Gift Me Your Project!

Before Burning Man starts telling Burners how to raise funds, they should clean their own act up internally.

Burning Man’s transition to a non-profit has sure been raising some eyebrows at Burners.Me HQ. The latest we hear, from Burning Man’s Social Alchemist Bear Kittay, is that the Burning Man Project is going to be the new, non-profit entity that encapsulates all of our values. We donate our money to it, and it owns the rights to all the content we provide to it.

1990 burning manThe party in the Black Rock desert, known as Burning Man, will continue – as a subsidiary division of the project. Right now, according to what we can piece together of Burning Man’s “almost transparent” finances, this event costs $8 million a year to put on, and brings in about $24 million in revenues. So, it should be contributing $16 million a year in tax-free donations to it’s new parent company.

Then, we have Black Rock City, LLC. Aka the BMOrg. This is currently the company with an exclusive monopoly to monetize our culture. Right now that comes mostly from photo agreements for their desert event. Presumably, in the future, the division of “The Project” that is getting the royalties from movies, albums, calendars etc will be a separate operating entity from the division that puts that one party on. In this structure the non-profit parent company would  own and monetize the Intellectual Property, not the party. The legal threats and lawsuits would be initiated by the non-profit company, not the party.

So, let’s think positive and believe BMOrg and their statements. This is being done for “us”, to preserve our culture into the future. Now that it’s going to be a non-profit, spreading Burner culture to the world, we can all participate by donating, we don’t have to even go to the party any more to save the world. Yes, we will be the new owners of our culture, through the non-profit Burning Man is planning to create for us “soon”, and our appointed representatives the 17-person Board of Directors (some of whom are married to each other, which good corporate governance suggests is a potential conflict of interest).

BMOrg’s financial statements say that the corporation itself costs $2.7 million a year to run; the “overlap”, the expenses that possibly relate to the party but also occur year round, are $10.6 million. And the non-party expenses, the “Outreach” that is going to bring Burning Man to the world, are only $264,000 – about 1% of the money they take in.

From what we know, Black Rock City LLC has about 50 full-time employees, splitting salaries of $8.6 million and eating $1.3 million of food every year (we believe most of this food is for volunteers at the event). They’ve just moved from multiple floors of an office building close to City Hall, to a new building in the hipster-friendly Mission district.

What that means, is that this organization costs $13.3 million to operate: a pretty freaking big overhead for a charity that’s raising $16 million a year. In fact, at 83 cents of every dollar being spent on overhead, that would be a new record for BMOrg. It even beats the atrocious performance of the Black Rock Arts Foundation, which despite all the millions of dollars of overhead costs that get billed to the party or the BMOrg, managed to spend 73 cents out of every dollar it raised on overheads, passing a mere 27% on to artists. Here’s the SF Chronicle writing about it:

 A combination of record ticket sales and a more efficient business helped create what [Larry Harvey] called “the nest egg we needed.” The profit, he said, will go back into the company.

Some of it will also go to the festival’s nonprofit arm, the Black Rock Arts Foundation. The charitable organization, which was founded in 2001 after Harvey loaned it $30,000 in cash according to tax documents, is dedicated to providing grants to artists who “promote and support community-based interactive art.”

But in an analysis of the organization’s tax filings by Charity Navigator, a New Jersey-based nonprofit watchdog group, the Black Rock Arts Foundation earned an “exceptionally poor” rating. The analyst found errors in reporting, a low revenue-to-grant ratio that showed artists receive on average 27 cents for every $1 spent – less than half the industry standard – and a conflict of interest involving David Best, a local artist best known for his intricate temples that rise at Burning Man.

Sandra Miniutti, an analyst at Charity Navigator who reviewed the filings at the request of The Chronicle, said donors to the foundation should be concerned by its poor practices.

“This is not a financially healthy organization,” Miniutti said. “If I were a donor, I’d think long and hard before I sent money their way.”

It seems somewhat unusual to create a new charity, and then “loan it” money. Why not donate? Was there interest involved? Does the charity still have this, or other outstanding liabilities to insiders? What sort of loans have gone between the existing organizations and the new charity? As a donor to a number of charities, these are all things that would cause me concern. We do not yet have any clarity on how the relationship between The Project and The Event will be managed in this new structure; the last interview of note was Scribe’s in the Chronicle earlier this year, which made it seem like even the founders weren’t sure. When in doubt, get it out! Since profit is no longer the motive behind Burning Man, will we finally get financial transparency?

Looking forward into the future, how big does this overlap have to be? Surely, some of the expenses that go on during the year, are needed for the party? Well, maybe so. And some, maybe not. I question, if the expense is really needed for the party, then why not account for it with the other party expenses?

I’m speculating here, so if anyone has more concrete information about the new operating plan and org structure, please share. I like charities that use most of the money they raise for the causes they support. A new, lean, focused organization, taking $16 million a year in profits from the annual spectacle Burners create for them, and using that to spread Burner culture and values could be a real positive force for the world. Just another charity, that takes our donations as “Gifts” and then spends the money  on fancy offices, travel, and entertainment for its workers – well, the world has enough of those already.

9 comments on “Gift Me Your Project!

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  6. I like this article, but the new BM office is definitely NOT in the Mission District. You could consider it the Mission District if you were a real estate agent, but they are definitely smack dab in the tenderloin, two blocks down from where stolen goods are fenced publicly, and about a block away from an open air drug market. You will routinely find passed out addicts and mentally ill homeless walking in that area, along with lots of other terrible human beings. They are definitely not at all in the Mission District.

  7. Nice reporting, burnersxxx

    My ledgering is the men and women behind the curtain are counting between $30 million and $40 million for annums 2010 through 2015. Great for a for-profit corporation. Beyond Belief for a party that runs on thousands of volunteers, artists, theme camps, sound camps, art cars, and others of us who throw the party with minimal or no compensation.

    My ledgering
    1. The six LLC members are paying themselves over $4 million an annum from 2010 through 2015, over $24 million in totality. How is this number ledgered?
    2010 = $7.2 million of payroll for 30 employees as of 2011 Jan.(sfpublicpress article)
    2012 = $7.8 million of payroll for about 40 employees
    2013 = $8.7 million of payroll for about 50 employees (above)

    If about $80,000 average for each employee (a guess), there is over $4 million of salaries and benies not accounted. Most temporary work is done by contract workers, not employees, which is ledgered on a different line, at most of a million. Outside services – accounting, legal, and others, are also ledgered on another line. So, over $4 million a year for 6 years for the 6 LLC members.

    2. Add in the huge payouts from selling the LLC to the non-profit. Big payouts in 2013 (a few months ago), 2014, and 2015. How much in retained earnings and cash and short term securities were on the LLC’s ledger? Whatever it was, it’s being paid out for the non-profit transition. My guess is a couple million apiece on average for the 6 LLC members. So, my ledgering is $30 million to $40 million to the 6 LLC members. If you disagree, what’s your ledgering?

    I wouldn’t care, but I have done more than my two bits in throwing this party. Add in a sense of right and wrong, and a sense of fairness. And, Larry likely wants us to process, assist, and entertain about 30,000 Newbies yet again this annum, instead of getting tickets to the traditional Burners.

    All the big decisions the past few annums seemed purposed to get more income to support their salaries and payouts. Tickets have been distributed to anyone who will pay the price, instead of to the cool Burners who have been supporting the party for years. Many more rules to make Burning Man for Everybody, deadening the city behind the Esplanade, especially after dark. Larry has embraced the massive Plug & Plays, by giving them support and great locations, for more Newbies to buy tickets and accommodations to the playa. All of which works well for selling more tickets at higher prices.

    If you disagree with this ledgering of the money the 6 LLC members are counting, what’s your ledgering?

  8. The damage-control comments from the BOrg shills should be quite entertaining. I would bet obfuscation and misdirection would be at the top of their list, to draw attention away from the man counting the money behind the curtain.

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