By 2050, because of climate change, Oakland officials insist that the city faces dealing with “100-year” type floods every two years—or maybe it won’t have those floods. Apparently, that forecast all depends on who city officials are talking to–whether you are an energy company being sued by the City of Oakland demanding money because of the dangers climate change supposedly bring or you are an investor interested in buying an Oakland municipal bond. In the latter case, Oakland officials attest that the city is unable to predict the impact of climate change or flooding.
This contradiction should be a concern to taxpayers and is worthy of the panel discussion scheduled at Pepperdine University’s School of Public Policy on next Tuesday, February 27.
The panel, which includes the Reason Foundation’s Marc Joffe and Chapman University Law Professor Anthony T. Caso, will focus on the lawsuits potential impact on municipal bonds and the ultimate effect on taxpayers. “The Unexpected Consequences of Climate Change on Government Finance” is scheduled to begin at noon at the Drescher Graduate Campus in Malibu.
Within the past year, eight California jurisdictions have filed public nuisance climate lawsuits against a slew of oil and gas companies demanding millions of dollars to offset the certain dangers facing the jurisdictions because of climate change. At the same time, these local governments have reached out to investors to back local bonds, declaring in the bond prospectus that they cannot predict risks related to climate change.
As law professor Caso suggested in an Orange County Register op-ed last month, “One could hardly be criticized for concluding that the cities and counties involved in these lawsuits have either lied to the courts or to their bond investors. If they have lied to either, there is big trouble ahead.”
The trouble for taxpayers comes if the Securities and Exchange Commission seeks million dollar penalties from the governments for making false statements to investors. When a local government must pay a penalty it falls on the backs of taxpayers. Such a consequence could also lead municipalities being required to offer more disclosure and result in higher borrowing costs for future bonds.
ExxonMobil has filed a counter action pointing out the discrepancies in the California jurisdictions’ actions—some would say hypocrisy—when discussing the effects of climate change—a different approach in the courtroom versus Wall Street. ExxonMobil argues that the lawsuits are designed to force companies to align policies with those “favored by local politicians in California.”
The integrity of the local governments and ultimately taxpayers’ financial responsibility is hanging in the balance.