City Adds $10 Million for Halligan Reservoir Environmental Mitigation
Fort Collins officials will seek City Council approval in November for $10 million in additional funding to purchase environmental mitigation credits required before construction can begin on the Halligan Water Supply Project, a decades-long effort to expand water storage capacity in the North Fork of the Cache la Poudre River.
The mitigation credits will fund wetland and stream restoration projects at two regional locations: the North Fork Poudre Mitigation Bank, which conducts restoration work locally on the Poudre River, and the Rocky Mountain National Park Moraine Mitigation Bank, which establishes wetlands and performs stream restoration within the national park.
City utilities staff presented the budget revision request to the Fort Collins City Council during an October 14 work session, explaining that the credits are necessary to secure a Record of Decision from the U.S. Army Corps of Engineers expected in August 2026. That federal approval is required before the city can begin construction on the reservoir expansion project.
The $10 million appropriation will come from water fund reserves and be replenished through a low-interest loan from the Colorado Water Conservation Board. The city anticipates securing $100 million from that state loan program as part of the project's overall funding strategy, with additional financing through revenue bonds.
Credits Required Under Federal Wetland Protection Law
The mitigation credits are required under Section 404 of the Clean Water Act because expanding the reservoir and heightening the dam will impact wetlands and streams. The Army Corps of Engineers serves as the regulatory authority evaluating these impacts through the National Environmental Policy Act review process.
Environmental Compliance Specialist Eric Potyondy, who works on the Halligan project, explained that the credits represent a legally backed federal permit requirement involving multiple agencies.
"This is a legitimate thing. It's approved by the Army Corps of Engineers through their permit process, but it's also approved by the EPA and it's also approved by the United States Fish and Wildlife Service," Potyondy told council members. "There's a lot of federal eyes on these."
The Corps prefers that project developers invest in established mitigation banks rather than attempt their own restoration projects because the banks operate under rigorous oversight with performance metrics and long-term maintenance requirements.
"These are accredited banks. They're a very long, complicated permit process. There's certain metrics and triggers that they have to meet," Potyondy said. "They're very expensive to build and they're very complicated to maintain. And these will be maintained in perpetuity."
The perpetual maintenance requirement addresses concerns about accountability raised by Councilmember Kelly Ohlson, who questioned how the city could verify the legitimacy of mitigation projects.
"Perpetuity is not a long time. It's very hard for an organization to stay on top of these banks and maintain these operations forever and ever," Potyondy said. "But these will be, and that's, it really is hands off for us."
Modified Dam Design Addresses Safety Requirements
The Halligan Water Supply Project has undergone significant design changes since initial planning began more than two decades ago. The original Halligan Reservoir was constructed in 1909 on the North Fork of the Poudre River, providing approximately 6,400 acre-feet of water storage.
Fort Collins Utilities and the North Poudre Irrigation Company completed feasibility studies to enlarge the reservoir to increase water supply reliability during drought years. The city acquired the reservoir property in 2003 and began federal permitting in 2004.
However, challenges in meeting Colorado dam safety requirements led the city to modify its approach. Rather than raising the existing dam by 25.4 feet as originally proposed, the modified design calls for constructing a replacement dam 26 feet higher than the existing structure and approximately 200 feet downstream, according to the Army Corps of Engineers.
The Final Environmental Impact Statement for the project was published in October 2023 after the initial Draft EIS was released in November 2019. The modified design would increase reservoir surface area from 253 acres to 391 acres and reservoir capacity from approximately 6,400 acre-feet to about 14,600 acre-feet, providing an additional 7,900 acre-feet of annual firm yield to meet Fort Collins' projected water demands through 2065, according to the Corps.
Credits Represent City Asset With Alternative Uses
Joe Wimmer, a utilities finance official, emphasized that the mitigation credits will become city assets with potential alternative uses if the Halligan project faces unexpected delays or permit challenges.
"Once we purchase these and have these, they're really a city asset that if the Halligan project's delayed or has trouble with permits, which we're not anticipating, these mitigation credits could be sold and we could recoup the cost of them or we could apply them to another project," Wimmer told council members.
The city must secure the credits through contractual agreements with both mitigation banks before the Corps will approve the project's mitigation plan. Fort Collins is already under contract with the North Fork Poudre Mitigation Bank and has a contract pending with the Rocky Mountain National Park Moraine Mitigation Bank.
Staff did not disclose the specific number of wetland and stream credits required for the project but indicated that negotiations with the Corps are ongoing to finalize those requirements.
Project Timeline Targets 2026 Construction Start
The city received a 1041 permit from the Larimer County Board of County Commissioners in March 2025, with 53 conditions covering construction, environmental mitigation and design review. In June 2025, the city submitted a 401 Water Quality Certification application to the Colorado Water Quality Control Division as part of Clean Water Act compliance.
The anticipated August 2026 Record of Decision from the Army Corps will complete the National Environmental Policy Act requirements, allowing construction to begin. That timeline makes the November budget appropriation critical to maintaining the project schedule.
The Colorado Parks and Wildlife Commission and Colorado Water Conservation Board approved the Fish and Wildlife Mitigation and Enhancement Plan in 2023, a requirement under state law to maintain balance between water resource development and fish and wildlife protection.
The project will maintain a minimum flow of five cubic feet per second in the North Fork of the Cache la Poudre River from May 1 to September 30, release a minimum of three cubic feet per second the remainder of the year, and forego all diversions to the enlarged reservoir for three days coinciding with the forecasted peak runoff flow event, according to the Corps.
City officials anticipate bringing appropriation ordinances to City Council in November to move forward with the mitigation credit purchases and advance the project toward the anticipated 2026 construction start.