and established the Port Arthur Light, Power and Ice Company. When he decided to make Port Arthur his permanent residence in 1908, the town held a celebration. After Mary Gates died while on a visit to her son and his family in December 1908, Gates built Mary Gates Hospital to honor her memory. He was also a large contributor to Port Arthur Business College, and built a model farm to give the city a source of fresh dairy products.