New York's mayor, Michael Bloomberg, has signed legislation to raise property taxes in the city by 18.5%.

Property tax for a single-family home worth $245,000:

2002/03: $1,853 2003/04: $2,024 2004/05: $2,196

The tax rise, the biggest in the city's history, is designed to erase a $1.1bn budget deficit.

"By increasing the real property tax and significantly reducing expenditures, the city moves another step closer to its economic recovery," Mr Bloomberg said.

New York is facing a serious financial squeeze.

Although the latest tax increase will bring in $837m, cancelling out the bulk of this year's shortfall, more will be needed next year, when the deficit is set to balloon to $6.4bn.

"It is a very difficult thing to face the public and say we have a problem and we have the courage to stand up and solve that problem," Mr Bloomberg said.

Several hits

New York's finances have been weakened by the US recession and the recent stock market slump, which has hit the city's Wall Street financial hub hard.

Tax cuts and spending increases under Mr Bloomberg's predecessor, Rudolph Giuliani, put the city's coffers under additional strain.

And, of course, last year's terrorist attacks on the World Trade Centre exacerbated the problem.

Mr Bloomberg had initially tried to push through a 25% rise in property taxes.