Tenino was officially incorporated on July 24, 1906, though it existed as a rural community since the mid-19th century. Initially, American settlers were attracted to the open prairies created and maintained by local natives through controlled burns to cultivate camas root, a staple food source. Records indicate the initial settlers' community centered on the prairie approximately 1/2 mile south of the present town. Early residents named their first post office and school "Coal Bank", in the 1860s, a reference to a nearby coal outcropping. When the Northern Pacific Railway arrived in 1872 they adopted Tenino as the name of the new station. It also appears informally as "T-9-O," a shortened variation in use as early as 1873.
In the late 19th century a number of sandstone quarrying companies began shipping building stone, used in many regional buildings outside of Tenino, including the Old Capitol Building and the old Thurston County Courthouse in Olympia, the Mason County Courthouse in Shelton, Washington, the First Congregational Church, developed by Cameron Stone, in Tacoma, Washington, Denny Hall and the Theodore Jacobson Observatory at the University of Washington, Seattle, the Pittock Mansion and the Pioneer Courthouse in Portland, Oregon and several post office buildings, including at The Dalles, Oregon. The US Government also used stone from these quarries to construct jetties at Westport, Washington and elsewhere. The quarries declined in the early 20th century when many builders switched to concrete.
In addition to quarrying, logging, saw mills, and coal mining were also well established industries in the area. However, as the timber played out and railroads switched to diesel in the mid-20th century, these industries also declined.
Tenino wooden money, issued during the Great Depression.
Tenino briefly achieved national fame during the Great Depression. After the local bank closed, the town government temporarily issued wooden money scrip for use locally when cash was scarce. However, most of the wooden money was never redeemed as it became a collector's item.
While Tenino retains its historic downtown, now a historic district listed on the National Register of Historic Places, the town serves largely as a "bedroom community", many of its citizens commuting by car to larger cities such as Olympia and Tacoma for work.
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