"argued parking lots can be a boon to the city — they're being used, after all. And the ordinance actually hinders development, he said, reasoning that it inhibits competition, and parking rates go up as a result. Owners in turn have less reason to develop lots, and dig in their heels"
Let's deconstruct that a bit: "They are being used, and are thus a boon". That argument is a bit tetchy--if I were to add free parking all over downtown, would that be a boon?
Short answer: 'No'.
Long answer: Free parking is a subsidy to people who drive to downtown. Which is something that people who take transit, or live downtown don't get. Secondly, downtown real-estate is expensive. Letting someone use it for free is silly.
But this is market based--why not let someone develop parking lots? The ordinance certainly hinders development of parking lots--that's the point. So, why not let half of downtown become parking lots? Lots of cities do.
Because it kills walkability. Walking along a parking lot is boring and unpleasant. And downtown isn't just the premier office and retail center for the metro area--it's also the premier entertainment district, tourist destination, and convention center. People who come downtown for a show, to visit Temple Square, and to go to Conventions all wind up walking around downtown SLC.
Does it actually inhibit competition for parking?
No. The lawyer is very clever--talking as if parking lots were the only option. You'll notice that multi-story parking structures aren't forbidden. Parking structures are the real competition to surface lots.
The Politics of Property Taxes
A quirk in Utah property tax also plays a role. When your property is assessed, it is assessed on the value of the improvements--the stuff on the land, rather than the land itself. (Why this is stupid will have to be a later post). The 'improvements' value of a parking lot is not very much--it's just asphalt over dirt. The value of a parking garage is much much higher, in the millions of dollars. For SLC, it makes financial sense to have anything BUT a parking lot.
And so SLC is holding down the supply of surface parking in the CBD. Which means supply is constricted even as demand rises. Prices are determined by the mis-match between supply and demand, so the cost of parking is going up. As the price of parking rises, the expected ROI on building a parking garage rises as well, so it makes financial sense to build a parking garage.
Digging in their heels
The last bit is simply silly--if rates go up, owners have MORE reason to develop parking lots. More lots are being developed for the same reason no-one builds high rises in historic districts--it's illegal.