Elma is yet another example of a Howard County town that maintained its livelihood in association with the railroad. Elma has its origins in Howard, a town which was located one mile north of Elma's present location. Travelers through the area in the early 1860's would often lodge at the well-known hotel in Howard operated by W. Pettibone. On April 11, 1860 a post office was established under the town's new name, Busti. The change of names came about due to increased confusion regarding the namesake of the county.
Over the next several years the railroad became an ever-important source of transportation and commerce. In 1886, the Minnesota and Northwestern Railroad extended service from New Hampton and Minnesota. The rails were constructed one mile south of Busti. As a result, the railroad brought about the relocation of Busti and its residents to this prosperous new area. The exodus from Busti coupled with the prosperity of the railroad resulted in the formation of a new town name after Lemuel Potter's youngest daughter, Elma. Subsequently, Elma was platted in 1886 on the farms of August Fallgatter, Truman Robinson, and Lemuel Potter. The first elected Mayor was F.W. Church.
Technological growth resulted out of rapid population growth. Numerous buildings were constructed including a baker, three meat markets, several restaurants, two hotels, three blacksmiths, an insurance agency, and a well digger.
Elma came to be marked as a town of many fires. The biggest fires of Elma came in 1900, 1901, and 1954, which burned several buildings and caused damage amounting to hundreds of thousands of dollars to the town. Another devastating natural act was that of tornadoes. On May 15, 1968 a tornado struck Elma at about 5:25 p.m. causing damage of nearly $1.5 million.
Although the railroad originally brought prosperity to Elma, it ironically hindered Elma in the end. The fast growth of rail service expanded the Chicago Great Western Railroad which has main terminals in Kansas City, Chicago, and St. Paul. This growth decentralized Elma when it came time for the railroad company to choose a site for its repair facility. To Elma's dismay, Oelwein was the site chosen for the repair terminal because of its central location to the three previously mentioned cities. As a result, in 1896 the roundhouse located in Elma and some 300 families moved on with their jobs. The once vital stop along the Chicago Great Western Railroad is forever a memory to be preserved by people reminiscing about the good old days.