In 1878 construction of a new rail line was started from Oakland around the shores of San Francisco Bay, through Martinez to connect to the Central Pacific at a point three miles to the east of Ellis. The line had been built to make possible greater efficiency by avoiding hills and to eliminate the expense of helper engines. The result of the new rail line was the founding of Tracy on September 8, 1878, named for Lathrop J. Tracy, a grain merchant and railroad director in Mansfield, Ohio.

Soon after the establishment of the new line connecting in Tracy, the railroad discontinued the coaling station at Ellis and employees and their families were moved to Lathrop and to the new Tracy station. The town of Ellis moved bag and baggage to Tracy including moving two hotels.