Ignore the fact that the letter-writer was incredibly judgey, and instead focus on the apostrophe -- a clear indication that he viewed “Frisco” as an abbreviation.
And though that is the first known written occurrence, it is also said “Frisco” might be an Americanization of “El Fresco”, the name Mexican gold miners gave the “refreshing, cool” city of San Francisco where they relaxed after panning for gold in the Sierra foothills.
The actual, no-apostrophe word "Frisco" goes back to Middle English, and means “a port where ships could be repaired”. It's possible that the treasure hunters who flooded San Francisco during the Gold Rush were actually being quite clever with a play on a word when they created the nickname.
I prefer the latter scenario for obvious reasons, but we’ll likely never know the exact origin. What is clear, however, is that the nickname stuck. Frisco was used 10 times (TEN TIMES!) in California newspapers in 1850, and appeared that year in the lyrics of “Oh, California”, a popular song sung to the tune of “Oh, Susanna”.
“I soon shall be in Frisco and there I’ll look around,
When I find the gold lumps there I’ll pick them off the ground.
Oh, California, that’s the life for me . . .”
A short story by C.J. Everett, The Gentleman from Honolulu, is published in which one of the refined characters talks of his trip to California and says he wishes he were “back in Frisco”.
When asked where he got that name for it, he replies:
“Oh, that’s the pet name the ‘boys’ give their beautiful harbor-city, the pride of the State. You ought to hear them shout for Frisco, as they throng into the ‘What Cheer House’ of a gala-day; and at the ‘Occidental’ is tossed off many a bumper ‘to Frisco and the ladies.’ ”
Of course, it wouldn’t be San Francisco if someone didn’t object to something perfectly innocuous, and so less than 25 years after the nickname takes hold, Imperial Majesty Emperor Norton declares:
“Whoever after due and proper warning shall be heard to utter the abominable word 'Frisco,' which has no linguistic or other warrant, shall be deemed guilty of a High Misdemeanor, and shall pay into the Imperial Treasury as penalty the sum of twenty-five dollars.”
It's important to point out that Emperor Norton was not, in fact, an emperor, and that the eccentric (if not insane) English transplant gave himself that title. His blue uniform with gold-plated epaulettes, however, was gifted to him by officers of the United States Army post at the Presidio, a sign of just how celebrated and accepted he was by the citizens of the city, who also ensured he dined at the finest restaurants even though he was penniless (bonus fact: there's a statue of him above the bar at Comstock!).
That Emperor Norton was so embraced by the upper class is perhaps the first sign that the nickname “Frisco” was viewed as beneath them.