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.

To Victorville officials, the advantages of job growth, no matter how minuscule, far outweigh any concerns over the increased water use. But some locals are not convinced that the plant is such a good idea. Because no matter how you slice it, corporate interests and political ambitions come out as the only real winners.

Victorville is the biggest and most powerful of the half-dozen closely packed cities and towns and smaller unincorporated desert communities that make up Victor Valley. The 350,000 people who call this place home are a varied bunch -- ex-military types, retirees, lower-income subprime mortgage fodder -- but they are all linked by a common and very limited resource.

"How does what happens in Victorville affect the rest of us? The water that we have in this valley is a shared resource that is supposed to be controlled by a California Supreme Court ruling," says Paul Bosecki, a council member for the city Hesperia, Victorville's neighbor. "Victorville has made more than a few bad choices lately. The full-speed ahead, pedal-to-the-metal attitude has consequences when it fails to deliver. It comes down to public interest versus private interest, with the public interests such as water for the residents of this valley coming after Victorville's business ambitions."

Standing on the sandy turf where the future bottling plant will stand and looking around at the Joshua trees and tumbleweeds stretching out as far as the eye can see, it's easy to see why people like Bosecki are worried.

Victorville receives 5 to 6 inches of rainfall a year. For comparison: Death Valley gets 2 inches, semi-arid Los Angeles gets 15 and New York City gets 28. Not surprisingly, a recent poll conducted by the Mojave Water Agency found that 90 percent of the local population was concerned about the availability of water.

Out here in the desert, water will soon become more precious than oil. Underground water reserves have been shrinking for decades. In fact, local aquifers here have been in overdraft -- with more water being pumped out than is replaced naturally -- since the 1950s.

To recharge its underground sources, the Mojave Water Agency has been purchasing water from the State Water Project via the California Aqueduct, which pumps water hundreds of miles via concrete rivers, all the way from the Sacramento Delta. But the recent subprime-fueled population explosion, combined with a total lack of water regulation and California's persistent drought conditions have put the overdraft process into overdrive.

Victor Valley residents use an average of 200 to 250 gallons per day, more than twice the national average. Not surprisingly, the aquifer is being drained at record levels. Victorville old-timers say that at the turn of the century, groundwater was so abundant in some parts of the city and so close to the surface that springs would pop up overnight and wash away pavement and roads. Now, wells that tapped fresh water at a 1,000 feet two decades ago have gone dry.

The more rustic parts of Victor Valley seem to be more mindful of water usage, with gravel-filled and desert-landscaped yards a common sight. Victorville proper is not as keen on conservation. The city is not trying to sell the desert lifestyle, but attempts to re-create the suburban ideal of green lawns, lush trees and golf courses.

But as water rates continue to climb, conservation efforts are starting to kick in. Victorville is promoting the "Cash for Grass" program, which offers 50 cents per square foot to replace lawn with low-water-use landscaping. Some communities are striving for a 20 percent reduction in water consumption.

Yet these efforts are dwarfed by the enormity of the Dr Pepper Snapple plant's water usage. In a single day, the facility would use a decade's worth of per capita water consumption. The 250 million gallons of fresh water it uses over the course of one year would be enough to supply 1 percent of Victor Valley's population.

"While the rest of the high desert is faced with ever-increasing water bills and told to conserve in every way possible, Victorville keeps creating huge water-guzzler projects that only benefit private interests," Bosacki said. "You got this juxtaposing of people getting fined for watering their lawns, while you have this plant using 1 million gallons a day for private profit. There is a different standard here, which should encourage some outrage."

Victorville's city officials say that the plant will not lead to higher water rates, nor the need for increased conservation. Without consulting neighboring cities, the city council voted against commissioning a "lengthy and costly" environmental impact study. Instead, it cited a flimsy five-page report prepared by a city engineer that did not even address the issue of water consumption, instead focusing on burrowing owls, desert tortoises and what to do if Native American artifacts would be discovered during the construction process.

To allay fears and quiet critics, Victorville politicians have been talking up a $40 million water-reclamation facility in the works, which they say will conserve 70 percent of the plant's water usage -- nearly 700,000 gallons a day -- by using it to water the city's golf course and to cool the reactors of a nearby privately owned power plant. (Called the High Desert Power Project, the plant has been using 3.5 million gallons of fresh water a day for nearly two decades and has been criticized for its wasteful water usage.)

The treatment facility was somewhat of a coup for Dr Pepper Snapple Group. To make Victorville more attractive for the company, the city agreed to bankroll the whole thing, and it even threw in a several million dollars worth of roads and assorted infrastructure for the bottling plant. (It was a noble gesture considering Standard & Poor's Rating Services downgraded Victorville's credit worthiness to "junk status," forcing the city to float five-year municipal bonds at a subprime rate of 12 percent to finance the wastewater reclamation plant, while at the same time cutting most city services by almost 50 percent.)

But the Dr Pepper Snapple plant is being subsidized with public funds on an even bigger and more sinister level.

There is no doubt that the bottling plant's oversized water consumption will have a real effect on the future cost of water in the area. So, not only is the city making locals pay for the construction of the plant, but will actually end up funding Dr Pepper Snapple's corporate profits with future water-rate hikes, giving the company access to cheap water now by making it more expensive for everyone later.

"They are shifting and deferring the cost to the public in order to bring them to Victorville," Bosacki said.

Put simply, the plan is nothing less than a transfer of wealth, a slow privatization of a scarce public resource and further plundering of taxpayer wealth by the shareholder class.

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