It’s been about a week since BMOrg finally released the IRS Form 990 for the Burning Man Project, for 2013. They made a great fanfare on their blog about how this heralded a new era of transparency for them, but now that they are a non-profit, they are required by law to release the 990 details publicly. In fact, there is very little in the way of new transparency from the Org. It’s about a year now since Larry Harvey promised us a “clean, well lighted suite of rooms”, and we don’t appear to be any closer.
The big news they revealed is that each director was paid $46,000 to pass over their share as a partner in the tontine Black Rock City, LLC. A tontine is an archaic corporate structure with military origins, used to finance the opium-trading vessels of the British East India Company and to organize the Freemason’s Hall in London. What it means is “last man standing”, basically if you leave you can’t come back, and the last one alive gets everything. A most unusual structure for a dance party, begging the question who was advising them back in 1996-97 when they commenced the corporatization of the event.
They don’t have the money yet – it is accounted for on the books of the Burning Man Project as a loan to related parties. They may have been paid out in 2014, we won’t know until 2016.
BMOrg had the business valued by 2 different professional assessors. One came in at $4.5 million, but this was discounted by 35% because control of the business was split 6 ways. They restructured the business and came up with a sale price of $7.39 million. The transaction appears to have been structured in such a way that the 6 directors have donated most, but not all, of the value to the Burning Man Project. This may net them a tax deduction of $1,185,667 each (I’m not a professional accountant so any who are, please chime in).
Ostensibly, this seems very altruistic of the 6 Founders, emphasizing a commitment to Gifting, Civic Responsibility, and – dare I say – Decommodification. However, before we get too excited in handing out the accolades, there are many things about this transaction that remain a mystery, and will not be revealed to us for at least another year. One wonders why this is, if they are turning over a new leaf of transparency?
The most significant area where transparency is still lacking, is Decommodification LLC. Before giving away their share in the ongoing profits of the Nevada event, they sold the main assets of the business – its trademarks, ownership rights of photos and art, and other intellectual property. Who did they transfer these to? Themselves. That’s why Decommodification, LLC exists, and they are charging the Burning Man Project for the use of their trademarks. Once again, something which had been speculation on our part, is now officially confirmed by BMOrg. The annual royalty fee is $75,000. This license is exclusive, and sub-licensable. It seems that it would cover use of the trademarks in all events worldwide, including by regional subsidiaries. We don’t know how much Decommodification, LLC is obliged to pay Black Rock City, LLC for acquiring these assets, and how much the Burning Man Project is expected to buy them back for in the future.
This fee is based on the valuation of the trademarks by the independent appraisers
It seems extraordinary to me that these expert appraisers would value the Burning Man trademarks, an internationally famous name responsible for at least $30 million a year in revenue, at $75,000 – 0.25% of sales.
In 2018, these Intellectual Property intangible assets will be transferred by Decommodification, LLC back to the Burning Man Project – unless the Directors vote unanimously against that. This is by no means a done deal yet. Will the transfer be a gift, or a sale? Larry Harvey and Danger Ranger both expressed slightly different opinions on the Voices of Burning Man:
Last gift? Does this mean they won’t even be attending any more, once the Project has been officially handed over to its Foundation?
The gift of Black Rock City, LLC was valued at “cost” of $7.39m. This is most likely balance sheet assets minus liabilities.
We also know nothing about the various salary payouts over the last few years. All we have to go on is the marked jump from $2.8 million to $7.2 million, which our reader A Balanced Perspective incorporated in his guest post calculations on the cash-out. [An addendum to that post follows this article. He feels that these disclosures from the new transparency may invalidate his earlier assumptions; my personal belief is that it is too early to say, as almost all the details of the transaction are still being kept secret].
Also still an unexplained mystery, is the million dollar+ “Other” amount – the difference between the fees paid to the BLM (according to them), and the “BLM and Other” line item on the Afterburn Report. This is the festival’s largest expense after payroll.
Let’s take a look at the combined entity, Burning Man Project (incorporating Black Rock Arts Foundation):
My updated spreadsheet shows that the combined “Burning Man Arts” entity has become much more expensive to maintain, expenses almost doubled from 2012 to 2013. The largest expense is salaries, with CFO Jennifer Raiser taking home $111,000, paid staff $172,000, and “management fees” of more than $300,000. They also spent $45k on travel and $17k on conferences – this is apparently in addition to the $425k and $100k spent on these by BMOrg (source: Afterburn report).
In 2016, we will see the Form 990 for 2014, the first year that the Burning Man Project and Black Rock City LLC were totally integrated. No-one outside the company has seen the top line revenue numbers for Burning Man, which we understand to be $30 million from comments made by Marian Goodell. Will these sales be reported as sales of the Burning Man Project, or will they just show a single line item for the net profit of Black Rock City LLC? If it turns out to be the latter, we’re really not getting anything new in the way of transparency and opening up the books.
The Reno Gazette-Journal, in a story headlined “Burning Man Founders Sold Festival for $276k”, looked at the numbers, and spoke to BMOrg’s Communications Director Megan Miller:
“It is definitely incomplete information”…While all of the information required from the Internal Revenue Service is in the documents, Miller said, Burning Man cannot yet disclose revenue information from this past year’s festival, nor the one prior since the organization currently is undergoing an outside audit for 2013 and 2014.
All of this missing information that Burners have been seeking should be available before this year’s end, Miller said.
“Coming soon”…11 months away, at least.
“None of the finances were shared before. We didn’t share how the transaction happened, who was paid what. We thought this was a good opportunity to share,” Miller said.
They still haven’t shared how the transaction happened, or who was paid what. They have simply shared the information they were required to by law, as they did the previous year. They share more information about the finances in the Afterburn reports, than in this Form 990.
…all profit made from the festival will flow directly into the nonprofit’s coffers. Burning Man is required as a nonprofit to use any surplus funds to further its worldwide mission of expanding minds through art….
According to one appraiser, the shares were worth $1.23 million each, though another appraiser estimated that each share was worth closer to $809,000, according to the 990 form filed for 2013.
…Since becoming a nonprofit, Burning Man is focusing more on fundraising for its grant programs, including the “honorarium” program that funds projects for artists who want to create art for the playa, the playa being the desert flat where the main event is staged.
We do not yet know if they have increased the size of the individual Art Grants, or are going to award more grants than in previous years.
Burning Man this year discontinued its donation ticket sales, in which Burners could opt to purchase a ticket for more than the previous $380 value to help someone else buy a ticket at a discounted price.
I think the Reno Gazette-Journal’s new Burning Man beat reporter Jennifer Kane, who has not actually been to the event yet, has got her VIP Donation Tickets mixed up with her VIP Pre-Sale tickets. Donation tickets are out, after 1400 were sold at $650 last year. They claim that the Pre-Sale enables lower income Burners to get a discounted ticket, despite the clear mathematical difference between a $410 premium for Pre-Sale and a $200 discount for Low Income. If VIP tickets were there to enable those who can’t afford it to attend, at $800 there should be double the number of Low Income tickets. Pre-sale sold out quickly, bringing the non-profit a cosy $3.3 million cash. Nice way to start the year!
“This is the beginning of what we hope to do a lot more of,” Miller said, noting that the Burning Man organization will be posting its forms annually on its website in an effort to be more transparent.
I hope that the long-awaited transparency turns out to be more than just publishing the information they are required to by law. Compliance is not the same thing as openness.
Having said that, I commend the Founders for choosing to keep the cash in the business to fund more Art. I hope that this will continue into the future.
The Burning Man Project is a 501(c)3 taking donations, my belief is they owe the donors of art, labour, cash, and stock, to the Project, and to the profitable subsidiary corporation of which they have near to total control, much more information as to where the money did go, and as to where the money is to go, in addendum to their conflicts of interests, purposed towards the DONORS being of the ablility to make an informed decision as to whether they might desire to make their donation of their art, labour, cash, or stock.
‘A Balanced Perspective’