The Olinda Creek, the eastern boundary of Gun Alley has been a focal part of life in Lilydale since the first settlers arrived in the 1830s. It was the reason behind the establishment of the town as it was the ribbon of life for the community.
However, while the creek sustained life it also took life and created its own brand of destruction – typhoid outbreaks were common in the early days of settlement while later floods threatened life and damaged shops and homes.
Throughout its history the Shire of Lillydale grappled with ways of preventing the floods but most options were too expensive for it to contemplate. It was not until the Great Depression when government funds flowed through to local government for approved projects, that the shire finally had the money it needed to do the work so the levee bank was built.
It withstood numerous floods over the subsequent years, but by the 1960s new schemes were being discussed such as building a lake on the Olinda Creek to hold back the flood water.
It was not until Torrential Tuesday, September 18, 1984 when hundreds of thousands of dollars damage was caused to businesses in lower Main Street that the shire and the Melbourne and Metropolitan Board of Works worked together to create the Lillydale Lake. It was to be a recreational lake but more importantly a flood retarding basin able to control the flow of floodwater into the Olinda Creek just south of the township.
Finally, Lilydale was flood-proofed and confidence was restored in the value of retail businesses in the town.