Correction: A previous version of this article misstated the estimated cost of staffing the parade. It is $116,000, not $161,000. This version has been corrected.

The District’s Emancipation Day parade will proceed on Wednesday as scheduled, after Mayor Vincent C. Gray and D.C. Council Chairman Phil Mendelson resolved a funding dispute that threatened to cancel the annual event.

The agreement between Gray and Mendelson, both Democrats, allows city agencies — including the police and fire departments — to absorb an estimated $116,000 to staff the parade. Gray had initially balked at covering the costs and questioned how the council was allocating funds for the festivities.

In future years, the mayor — not the council — will be in charge of planning and running any Emancipation Day festivities.

The Emancipation Day celebration has largely been the production of D.C. Council member Vincent B. Orange (D-At Large), who championed legislation in 2005 establishing the commemoration of the 1862 freeing of the city’s slaves as a public holiday.

Last year, the council spent $250,000 on a town-hall debate, a concert and a parade. This year, the council budgeted $350,000 for similar events. But in both years, prepared budgets did not fully cover the city’s expenses in holding the parade, including police and firefighter overtime. Those costs were absorbed within those departments’ budgets, leaving them with less spending flexibility later in the fiscal year.

Gray’s chief of staff, Christopher K. Murphy, threatened last week to withhold city services for the parade unless Orange’s office could show that it could cover those costs. Because Orange had expected the city to absorb the costs, the dispute threatened to cancel the parade.

Orange said Monday that he and his staff had been working with city agencies on the parade for months and that the mayor’s office only last week took the position that all parade costs needed to come out of the council’s budget. The mayor’s office disputed that contention: “From the very beginning, they were told that they would have to incur these cost,” spokesman Pedro Ribeiro said.

In future years, Ribeiro said, there will be no such misunderstandings. “The council will no longer be running this event, as it has become clear there have been too many issues,” he said.

Orange said Tuesday that he’s fine with that. “I’m glad they’re at the point that they realize that this is a government holiday,” he said. “This is an obligation of the government and not the legislature. . . . This is not a Vincent Orange event — this is a District government event, and they should treat it in that fashion.”

The parade, which runs down Pennsylvania Avenue NW from Third Street to 14th Street, is set to kick off at 11 a.m.