The Peninsular Railway was incorporated in January 1906 as a subsidiary of the Southern Pacific in response to calls for an interurban line from San Francisco to San Jose. In addition to the line to Los Gatos, branches were also planned to extend to Alviso, Oakland and Lick Observatory. However, due to the Colorado River flood of 1905 (which created the Salton Sea), many of the rails to be used for this construction had to be rushed to the Imperial Valley to rebuild the Southern Pacific line between Los Angeles and Yuma, Arizona. Therefore, only the lines connecting San Jose, Palo Alto and Los Gatos were constructed, and interurban service did not exist between Palo Alto and San Mateo. Another attempt to complete this line came in the next decade, but construction was again delayed by a scarcity of steel rails, this time due to World War I.