Minor correction: it was the amalgamation of two smaller towns, Port Arthur and Fort William. I was in grade school in Port Arthur when it happened, and as you can imagine, it was covered quite a bit in school (and on the radio, and TV, and the newspapers).

The short version is that there were tax benefits to being a city over being a town, but that neither town met the legal requirements under Ontario law at the time to (re)incorporate as a city. So both Port Arthur and Fort William (as well as smaller communities like Neebing, and McIntyre) decided to merge and become a single city. At least that's how it was explained to us in school.

Fun fact #1: there was a referendum about what to call the new city, and the three choices were (1) Lakehead, (2) The Lakehead, and (3) Thunder Bay. As expected, The first two choices split the vote, and the name Thunder Bay won out, even though everything that wasn't nailed down at the time was labelled "Lakehead" already.

Fun fact #2: the three members of my family that were legally able to vote at the time, all did, with one vote for each of the offered choices. I still remember the arguments over that, 50 years later.

Fun fact #3: We lived in Current River, and my grandfather was involved in local politics. Current River is to Port Arthur as Port Arthur is to Thunder Bay today. He (and many of the local Current River council) routinely described the expansion/merger with Fort William as "like watching gangrene spread". No, they were not fans of the idea.

Fun fact #4: There was more discussion of the fact that (at the time) there were more living relatives of Simo Häyhä in Port Arthur (or maybe Port Arthur and Fort William combined) than there were in Finland of the time. The time zone thing was a trivia question; a close relations to the White Death was a point of pride (especially to my Finnish speaking teachers and classmates).

Yes, before and during the First World War, Port Arthur and Fort William did at times have different time zones a few times, which led to considerable hilarity for people who lived in one town but worked in the other. Since Port Arthur had the port (by definition), and the airport in Fort William hadn't been built yet, all shipping routes and the like were published using Port Arthur time, which was another bone of contention between the two towns.