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City Council sources tell NY1 that a budget deal was reached Wednesday night between council members and Mayor Michael Bloomberg, ending weeks of heated negotiations.

The council is expected to vote on it at its stated meeting on Thursday.

Under the deal, the $400 property tax rebate checks that were on the chopping block this month will now go out to New Yorkers. In exchange, the council will approve a mid-year 7-percent property tax increase, and the hotel tax will increase by almost 1 percent, raising the overall tax to nearly 6 percent.

New Yorkers said they were dismayed with the return of property taxes.

"I'm not too happy about that," said one New Yorker. "We pay enough taxes. It's time to let us get a little break. Everything's going up, but paychecks are going down."

"I'm not thrilled about it, let's put it that way," said another. "Of course it bothers me. You are going to pay more."

Those thinking of buying a home soon say this is only going to discourage them more.

"I think it's kind of unwise to raise property taxes when you have a problem in real estate going on," said a potential home owner. "It's not going to encourage it."

Renters say they are also worried.

"Well my rent may go up because of the property taxes," said a renter. "The owner already pays $8,000 in property taxes every year."

However, some homeowners say the $400 tax rebate does take some of the sting away.

"That kind of softens the blow," said a homeowner. "I'm sure they are going to get more than $400 out of us."

There will also be new police officer cadets.

The mayor had proposed canceling the next police class, but under the deal there will be 250 new officers in the current class and another 250 officers beginning in July.

"We need more police, too, but we also need a break on our taxes," said yet another New Yorker.

The mayor also agreed to restore $20 million in social service funding, and has accepted a number of the proposed alternative cuts put forward by the council.

The property tax rebate checks became a source of contention this fall when Bloomberg said he planned to withhold them from New Yorkers due to the city's ongoing fiscal crisis. Bloomberg himself enacted the refund as a one-time payment in 2004, but has continued the refund every year since.