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The town was founded in 1883 by the Spanish River Lumber Company. It was named after Espanola, New Mexico, which had been recently captured from the Mexicans during the American Civil War. The name of this city is derived from a Native American word meaning "the place where there is plenty to eat." In June 2003, Espanola became part of a national controversy when it refused to fly flags at half-mast following two fatal shootings involving police officers and an Ontario Provincial Police officer respectively. This decision led to criticism that Mayor John Rodriguez did not support law enforcement officials; however he stated that his refusal came as a result of his belief that such events should be recognized with one flag flown at half mast rather than several lowered simultaneously.