Thanks to the folks at the Environmental Law Institute, who have allowed us to reprint an article from a recent Environmental Law Reporter which brings some clarity to the subject of the "denominator" issue in regulatory takings.
In Temporary Takings, Tahoe Sierra, and the Denominator Problem, William W. Wade, Ph.D., a resource economist with the firm Energy and Water Economics (Columbia, Tennessee), writes:
Hundreds of briefs, decisions, and journal articles debating “how much loss is enough” should be sufficient proof that the Keystone Bituminous "taking fraction” provides poor guidance to decisionmaking in partial regulatory takings. The Penn Central court intended to measure the severity of economic impact by interference with distinct investment-backed expectations. Where lost income from use of the property is at stake, standard economics requires the denominator in the “taking fraction” to be the owner’s investment in the property. Instead, too many judicial decisions have obscured the clear economic language of Penn Central with musings about whether an owner’s expectations of regulatory prohibitions were reasonable or not. The Federal Circuit Court of Appeal’s 2007 Cienega X opinion invoked Tahoe Sierra’s temporal parcel to fatally confound the denominator problem. Cienega X proposed either real property value or earnings over the entire life of the property for the denominator. Neither is theoretically correct to evaluate severity of economic loss from proscribed use of property.
Download the complete article here. The article is ©2013 Environmental Law Institute®, Washington DC. Reprinted with permission from ELI®. Again, our thanks for permission to post it.