A year that began with a $7.3 million budget gap, a fatal plane crash and deep anxieties over California's proposed high-speed rail concluded on a high note Monday night for members of the Palo Alto City Council, who celebrated the city's achievements during their final meeting of 2010.

"There were unprecedented challenges facing our city and cities around the world this year," City Manager James Keene told the council. "I think we can say there was progress and promise from where we began and I think we ended the year stronger than we began."

Keene's presentation highlighted an array of 2010 accomplishments, which included closing a looming budget hole and cutting 40 city jobs, leading the Peninsula's challenge to the California High-Speed Rail Authority and keeping the city at the forefront of innovation.

Keene noted that in the past year, Hewlett-Packard decided to expand its local headquarters while companies such as Skype, Groupon, Bling Nation and Ning set up shop in Palo Alto. AOL, meanwhile, is preparing to set up "incubator space" for small new start-up companies at its Page Mill Road facility, Keene said.

Keene also lauded the council and staff for grappling with the recent financial struggles, which were caused largely by drops in sales tax and other revenue sources. The council began 2010 with a $6.3 million budget shortfall and wrestled with a $7.3 million structural deficit later in the year.

"Our city led the state in starting to tackle some of the systematic issues relating to employee costs," Keene said. "We reduced employee pay and benefits and at the same time we had improvements in management and employee relations."

The council acknowledged that it has plenty of unfinished business going forward. The city has yet to vote on the proposed expansion of Stanford University Medical Center -- a massive project that the council had hoped to decide before the end of 2010. The council will hear an update on the city's negotiations with Stanford next month in January.

The city's goal of tackling the infrastructure backlog, estimated at about $500 million, is just getting off the ground, with a citizen committee beginning to analyze the list of projects -- which grew from about $360 million in the past decade.

Palo Alto's effort to trim public-safety costs also remains a work in progress. Keene said staff is preparing to share dispatch services with Mountain View and Los Altos -- a plan he said he would discuss in greater detail in January.

Mayor Pat Burt, in his final speech as mayor, called 2010 "an incredible year of accomplishments" and told his colleagues that they should feel proud. He praised the council for working well together, despite differences.

"We have different skill sets, but in the end we create a whole that's much better than the individual components," Burt said.

Vice Mayor Sid Espinosa, who is slated to take over as mayor on Jan. 4, said he particularly appreciated the high number of unanimous votes this year.

"It's been great to see the council really come together and put a very aggressive work plan together," Espinosa said after Keene's presentation.

"As we can see, we're really getting things done."