After Secretary of State Hillary Rodham Clinton this week criticized plans to extend a park across 88 buildings that house Palestinian families in East Jerusalem, newly elected Jerusalem Mayor Nir Barkat said she was meddling in local control over zoning and the city's economic future.

The threatened homes were built without permits and should not be there in the first place, Barkat told reporters Thursday, while the envisioned park -- running from beneath the walls of the Old City across a valley associated with Old Testament kings -- would draw more tourists to a city that could use the boost.

"I totally reject the criticism," Barkat said. "It is a lot of air. There is no substance. Maybe it is because there is a new administration in the States." He speculated that she had been misled by what he called Palestinian "disinformation."

Clinton's comments -- she called any potential demolitions in the area "unhelpful" -- have raised hopes among Palestinians that the Obama administration will force Israel to treat more seriously their concerns about ongoing Jewish settlement of the occupied West Bank and land-use decisions in East Jerusalem.

Israel's annexation of East Jerusalem after the 1967 Arab-Israeli war has not been recognized internationally and left Palestinian residents in an uncomfortable limbo. Now numbering about a quarter of a million people, many hold out hope that the city will serve as the capital of a future Palestinian state.

But Barkat and many other Israelis, including Jewish settler organizations, don't want the city divided. Settlers have begun moving into some Arab neighborhoods, while expansion plans have been set for existing settlements such as Maale Adumim, farther to the east. Near the floor of the Kidron Valley, where Palestinians have erected a standing protest tent over plans for the park, a long, rectangular Israeli flag hangs down the side of one building, showing the cheek-by-jowl nature of the conflict.

Barkat, one of the first generation to be raised in the country -- he was born in 1959 and grew up in Jerusalem -- said one of his priorities for the city is to reverse the steady departure of young Jewish families seeking better jobs or a home less defined by conflict and religion. He also said he hopes to draw some neighboring Jewish towns and settlements into a larger metropolitan zone, while stemming what he referred to as the "illegal immigration" to East Jerusalem of Palestinians from the West Bank.

To Palestinians, the strategy seems clear: expand the Israeli presence to the east, allow more Jewish families to build in Arab neighborhoods and make it harder for future negotiators to divide control of the city. Residents of the affected sliver of land in Silwan say their area is a potential flash point.

Some say their families have been there for generations, while others acknowledge that many of the buildings were erected in recent decades without proper permits. But they also say Jerusalem city officials left them little choice over the years by failing to issue permits needed to accommodate natural population growth in Arab neighborhoods.

"Where will I go?" said Mohanned Kafishe, a waiter at a local hotel whose roughly 20-year-old home is in the area of the planned park. "I am here all my life. It's the house of my father."

Barkat, three months into the job, says he doesn't want to ignore Palestinian concerns. He says he wants to provide better services in East Jerusalem, improve planning and speed permit approval. Assuming plans for the park move ahead after expected court appeals, he said, there may be some compensation or relocation help for residents, in acknowledgment that "this is a sensitive area."

But the former paratrooper also said he would make no promises about the homes in Silwan -- despite what the U.S. secretary of state might have to say. "I am not willing to say the houses will remain houses. It is the wrong signal to send to people who break the law," Barkat said.

Just before Barkat's planned session with foreign correspondents, a Palestinian driver used a bulldozer to ram a bus and police car in Jerusalem before police and bystanders shot him dead. There have been two similar rampages by Palestinians driving construction vehicles in Jerusalem in recent months. At the scene, Barkat called for stricter punishment of such attackers -- including the demolition of their houses.