Mayor-President Kip Holden announced at a news conference Monday that he has lined up $1 million to keep buses rolling in East Baton Rouge Parish, averting a potential shutdown of the Capital Area  Transit System in October.

The immediate crisis was averted after the East Baton Rouge Parish Mortgage Finance Authority agreed to grant $500,000 to CATS and the state Office of Community Development stepped in with $500,000 in federal block grant funds for local communities affected by hurricanes Katrina and Rita.

Brian Marshall, CATS’ CEO, praised Holden for his efforts to find CATS money to keep its doors open this year. However, Marshall said, after the news conference the transit agency faces a difficult budget year for 2012.

He said decisions will have to be made within the next two months about possible service cutbacks or fare increases to address a projected $2 million shortfall in 2012.

“The gap right now would be approximately $2 million,” Marshall said.

A Blue Ribbon Commission Holden appointed to study long-term solutions for the city-parish’s transit has recommended placing a combined sales and property tax proposal on the ballot in the fall of 2012.

Even if approved, Marshall said, the proceeds of the tax won’t come in time to bail CATS out of financial difficulty next year.

Holden noted at the news conference that the Metro Council rejected a plan in January that CATS had put forward to solve its budget woes through a combination of service cutbacks and fare increases.

The mayor said he stepped in to try to find a short-term solution so CATS could keep its doors open even though the city-parish is not responsible for funding CATS.

CATS was created by state statute as a political subdivision of the state, but the law gives the Metro Council the power to appoint board members and approve rate adjustments and fare increases.

The funds obtained from the Mortgage Finance Authority and the Louisiana Office of Community Development will be used to leverage additional federal grants, wiping out the projected $1.29 million deficit CATS faced this year, Holden said.

“This means there will be no shutdown of service and no layoffs of employees,” Holden said.

The mayor made the announcement from the Metro Council’s chambers.

He stood at a podium in front of two large posters bearing signatures and the words: “Thank You Mayor-President Holden from 150 CATS Employees and Families and 10,000 Riders.”

Holden said the public transit system is vital to residents who rely on buses for transportation to get to school, work, doctor visits and other destinations.

Holden said the $500,000 from the Mortgage Finance Authority comes as a grant and is from a pool of funds used to support ownership and economic development in East Baton Rouge Parish.

If CATS receives a dedicated funding source, the grant is to be converted to a loan and is to be repaid to the Mortgage Finance Authority over the next seven years, Holden said.

The mayor said he will support a tax proposal on the ballot next year that would provide CATS with a source of dedicated funds for its operations.

He said it would have been devastating for the community if CATS had been forced to shut down this year.

“Successful communities have successful public transit systems,” Holden said. “We have to build one too.”