David Johnson, who follows us on Facebook, brought our attention to this article, which demonstrates that some California cities, including San Francisco, which with Oakland is suing five major oil companies including ExxonMobil, alleging that the companies suppressed from their stockholders what they knew about the risks of climate change to their stocks’ future value, are guilty of exactly that practice themselves in dealing with their bondholders. Here’s the essence of the story:

… consider the hypocrisy laid bare this week in an Exxon court filing.  It points out that many of the California towns and cities took the exact opposite position in their municipal bond offerings.  When borrowing money, they took pains to insulate themselves from liabilities stemming from climate change when offering bonds to investors.  Some said they had no way to predict accurately risk related to rising sea levels or climate change or simply failed to mention such risks.  Apparently, these cities and towns believe it is better to tell the truth to the markets in New York City than to judges and jurors in court.

For example, in its bond offering in 2017, Santa Cruz states, “Areas within the county may be subject to unpredictable climatic conditions, such as flood, droughts and destructive storms.” And yet, in its lawsuits against the energy companies, Santa Cruz declared with righteous certainty that there is a “…a 98% chance that the County experiences a devastating three-foot flood before the year 2050, and a 22% chance that such a flood occurs before 2030.”

In its 2017 bond offering, San Francisco acknowledged, “The City is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City and the local economy.” But in its lawsuit, the city declared, “Global warming-induced sea level rise is already causing flooding of low-lying areas of San Francisco…”

And this was even before smoking marijuana became legal in California.

These contradictions only underscore the highly political origin and motivation of the city lawsuits. The plaintiffs’ lawyers include Matthew Pawa, long regarded as an innovative and entrepreneurial strategist when it comes to using the court room as a substitute for the legislature to advance climate change orthodoxy. It is no coincidence that Hagens Berman Sobol Shapiro, a large plaintiffs firm based in Seattle, recently announced that it is expanding its environmental practice by acquiring the Pawa Law Group.  Municipalities likely welcome the chance to outsource the costs of litigation to firms working on a contingency basis. Rulings by environmentalist-friendly judges could mean a big pay day for all, giving new meaning to the “green” movement.

In a petition filed in Texas court early this week, Exxon lays out the conflict between what the cities have told judges and what they have told the bond markets. Exxon is asking the court to require government officials to answer questions under oath about those statements. The case could have broad implications for the bond markets, as investors could have legal grounds to challenge the local governments for similar inconsistencies.  In the end, the cities’ mismanagement will come home to roost in higher borrowing costs and, ultimately, higher taxes for their residents.

For more about San Francisco and Oakland’s lawsuit, click here.