A huge budget gap may force Palo Alto to cut staff and services but it should not keep the city from rebuilding its infrastructure and preparing for emergencies, Mayor Pat Burt said in the annual "State of the City" address Monday night.

Burt's speech touched on all five of the priorities adopted by the City Council earlier this year: city finances, land use, emergency preparedness, environmental sustainability and youth well-being. But Burt also made it clear that the first priority -- a huge, long-term shortfall between city revenues and expenses -- will dominate Palo Alto's agenda in 2010.

With the city facing a $6.4 million budget gap in 2010 and swelling deficits in the years ahead, Burt said Palo Alto will be forced to make difficult decisions about staff levels and program cuts in the coming year.

He also said Palo Alto is in for a year of tough negotiations with its employee unions.

Last year, the council unilaterally imposed new conditions on Palo Alto's largest union, Service Employees International Union, Local 521, after negotiations collapsed. The city is scheduled to renew its negotiations with SEIU this year, as well as reach new deals with police and firefighter unions.

"Many other cities are currently facing up to the realities that Palo Alto took on a year ago," Burt said. "Namely, that government had agreed to a benefit and pension structure that was unsustainable."

But even with the budget woes, the city cannot afford to ignore its swelling infrastructure backlog, Burt said. Staff had estimated that the city's backlog -- which includes outdated facilities and deferred street maintenance -- totals about $510 million.

Burt said he will appoint a task force this year to "develop a comprehensive plan for the repair of our infrastructure, from our roads and sidewalks to our major buildings."

He also said the city might have to resurrect the business-license tax -- a revenue source that Palo Alto voters emphatically struck down last November.

Burt suggested that the city's worsening budget picture and the prospect of service cuts may prompt more residents to support the tax, provided the proposal is more fair and better written than last year's version.

"As we struggle this year with the likely loss of some valued services, we also need to decide as a community whether we support a more fair and better designed business-license tax," Burt said.

City officials are also considering installing red-light cameras, an idea spearheaded by Roger Smith, former CEO of Silicon Valley Bank. Burt said the new cameras could bring in "significant revenues," while also improving safety and allowing the city to reduce staff.

Burt listed a series of critical land-use decisions Palo Alto will concentrate on in 2010. These include an update to the city's Comprehensive Plan, its official land-use bible; the state's $46 billion high-speed-rail project, which would stretch through the middle of Palo Alto; and Stanford University's massive expansion of its medical facilities.

Burt called the Stanford proposal "the largest single development in the history of Palo Alto" but said he hopes to complete the city's review of the project before the end of 2010.

"The recent events in Haiti and Chile remind us of the life-saving importance of world-class medical care," Burt said. "I am determined that we will move this project forward expeditiously this year through review by our relevant boards and commissions and finally the City Council."

Burt also alluded to the earthquakes in Haiti and Chile when discussing the need for Palo Alto to prepare for major disasters. He lauded the city's newly formed Citizen Corp Council -- a group of local organizations and agencies that is preparing for a coordinated response to emergencies -- and a neighborhood "block preparedness" program.

But he also said the city needs to do more to prepare itself for future disasters.

"The day after the emergency there will be no doubt what our highest priority is," Burt said. "On that day we'll ask ourselves what we should have done to prepare better."

Burt pointed to some good news on Palo Alto's economic horizon. Despite the sagging economy, three hotels are currently going through the city's planning process, from which the city will reap 12 percent of their profit.

And, he said, clean-technology firms such as Tesla and Better Place have set up shop in Palo Alto, underscoring Palo Alto's reputation for world-class technology and green leadership. He said Monday was Tesla's move-in day to its new facilities in the Stanford Research Park.

Burt said the city's relationship with Stanford creates "even greater opportunities" to promote green technology and sustainability.

"We have both recognized that our future well-being and economic strength are tied to a sustainable, clean-tech economy," Burt said.

Related material:

■ Full text of Mayor Pat Burt's speech

■ Watch video highlights of the speech