"The state of the city is good," Callahan says.

More than $1 billion of recent development is completed or under way in Bethlehem, another $2 billion is on the drawing board, and the city is about to get an annual windfall of $8.7 million, courtesy of slot machine gambling.

The city's tax base in the past year edged above its pre-Bethlehem Steel closing level, its 150-member police force is bigger than ever, city debt is declining and development is booming.

It was the first State of the City address since the city was issued a license for a $600 million casino development to be built in south Bethlehem. The license is bringing the Sands BethWorks casino, a hotel, shopping mall, new PBS-39 studio, an ArtsQuest performing arts center, the National Museum of Industrial History and thousands of jobs. But it also brings an annual host fee of $8.7 million.

That money will, virtually overnight, vault the city from its budget struggles, according to Callahan. He spent much of his speech detailing how he wants to spend it, and how he's appointing a 15-member task force of business and community leaders to devise a detailed plan.

Callahan said he plans to use the host fee money to handle the impact of the 4 million people expected to visit the casino district annually, increase the city's budget reserve from $500,000 to $6 million, invest in the north and South Side business districts and reduce taxes.

In the past year alone, Money magazine named it one of the top 100 places to live and a federal crime report indicated it was the safest city in the state with more than 30,000 people. Taxable property values are rising, city debt is falling, and $1.2 billion of new development has already begun creating nearly 4,000 new jobs, Callahan said. Add to that $2.2 billion in future developments that include Sands BethWorks, Martin Tower, Lehigh Valley Industrial Park VII and the Bethlehem Commerce business park, and the future appears bright, he argued.