Palo Alto's permit process for solar panels, energy storage systems and other home upgrades is hobbled by long lead times for inspections, inconsistent feedback from city staff and insufficient communication between city departments, a new review by the city auditor concluded.

The findings by Baker Tilly, the firm that serves as city auditor, largely comport with the complaints that the city has been receiving for years from residents and frustrated contractors, some of whom have opted to either charge more to work in Palo Alto or to leave the city altogether, according to an investigation by this news organization last year.

The Baker Tilly audit, which included a survey of customers and contractors, highlights the various issues that have caused delays and frustrations and includes several recommendations for improving Palo Alto's permitting process. The most critical issue, the audit found, is the long lead time for building inspections, which is typically about two weeks between request and inspection. It recommends hiring an additional inspector and making the current system more efficient by assigning each inspector a geographic area.

The audit states that the Department of Planning and Development Services has shown some recent progress in speeding the process over recent months. Such improvements, however, "are precarious with any staff absence — whether planned or due to injury, etc. — that can quickly erode any improvement to lead time," the audit states.

"Long lead times result in a host of compounding issues, with contractors scheduling inspections far in advance of work being completed — resulting in either inspectors arriving before work is complete or re-scheduling of appointments," the audit states.

The audit found that more than 4,000 inspections were requested and canceled in 2021, with another 800 scheduled and then deemed not ready. The total means that about 22% of the total inspections that were requested in 2021 did not occur. That actually reflects a slight improvement over 2020, when 25% of the inspections were canceled or deemed not ready.

The audit also found that customers often have difficulty obtaining information about requirements for permitting and inspections. Some of the information needs to be updated, the audit found, with the city introducing new services during the pandemic to allow online application submissions.

"In addition, customers would benefit from continued enhancements to the online permitting system — particularly those related to streamlining the process," the audit states. "Further, the customer experience would benefit from additional training of staff and communication across departments."

As part of the review, the auditors contacted customers and contractors to get their feedback about Palo Alto's process. The survey results showed 12% of the respondents saying they were "extremely satisfied" with the process and 19% saying they were "extremely dissatisfied." About a quarter of responders were "somewhat satisfied" and about the same number were "somewhat dissatisfied." The remaining 20% were neither satisfied or dissatisfied.

When given the opportunity to provide feedback, those who chose to do so tended to complain about long wait times for permit approvals and "inconsistency in experience and knowledge of inspection staff." The summary of comments in the audit also notes that respondents found that the city's requirements went "well above and beyond what is considered 'best practice' from surrounding jurisdictions" and that some contractors have refused to work in Palo Alto or are "charging premiums for projects in the city."

Aside from improvements to day-to-day operations, the Baker Tilly audit recommends that Palo Alto take a fresh look at its broader strategy for development services. Its chief guiding document is the "Blueprint for a New Development Center," which the city adopted more than a decade ago after a lengthy process that included collaboration with local developers and contractors.

The auditor acknowledged that a strategic planning process is a "significant and lengthy undertaking." However, the city "needs to be cognizant of what the building permitting process will look like in post-pandemic times to ensure alignment with process improvements, staffing, and related items," the audit states.

The topic of permitting has become more urgent in Palo Alto over the past year, with more people looking to purchase solar panels and energy storage systems and with the city banking on conversion of gas appliances to electric ones to meet its ambitious sustainability goals. The Department of Planning and Development Services has begun to provide regular updates to the Utilities Advisory Commission about process improvements.

The city is in no rush, however, to undertake a new strategic plan, given the amount of time and effort this initiative would require. The city's response to the audit states that an update could potentially begin in about two years and be completed within three.

"The staff resources and time needed to properly prepare an updated strategic plan is extensive," the city's response states. "The department is currently implementing several structural and operational changes to respond to a changed work environment, new challenges, and adjusting its service model to respond to challenges."

In other respects, the city largely concurred with the audit's findings and pointed to various initiatives already underway to address the well-documented shortcomings in its permitting operations. This includes exploring a requirement for real-time interactions between staff and customers who submit online applications. The hope is that having conversations, either in person or virtually, could speed up a process that currently relies on email exchanges and uploading of application materials.

Perhaps the most meaningful change, however, is hiring more inspectors. The budget that City Manager Ed Shikada proposed last week for fiscal year 2023 includes two new building inspector positions. The council's Finance Committee will consider the proposal on May 11 as part of its review of the Department of Planning and Development Services budget.

The city also is exploring other ways to speed things up. Last month, planners have begun using SolarApp+, software that allows customers looking to install solar panels to get their plans reviewed and approved online. Five companies are now participating in the pilot program.

The city also is looking to reduce the number of inspections required for approval, Planning Director Jonathan Lait told the Utilities Advisory Commission during a January discussion of the permit process. In the past, a solar permit would require separate reviews from a fire inspector, a utilities inspector and a building inspector. The new system would consolidate the operation into a single inspection.

Lait said the city has already achieved some reductions in permit-review times between 2020 and 2021, but acknowledged that Development Services will have to do much more to win over its critics.

"We're going to need to demonstrate through our performance that we're maintaining our targets and are not as difficult to work with as people have experienced in the past," Lait said at the meeting. "That really is our goal. Some of that is just going to take time."