Dr Pepper's Wet Dream: Water, Government Subsidies and Transfer of Wealth in the Middle of the Desert

VICTORVILLE, Calif. -- On a sun-baked afternoon in October 2008, a group of soft-drink executives and city officials gathered for a groundbreaking ceremony at an old Air Force base on the outskirts of the city, 100 miles east of Los Angeles.

They were standing on the edge of the Mojave Desert, one of the driest, most inhospitable terrains in America. Yet there they were, posing for photographs, gold-plated shovels in hand, to mark the construction of a massive new bottling plant and distribution hub for the Dr Pepper Snapple Group, a facility that will to suck up hundreds of millions of gallons of water a year from this water-scarce area to supply soft drinks to 20 percent of its domestic market.

A bottling plant in the middle of the desert? It sounds too absurd to be real. But in the warped "pro-growth, pro-business" logic of a city on the frontier of Southern California's urban sprawl, the plan made perfect economic sense.

If the scheme is pulled off without a hitch, Dr Pepper will fire up one of its biggest production nodes in America sometime near the end of 2010.

The $120 million plant will occupy 57 acres, with 200 low-skilled workers manning almost 1 million square feet of warehouse space. Using 250 million gallons of water a year, six production lines will crank out 350,000 gallons worth of liquid refreshments a day, shipping perennial soft-drink favorites like Dr Pepper, Snapple, 7UP, A&W, Hawaiian Punch and 50 other brands all across the West Coast and Southwest.

The Victorville plant was a steal for the beverage manufacturer, receiving tens of millions of dollars in subsidies from the city. Local officials have painted it as a win-win situation, talking up the jobs and tax revenue it will bring to a community hard-hit by the recession and housing market collapse.

Yet, no one has seriously addressed the big wet elephant in the room: water. Where will it come from, and at what cost to the local population?

California is on the verge of a water-related calamity. For the past three years, the state has been in the grips of a devastating drought. Up and down the Golden State, water deliveries have been cut by more than half of the normal allotment.

In the fertile Central Valley, the bosom of America's agricultural powerhouse, fields stand fallow because of water rationing. Farmers are losing their jobs, lines for emergency food rations are become a common sight, and some agricultural communities are going bust for lack of water.

The scenes are eerily reminiscent of the Dust Bowl. The situation has become dire enough for the Obama administration to say "California's ongoing water crisis is a major national priority, akin to restoring the Chesapeake Bay or Florida's Everglades."

But as far as Victorville is concerned, this drought might as well be happening on Mars.

"This is a great day for High Desert residents," City Councilman Terry Caldwell said at the plant's groundbreaking ceremony. "When a company like Dr Pepper Snapple chooses Victorville for its new West Coast facility, it means we have arrived, and others will follow. This means hundreds of new jobs for our local residents."

Victorville, a sprawling commuter exurb of Los Angeles, is a pro-growth, pro-business city. Its free-market free-for-all approach to governance and abundance of cheap unexploited land made it the second-fastest-growing city in 2007.

Fueled by securitized subprime mortgages, its population doubled to 100,000 in less than a decade, and the city swelled with some of the cheapest tract-home developments in California.

Most of the growth was built on empty promises. Victorville was supposed to become the industrial and manufacturing capital of Southern California. Now completely bankrupt, the city has some of the highest unemployment and foreclosure rates in California, with home prices shrinking to 1989 levels.