It's not a popular decision but Bethlehem Mayor John Callahan says the city needs to raise taxes to avoid falling off its own fiscal cliff.

Callahan released his proposed 2013 budget Friday.

It includes an 8.5% property tax increase.

Callahan is also asking not for profits to make a donation to the city tax burden and the city will enact a new first responders fee.

"We've got to find a way to plug this four million dollar gap," he said.

Once again the word "pension" is causing creators of another city budget to make some tough decisions.

This time it's Bethlehem mayor John Callahan creating waves.

"We are looking at a $4 million increase in our legacy cost as it relates to our police and fire pensions," he said.

Callahan says in 2004 the city contribution was $1.5 million. In 2013 it will be $11 million.

Bethlehem has the third highest funded pension in the state at 78 percent funded.

Compare that to the area's other large cities: Easton's pensions at 69 percent and Allentown's at 64 percent.

Callahan says tough choices need to be made now to avoid financial ruin later.

The city has already negotiated new contracts with the unions to only fund 50 percent of fire and police pensions.

The change only affects new hires.

"It will save us $30 million over the course of the next twenty years, but just $60,000 next year," said Callahan.

So to help add more money to the city coffers Callahan created a three step plan.

First ask for a voluntary contribution from the not for profits like Lehigh University, Moravian College and Lehigh Valley Hospital Muhlenberg.

Second -- increase property taxes by 8.5%.

Lastly, implement a new first responders fee.

"Anyone that purchases a ticket for Musikfest, Sands Event Center, or another music venue within the city of Bethlehem would pay a five percent tax on the cost of that ticket," said Callahan.

City Council still has to approve the budget but Callahan says people have to take action now to keep Bethlehem as one of the top places in the Valley.

"I'm not making decisions based on what's best for John Callahan, mayor Callahan next year. I'm trying to make decisions on what's best for the city of Bethlehem 10, 20 , 30 years from now," said Callahan.

Cities like Reading, Easton and Philadelphia already what's call an amusement tax.
Bethlehem is calling it a first responders fee because all money will go to paying the salary of police, fire and EMS crews.