Introduction: Too Little Attention to Economic Underpinnings of Penn Central Test

The U.S. Supreme Court remanded Palazzolo v. Rhode Island¹ to the Rhode Island Supreme Court to examine the plaintiff's takings claim under the Penn Central Transportation Co. v. City of New York² test. Arguably, this decision transferred to Rhode Island a question upon which certiorari was granted, but never dealt with: "Whether the remaining permissible uses of regulated property are economically viable merely because the property retains a value greater than zero."³ This question is more a matter of economics than law. Courts have dedicated too little attention to the economic underpinnings of this question.

Like Palazzolo, the Michigan Supreme Court remanded K&K Construction, Inc. v. Department of Natural Resources⁴ to the trial court to determine: (1) which parcels of the entire property should be included in the denominator parcel; and (2) applying the balancing analysis of the Penn Central test, should compensation be paid for a taking. The K&K trial court ultimately found in favor of the plaintiffs. The case provides a good illustration of how economic calculations fit into the Penn Central test.