Mayor Kasim Reed has reversed his decision to cut the city’s Office of Cultural Affairs grants program by half, telling arts leaders Thursday that he’s restoring its full budget to $470,000.

Reed acknowledged that the arts trim, as part of an attempt to close an overall shortfall of $17 million in the city’s 2012 budget, “didn’t sit right” with him. It didn’t sit right either with arts leaders and artists, more than 200 who held a rally at City Hall and spoke at a City Council budget hearing last week.

“I’ve been thinking about it and then I realized, I was the mayor,” Reed said with a smile. “We’re going to restore every single penny.”

A full Marriott Marquis ballroom of metro Atlanta arts and corporate leaders attending the Metropolitan Atlanta Arts Fund luncheon gave Reed a standing ovation.

“If you’re gonna say it,” Reed, who has spoken at many arts functions about culture’s ability to lift spirits and elevate the city economy, told the crowd, “you’ve gotta live it.”

Though Atlanta’s arts funding is minor compared to many cities of its size, arts leaders feel the city needs to at least continue at the current level for reasons both monetary and symbolic.

“To say the city of Atlanta needs great arts is one thing, but to back that up with cash is another,” said Lisa Adler, co-founder of Horizon Theatre. “Where you put your dollars is where your values are.”

Horizon, which opens “Avenue Q” at its Little 5 Points space on May 20, operates on a $1.15 million budget, yet Adler said it reeled from combined governmental cuts of $50,000 this year because they came at the same time as corporations were pulling back. “If you lose even even $20,000, it’s hard to make it up in small individual donations,” Adler said. “There are not multiple sources that are untapped” for large donations.

“There’s no question it’s about the money,” she said, “but it’s also about the message.”

The Metropolitan Arts Fund, part of the Community Foundation of Greater Atlanta, announced $500,000 in grants to 11 metro groups at the luncheon. The funds — raised from corporations, other foundations and board members — are part of its short-term Atlanta Arts Recovery initiative launched in 2009 as performance and visual arts groups were feeling the impact of the recession. The fund doubled its annual giving with the initiative, to $1 million.

Arts Fund director Lisa Cremin said her long-term goal is to raise its endowment from its current worth of $7.6 million to $20 million, so that it can continue to bestow $1 million annually to metro groups.

Reed spoke in support of another arts funding option — a statehouse bill that would allow communities to vote on adding a fractional sales tax for cultural and other economic development projects. The measure failed late in the legislative session for the second year.

“We’ve seen signs of progress” in getting the legislation passed, Reed said. “I believe the Senate is with us and I need everyone in this room to work on the House.”