Horseshoe Bay is a body of water located on the official map of Equestria, on the western shore of the Celestia Sea.
Here's my spin on the history of the Horseshoe Bay Area and Twilight Sparkle's family's history.
Shortly after Celestia and Luna were crowned joint princesses of of Equestria by Star Swirl the Bearded, the mother of the two Alicorns, the Lady Baltimare, was granted personal authority over the entire Horseshoe Bay.
Lady Baltimare founded the city of Baltimare (see the map of Equestria) on the northern shore of the Horseshoe Bay, and in the following years other communities were founded elsewhere on the shore of the same bay.
Lady Baltimare ruled as Mayor of Baltimare from the city of Baltimare, which became the political capital of the entire bay.
After her death, Princesses Celestia and Luna granted Lady Twilight, a leading advisor to their late mother and a distant ancestor of Twilight Sparkle, the hereditary position of Mayor of the Horseshoe Bay.
For over 500 years, the Twilight family ruled the Horseshoe Bay from the capital city of Baltimare, fending off attacks from the Griffon Kingdom and from dragons.
About 400 years before the time of My Little Pony Friendship is Magic, a more recent ancestor of Twilight Sparkle, Ben Solo Twilight, a rare male pony who served as Mayor of the Horseshoe Bay, inaugurated the elected Horseshoe Bay Senate, elected every five years by the ponies of the bay.
When Ben Solo Twilight's daughter Twilight Three Moons inherited the position of Mayor, she soon stepped down and changed the local laws permitting the position of Mayor of the Horseshoe Bay to be elected every seven years.
In practice, many unicorns belonging to the Twilight family were elected Mayor and/or Senator. Descenants of Ben Solo Twilight and Twilight Three Moons still largely dominate local politics.
When Twilight Velvet, Twilight Sparkle's mother, was a young filly, she moved with her parents to Canterlot, and years later she married Night Light, giving birth to Shining Armor and Twilight Sparkle, and the rest is history.
Jennings 1970's thoughts
My inspiration for this blog post was from the Star Wars Expanded Universe (now called the Legends brand). It was mentioned that an ancestor of Han Solo, who served as King of the planet Corellia and formed a constitutional monarchy which later evolved into a local planetary republic.