Folks living in Bethlehem say the last thing they need are higher taxes. But the mayor says that's exactly what he needs to balance his city's books. Mayor John Callahan is calling for an 8.5% increase in Bethlehem property taxes. He says the hike is modest but folks living and working in the city say it will be a hardship.

You could soon be paying more to live in Bethlehem. A budget proposal has homeowners and business owners paying 8.5% more in property taxes.

"That seems kind of steep for one year's worth of tax increase," said Harold Milton.

"It seems like a significant increase because I am a property owner," added Patricia Cunningham. "It affects me significantly."

Bethlehem Mayor John Callahan says the plan goes hand in hand with a new entertainment tax, and asking for voluntary contributions from non-profits like Lehigh University, Moravian College and Lehigh Valley Hospital Muhlenberg. The goal is to fill a $4-million hole caused by unfunded pensions.

"We're looking at about a $60 dollar increase for the average homeowner in Bethlehem," explained Callahan. "It's $5 a month so we think it's something that's reasonable in the tough economy given the services that you get in the city of Bethlehem."

But not everyone's on board with those figures. Main Street Bethlehem business and property owner Carmen Lobaido says she could be shelling out a large chunk of change with the proposed increase.

"It could be significant, I believe upwards of $1,000 a year."

Her building includes three store tenants and six apartments. She hasn't taken news of the possible spike lightly.

"A little upset and shocked because the economy is poor," shared Lobaido. "And what's going to be the repercussion, you know, are we going to have to raise rent? I mean hopefully it won't have to come down to that."

But it's still a real possibility. The proposed budget still needs approval from City Council.