The Capital Area Transit System is one-third of the way to closing its $1.5 million budget deficit that has threatened to shutter the parish bus system by the end of October. 

The CATS Board of Directors accepted a $500,000 grant from the East Baton Rouge Mortgage Finance Authority at its Tuesday meeting. 

The Mortgage Finance Authority is a privately funded agency that provides affordable housing and economic development projects.

“I feel like we should get up and dance,” said Jared Loftus, a CATS board member, after acknowledging the months of financial uncertainty the board has faced.

The rest of the funding gap is expected to be filled by a combination of federal grants, said Gary Owens, CATS chief financial officer. 

Brian Marshall, CATS CEO, said now that the private funding component has been secured, he’s sure CATS will avoid closure. 

The $500,000 grant from the Mortgage Finance Authority will be considered a loan should CATS start receiving a dedicated revenue source, according to the agreement.  In that case, the loan would have to be paid off in seven years.

A call to the Mortgage Finance Authority on Tuesday was not returned. 

Earlier this year, Mayor-President Kip Holden said he was in the process of securing $1 million a year for three years from two funding sources.

Owens said the Mortgage Finance Authority’s grant represents one of those sources arranged by the mayor. 

Holden is expected to announce next week that

CATS is also going to get a $500,000 federal grant from the U.S. Department of Housing and Urban Development’s Disaster Relief Fund, Owens confirmed. 

CATS is eligible for the grant because of increased costs caused by the influx of disabled riders since hurricanes Katrina and Rita. 

Disabled riders are more costly because the transit system is obligated to provide them with door-to-door service, which is more expensive than a fixed route. 

Owens said another $450,000 in recurring funding is expected to come from Federal Transit Authority grants aimed at low-income and disabled workers who are reliant on public transit. 

To meet eligibility, CATS will have to alter some routes to reach the Louisiana School for the Deaf and the Lighthouse for the Blind, Owens said. 

Marshall credits Holden for helping CATS survive through the year. 

“The fact that he’s come through with this portion is such a positive sign,” Marshall said. 

Holden declined comment via his aide Scott Dyer. 

Earlier this year, CATS attempted to close a $1.2 million funding gap by cutting weekend service and increasing fares. 

The deficit was the result of state and federal funding sources drying up. The gap later increased to $1.5 million because of higher fuel prices. 

The Metro Council rejected the changes out of concern that ending weekend service would hurt low-income workers. 

Thomas Govan, the board chairman, said 2012 promises to be another difficult year for CATS financially. 

“It was ultimately good for citizens that we didn’t have to cut service,” Govan said. “But it’s been a difficult position to be in and a challenging year. If we’re in the same position next year, our alternatives will be the same — to cut routes and increase fares.”