UTAH - Salt Lake City's new-urbanism epiphany -- fervently backed by Mayor Ralph Becker and the City Council -- appears to be catching static from an unlikely source.

Transit-oriented development isn't stymied by outdated zoning, unwilling developers or a lack of space. It turns out, banks, wedded to old-fashioned lending standards that stress parking, may pose the biggest blockade by denying financing.

The reason: Lenders operate from a tried-and-true principle that maintains more parking means less risk and a higher return on their investment. But ditching cars is the whole point of urban developers looking to create 24-hour live, work and play environments that hug light-rail hubs.

Take the capital's gateway district, which soon could be further revived by a North Temple TRAX train, a new viaduct and millions in streetscape upgrades. City leaders envision a walkable, vibrant mix of housing, retail, restaurants and offices that one day will bridge the FrontRunner hub and a new North Temple transit station along downtown's western rim.

But commercial investors, including one with a $100 million blueprint, complain banks cannot grasp the concept and instead slam their doors.

"It's an interesting dilemma," says Council Chairman Carlton Christensen. "In Portland [Ore.] they admitted it and said it took a number of years. For the first few projects, lenders had to have their hands held. The educational part is critical. We can help facilitate that."

To be sure, commercial loans in general are incredibly difficult to secure as the Great Recession drags on. But more and more mixed-use builders cannot get banks to finance their projects without a guaranteed number of parking stalls, Redevelopment Agency Executive Director D.J. Baxter recently told the council.

As he unveiled the conundrum, developers Jeff Woodbury with Woodbury Corp., Russ Callister with Mecham Investments, and Tom Guinney with Gastronomy nodded in the background. The builders later said a recent tour of Portland, set up by the city, convinced them that a largely car-less combo of live-work-and-recreate projects could thrive.

But banks, which often sell the loans after a few years, need to ensure whatever is financed is acceptable to the long-term credit market. That way, they don't end up with foreclosures they must unload.

"We're not going to make a loan without getting comfortable with the parking element and the parking strategy," explains Michael Morris, executive vice president of real estate for Zions Bank.

Other factors besides parking ratios also play a role, he says, including the overall economy and the mix of equity and debt.

Construction lenders could be "flexible" and approve transit-oriented projects, Morris says, so long as long-term lenders are content. But he predicts parking at housing units, regardless of location, likely will remain a premium.

"I don't know if public transportation or fuel efficiency or the green movement is going to change that in the near term," Morris adds, before pausing. "As a corporation, we're open-minded and will participate in the dialogue. And we'll do what makes sense."

Former Salt Lake City Planning Director Stephen Goldsmith says parking was a frequent fight while shepherding the "progressive planning" for Artspace under then-Mayor Rocky Anderson. Unfortunately, he argues, the outdated thinking remains.

"The lack of alignment that exists in the banking community and the city offices to accomplish community goals," Goldsmith says, "is quite astounding."

Still, the perception problem may not rest solely with the banks, says Councilman Luke Garrott, a Chicago native and transit advocate.

"It's with the perception of potential tenants and buyers," Garrott says. "We still want it both ways in Salt Lake. We're still a car culture."

Andrew Adamson, a Barnes Bank manager in Salt Lake City, agrees.

"Utah hasn't graduated yet to that phase of what the city wants to do," he says, adding that large regional banks get more restrictive after getting burned. "Mixed-use stuff has an element of risk. If there's not a market for that product, maybe they're saying, 'We won't do a loan for that.' "

Bruce Bingham, whose Hamilton Partners is about to complete the new 222 S. Main office tower, sees it differently. He deliberately scaled back parking -- the skyscraper offers two slots per 1,000 feet of rental space -- because of the proximity to light rail.

"So far, it's proven out that the TRAX stop is going to compensate for a lack of excess parking," he says. "The same conditions would exist for any transit-oriented development near a TRAX stop."

Bingham also disputes the notion that all downtown development must include surface lots or parking garages. Nearly 5,000 parking spaces, he points out, sit within a block and a half of 300 South and State Street.

"The myth that there is a lack of parking in Salt Lake is just that: a myth."

Perhaps the only market force fueling transit-oriented projects is the high price of adding parking.

Right now, The Gateway mall still wrestles with the balance. If the city successfully raises the $71 million for a new North Temple viaduct, the base of the bridge will wipe out 200 Gateway parking stalls that mall owners may want back.

"Will we have to build them a parking garage?" an incredulous Garrott asked the RDA staff.

The Gateway is not yet sure it needs the spaces to support its long-term growth, Baxter notes, although some city leaders fear it will insist.

But, like the lenders who got new-urbanist religion in Portland, Christensen and Co. predict a similar conversion could happen here.

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