He says only a third of the 40 cities which held the Capital of Culture title have reaped financial rewards.
Political rows and disappointed communities could be the legacy if the city does not heed the advice of those who have held the title before it, he claims.
In an interview with the Daily Post, Canadian-born Mr Palmer claimed that in any successful bid cracks would soon begin to appear between the demands of politicians and the needs of artists and those working in culture.
He said: "There are contradictions between political and cultural objectives. The objectives politicians have for the city are quite different to the process in which artists and cultural people operate.
Mr Palmer said he had discussed his concerns with Sir Bob Scott, who guided Liverpool to the accolade.
He said: "He said there was an interesting change from during the bid, when he was saying 'yes yes yes, we want you to get involved' to having to say 'no no no'. You can have too many projects.
"For me, the most important year will be Liverpool 2010, not only in terms of what is left behind physically, but for the way in which the experience of those last four of five years are going to act as a foundation for what happens beyond that."
The 56-year-old admits that the harvest of Glasgow was never fully reaped. While the city made around £48m, he feels that it became a victim of its own success and was left with a cultural hangover.
Council leader Mike Storey said last night: "We are keen to learn from other experiences and are already talking to six cities who have hosted Capital of Culture celebrations and there is a lot we can learn from them.