Tag Archives: 2013

Feb 3 2015

Analysis: 2013 Burning Man Project Financials

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, if my friends from Xero North Sydney are seeing this, or 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?

bm trademarkThe 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:

    • Speaking for myself, I don’t see why we should be compensated for the transfer of the trademarks. I can say with complete confidence that it will not be a big payday; this has never been our intention.

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.

LLCs are different from Incs, in that they don’t have stock. Instead, the partners share in the spoils of the business. LLCs can distribute cash to the partners. We know nothing about what happened between Black Rock City, LLC and the Founders, before they gave their shares of the business to their non-profit foundation. Did they get a payout, on their cut of the profits accumulated over nearly 30 years of putting on this festival? And can this payout be offset by a tax deduction, from the donation of their partnership slot to the non-profit?

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):

Screenshot 2015-02-03 16.45.22

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.

openness

A Balanced Perspective writes:
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The BMOrg’s donation of the BRC LLC to the Burning Man Project, and the process the BMOrg utilized is very honourable. The Burning Man’s Nonprofit Financial Information Released, and the 990 form of 2013, are a first step towards ‘a well-lighted suite of rooms’. Larry, Marian, Danger Ranger, Harley, Will, and Crimson deserve our immense gratitude upon their donation. But, there is much more information required for ‘a well-lighted suite of rooms’.
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I must apologise for parts of the cash out posts and my other comments. While I was correct in regards of what occurred, of that they donated the BRC LLC to the Project for near to $0, I was very wrong in regards to the numbers from their donation of the BRC LLC, dba Burning Man, to the Project at the end of 2013, and the 2014, 2015, and 2016 numbers, my numbers were way too big. I estimated the tax deduction in due of the donation was $30 or $45 million, utilizing a market value method of valuation of 1x or 1.5x of sales, but they utilized the cost method of valuation, of assets upon the ledger minus the liabilities, resulting in solely $7.4 million of deductions upon tax levies. I do not understand the rationale of why the profitable $30 million revenue stream was valued at solely $0, but, it is very honourable of the BMOrg to donate the BRC LLC to the Project for such a low deduction upon tax levies.
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I estimated $1 million for 2014, 2015, and 2016 for licence of the Burning Man(TM) name and trademarks in due of the missing $1 million they wrongly stated, in ‘Where Does Your Ticket Money Go’, they paid towards the BLM as a usage fee within 2013, but they will licence the name and trademarks to the Project for solely $75,000 each year. I apologise for being wrong in this manner, what the BMOrg did in donating the BRC LLC to the Project, and taking solely $75,000 each year for the licence of the trademarks, is very honourable.
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In addendum, by appearance, they will solely take near to $1 million each, if even that, and, perchance, a very big tax deduction for the other part, as payment for the Burning Man(TM) trademarks within 2018, which is very honourable. I estimated they would take $2 million each for the trademarks, with a high number of $3 million each, I was wrong in this estimate. I based this estimate upon the continuation of their estimated pocketing of $4 million each year of 2010, 2011, 2012, and 2013, based upon the difference in the afterburn reports from the payroll number and what employees, by simple maths, were in actuality paid. This results in an estimated $16 million take towards their pockets, in total, from 2010 to 2013, which remains a valid estimate, whether they took this as salaries, or as distributions of retained earnings, prior to their honourable donation of the BRC LLC to the Project. Might any person desire to dispute this, tell us where is the missing $4 million of payroll, when they stated towards us payroll increased from $2.8 million in 2009, to $7.2 million in 2010, with solely 30 employees to pay, and contractors being on a different line in the ledger, and paying little towards temporary labourers.
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This lowers my estimate of their cash out, from near to $40 million, to within the mid-twenty million dollar range, from 2010 until 2018, I apologise. But, we are not of the knowledge of the amount of cash they took towards their pockets prior to their honourable donation of the BRC LLC to the Project, they do not desire to tell us, thus, this is solely an estimate.
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I do not understand the rationale as to why the BMOrg delayed 10 months in disclosing the information we have been requesting upon their cashout. It would have been easy peasy for them to state this the prior March (or May, or July, or September, or November) when queries upon payments towards them, and towards their Decommodification LLC, were presented. I might understand of them stonewalling any query upon how much cash they took towards their pockets prior to their honourable donation of the BRC LLC to the Project, but I do not understand the rationale as to why they did not answer the queries upon the donation and upon the years after the donation. The first step in proper public relations is to get in front of an issue, of which, they did not do. Two simple paragraphs were all that might be required, with the statement of that it was preliminary and unaudited.My desire is, now that their honourable donation of the BRC LLC to the Project is complete, and ticket sales were increased from $12 million in 2010, to $30.5 million in 2015, and their cash out is near to completed, is that they might cover all costs of the awesome artists (of which, they do not plan to do within 2015), present to the artists a fair contract, pay all DPW a very fair wage, and provide full transparency, this spring, as to where the ticket money in actuality went within 2014, and is planned to go in 2015, in the place of stating towards the artists, and towards DPW labourers, of that ‘we do not have the cash to pay you’. In addendum, support the mutant vehicle owners, sound camps, and other camps providing entertainment, by gifting them several thousand free tickets to the event, this is solely fair.

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’

Oct 19 2014

Deep History of Drugs

Benjamin Breen at The Appendix has written this fascinating overview of the scientific discovery of illicit drugs. It’s concise, rather than comprehensive, but it makes for a good Sunday read.

It skips Ecstasy, which was invented by pharmaceutical giant Merck just before World War I. MDMA was later synthesized and popularized by Burner (and Bohemian Grover) Sasha Shulgin, who passed away in Berkeley this year at the age of 88.

It also misses the “discovery” of Magic Mushrooms by JP Morgan’s PR guy Gordon Wasson; their psycho-active ingredient psilocybin was synthesized by Albert Hoffman, the same chemist who “accidentally discovered” LSD. Both of these substances had actually been around for thousands of years, used in ritual hallucinogenic ceremonies like the Ancient Mystery Rites of Eleusis which Burning Man was based on.

Re-blogged from The Appendix:

Season_2_promo_pic_4

Meiji Meth: the Deep History of Illicit Drugs

Posted by Benjamin Breen on August 23, 2013

“We’re not going to need pseudoephedrine,” Walter White mutters through clenched teeth. “We’re going to make phenylacetone in a tube furnace, then we’re going to use reductive amination to yield methamphetamine.” Chemicals go in, and out come 99.1% pure crystals glittering with the brilliant azure of a New Mexico swimming pool.

The invention of Breaking Bad’s blue meth has become the stuff of television legend, and has even inspired a spate of real world knock-offs. But few know the true origin stories of illicit drugs—for instance, the strange fact that methamphetamine was actually invented in 1890s Japan.

Chemists have been fascinated by recreational drugs for a very long time. Robert Hooke, the short-tempered genius who discovered cells, was also the author of the first academic paper on cannabis. In the fall of 1689, Hooke ducked into a London coffee shop to purchase the drug from an East Indies merchant, and proceeded to test it on an unnamed “Patient.” It was evidently a large dose. “The Patient understands not, nor remembereth any Thing that he seeth, heareth, or doth,” Hooke reported. “Yet he is very merry, and laughs, and sings… and sheweth many odd Tricks.” Hooke observed that the drug eased stomach pains, provoked hunger, and could potentially “prove useful in the Treatment of Lunaticks.”

cannabis

An early depiction of cannabis from Jean Vigier’s Historia das Plantas (1718), originally published in French in 1670.The John Carter Brown Library at Brown University

Hooke also strongly hinted that he’d personally sampled his coffee shop score: the drug “is so well known and experimented by Thousands,” he wrote, that “there is no Cause of Fear, tho’ possibly there may be of Laughter.” (There were good reasons that Hooke’s readers might be afraid of a new drug—this was, after all, a world where pharmacies sold ground up skulls and Egyptian mummies as medicine).

Historians have largely ignored Hooke’s adventures with cannabis, entertaining as they may be. Albert Hoffmann’s accidental discovery of acid, however, is well known. In fact it’s arguably the most famous tale of drug discovery, challenged only by August Kekulé’s famous dream-vision of the benzene molecule as an ouroboros, which preoccupied Thomas Pynchon in Gravity’s Rainbow.

Even LSD, however, has a more obscure prehistory. Roman physicians described a painful disease called the sacred fire (sacer ignis) which by the Middle Ages came to be known as St. Anthony’s Fire—“an ulcerous Eruption, reddish, or mix’d of pale and red,” as one 1714 text put it. Sufferers of this gruesome illness, which could also cause hallucinations, were actually being poisoned by ergot, a fungus that grows on wheat. Several authors, most recently Oliver Sacks in his excellent book Hallucinations, have noted a potential link between ergot poisoning and cases of dancing mania and other forms of mass hysteria in premodern Europe.

ergotism

“The Beggars” by Pieter Bruegel the Elder, a painting believed to show victims of ergotism.Wikimedia Commons

By the 1920s, pharmaceutical firms began investigating the compounds in ergot, which showed potential as migraine treatments. A Swiss chemist at the Sandoz Corporation named Albert Hoffman grew especially intrigued, and in November 1938 (the week after Kristallnacht) he synthesized an ergot derivative that would later be dubbed lysergic acid diethalyamide: LSD for short.

It was not until five years later, however, that Hoffman experienced the drug. Immersed in his work, Hoffman accidentally allowed a tiny droplet of LSD to dissolve onto his skin. He thought nothing of it: hardly any drugs are psychoactive in such minute doses. Later that day, however, Hoffmann went home sick, lay on his couch, and

sank into a not unpleasant intoxicated-like condition, characterized by an extremely stimulated imagination. In a dreamlike state, with eyes closed (I found the daylight to be unpleasantly glaring), I perceived an uninterrupted stream of fantastic pictures, extraordinary shapes with intense, kaleidoscopic play of colors. After some two hours this condition faded away.

Three days later, the chemist decided to self-administer what he assumed was a tiny dose to further test the drug’s effects. He took 250 micrograms, which was actually roughly ten times higher than the threshold dose. Within an hour, Hoffman asked his lab assistant to escort him home by bicycle. Cycling through the Swiss countryside, Hoffman was shocked to observe that “everything in my field of vision wavered and was distorted as if seen in a curved mirror.”

By the time he arrived home, Hoffman decided to call a doctor. However, the physician reported no abnormal physical symptoms besides dilated pupils, and Hoffmann began to enjoy himself:

Kaleidoscopic, fantastic images surged in on me, alternating, variegated, opening and then closing themselves in circles and spirals, exploding in colored fountains, rearranging and hybridizing themselves in constant flux.

Hoffman awoke the next morning “refreshed, with a clear head,” and with “a sensation of well-being and renewed life.” In an echo of Hooke’s report about his friend’s cannabis experience, which left him “Refreshed…and exceeding hungry,” Hoffman recalled that “Breakfast tasted delicious and gave me extraordinary pleasure.”

One of the interesting aspects of Hoffman’s story is how detached it was, both temporally and culturally, from the 1960s context with which LSD is often associated today. This delay between the scientific identification and the popular adoption of a drug is a common story—and in no case is it more stark than in the gap between the discovery of meth and its widespread adoption as an illicit street drug. Methamphetamine was synthesized by a middle-aged, respectable Japanese chemist named Nagai Nagayoshi in 1893.

ergotism

An elder statesman of Japanese science and medicine, Nagayoshi Nagai and his wife hosted Albert Einstein in 1923.Wikimedia Commons

A member of the Meiji Japanese elite, Nagayoshi devoted much of his energy to the chemical analysis of traditional Japanese and Chinese medicines using the tools of Western science. In 1885, Nagai isolated the stimulant ephedrine fromEphedra sinica, a plant long used in Ayurvedic and Chinese medicine.

The year before, in July 1884, Sigmund Freud had published his widely-read encomium to the wonders of cocaine, Über Coca. Cocaine was radically more potent than coca leaves, and chemists the world over were on the lookout for other potential wonder drugs. It’s likely that Nagai hoped to work the same magic with ephedra—and in many ways he did. Ephedrine is a mild stimulant, notable nowadays as an ingredient in shady weight-loss supplements and as one of the few drugs historically permitted to Mormons, (although see thisresponse post for an interesting breakdown of the debate over “Mormon tea”). Currently, on T.V there are so many drugs for sale, yet we are in a “war on drugs” you can even find a “ dr oz guide on how to buy garcinia cambogia” if this were a real war, how could such things be allowed?

But in 1893, Nagai blazed a chemical trail that would live in infamy: he used ephedrine to synthesize meth.

As with LSD, it took the world a couple decades to catch on. In 1919, a younger protégé of Nagai named Akira Ogata discovered a new method of synthesizing the crystalline form of the new stimulant, giving the world crystal meth.

It wasn’t until World War II, however, that meth became widespread as a handy tool for keeping tank and bomber crews awake. By 1942, Adolf Hitler was receiving regular IV injections of meth from his physician, Theodor Morell. Two years later the American pharmaceutical company Abbott Laboratories won FDA approval for meth as a prescription treatment for a host of ills ranging from alcoholism to weight gain.

ergotism

Ambar: a potent mixture of methamphetamine and phenorbarbital, shown here in a mean-spirited 1964 advertisement that appeared in the Journal of the American Medical Association (Vol. 1, No. 5385).

The rest is history—by the 1960s, “tweakers” had made meth a byword for deranged drug addicts, and it lost its standing in the scientific and medical communities. Much like heroin, which was originally marketed by Bayer as a companion to aspirin (the company still technically owns the copyright to the name), meth began life as a wonder drug only to segue into a depraved middle age.

It all points to an interesting and unexplored dichotomy in the history of drugs: there’s a huge gap between the inventors of illicit drugs—usually rather austere, cerebral and disciplined—and their consumers.

I’m guessing that Robert Hooke, Nagayoshi Nagai, Albert Hoffman, and Walter White would have a lot to talk about.

This post is part of a larger series. Read the next installment.
Burners.Me:
Burning Man seems tailor-made for the psychedelic movement. Founder and Director Michael Mikel, aka Danger Ranger, used to hang out in a house in the Berkeley hills in the early years, with a bunch of techies from the Mondo 2000/WIRED scene and acid straight from Stanford’s Chemistry Lab, which provided the gear for the original “acid tests”. In a panel discussion with This Is Burning Man author Brian Doherty in July 2013 , Danger Ranger said:
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“I have a connection to Silicon Valley that goes back to the beginning of the personal computer…We were all hanging out a lot, I was meeting people who were from Mondo 2000 which was the pre-cursor of Wired magazine. We were going to parties, I’d go over to their house in Berkeley, they had connections to the Stanford Chemistry Lab, they had drugs that had not been outlawed yet – it was out on the edge, it was really crazy. A lot of the connections came from out of that tech industry because we knew each other and we hung out” [YouTube, from 19:20]

Larry Harvey and Grateful Dead songwriter (and Electronic Frontier Foundation founder) John Perry Barlow gave an interview in London for Tech Crunch last year, where they described the long history of inter-relationships between psychedelic drugs, the counter-culture, and the tech industry, as outlined in John Markoff’s book What the Dormouse Said.

Burning Man takes place on Federal Land, where marijuana is illegal even if you have a medical prescription for it in your home state. Alcohol is illegal for anyone under the age of 21, and cigarettes are an illegal drug if you are younger than 18. Even Ambien, Viagra, and Xanax are illegal if you don’t have a current doctor’s prescription for them.
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Given all that, I’m wondering – have you ever done illegal drugs at Burning Man? This poll is totally anonymous and there is no way to track your vote back to you, you don’t need to provide a name or email address to answer.
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Sep 24 2014

Exploring the Other: 2014 Edition

Burning Man requires its Regional Events to have transparent financials, donate to their charities, and obtain a license to use their trademarks. For themselves, the requirements are not so strict. Sure, they have to disclose the activities of their non-profits to the IRS. And they share numbers with us in their Afterburn reports. The Afterburn numbers are not audited as far as we can tell, and are not a complete financial statement. Significantly, Revenues are left out. Also significantly, very general category headings are used for expense items. We know that Decommodification, LLC, a private, for-profit company, owns all the rights to the trademarks, images, videos, soundtracks, fine art, and other intellectual property of the event. We believe that Black Rock City, LLC pays royalties to Decommodification, LLC, to call their event in the Nevada desert “Burning Man”. But there is no line item for this payment. How much are those royalties? That’s a secret.

cartoon_accounting_2In order to estimate it, some forensic accounting is required. It may not be perfect, but it’s better than nothing. And Burners.Me is the only site on the Internet that is even trying.

Last month, right before the event, Burning Man added a page to their site explaining “where does my ticket money go”. The page appears to be an “orphan”, which means it is not linked to by any other page there. The Reno Gazette-Journal somehow found this page, describing it as an “announcement”, and used it as a reference for their story “Where does your ticket money go?”. The Journal said:

Burning Man announced today where ticket sales money goes to shed light on why tickets cost what they do

We looked for the announcement on their web site, their press page, their blog, and in their JackRabbit speaks newsletter – couldn’t find it. Some claimed they posted it to Facebook, but it doesn’t appear in their official feed. The page seems like it was added to the site for the purpose of the RGJ story. It is filed under “What is Burning Man?”, but that page has no link to it.

Water please, he's got mud on his advertising!Was it really an announcement, designed to shed light? Or was it a ruse, designed to muddy the waters and confuse the language, figures, and facts used in public discussions of the event?

The story raised an issue with us here. Both Burning Man, and the RGJ, were claiming that “BLM fees were $4.5 million”. The entry in the Afterburn accounts says “BLM and Other”. So what is the Other? And how much are the payments to them?

We have speculated that “Other” is Decommodification, LLC. Payments to them may be lumped together in this figure, and may also be included in “Taxes and Other Licensing Fees”. We said:

the reason that the word “other” is significant in the original report is that in 2013, this category jumped from $1.8m to $4.5m – with no explanation given for the gigantic leap ($2,654,919 gain). “Taxes and Licenses” jumped from $154,994 to $1,021,851, also without explanation ($866,857 gain). At the same time, “Decommodification LLC owns the rights to everything” (or words to that effect) is now on all the tickets. Coincidence? Well the fact that BMOrg is trying to gloss over it by using increasingly vague language makes that seem even less likely.

…What is interesting here is the subtle use of language to mask truth. The carefully chosen words “BLM and Other Usage Fees” are repeated and slightly distorted, through a technique sometimes called “Chinese whispers”, to become “BLM manages the event…2013 fees”.

The distorted information has been picked up and repeated by many other sites: Las Vegas Sun, High Country News, Reddit, Ron’s Log, Yahoo Finance, the Black Rock Beacon.

So who is correct? Burning Man themselves? Mainstream media newspapers? Or little ‘ole us, puny and pesky “social media bloggers”?

It’s us, of course. RGJ is wrong, and BMOrg are either misleading us (accidentally or deliberately), outright lying, or (to be charitable) are merely ignorant and the left hand doesn’t know what the right hand is doing.

How do we know? Because we went to the source. The Federal Bureau of Land Management.

Here’s what BMOrg said:

The Black Rock Desert is public land, but we don’t get to use it for free. It also takes a lot of equipment and hours of labor to put things together out there. The following are just a few highlights of costs we incurred in 2013:

  • The space we use is managed by the Bureau of Land Management (BLM) and our 2013 fees to them totaled $4,522,952.

Here’s what the RGJ said:

The following are some of the costs Burning Man said it incurred in 2013:

• Bureau of Land Management (BLM) manages the land the event is held on: 2013 fees totaled $4,522,952;

Here’s what Gene Seidlitz, chief of the Winnemucca-based Black Rock Field Office of the BLM, and the guy responsible for the Burning Man permit, said in response to our enquiries:

Burning Man is required to pay fees and costs to the Bureau of Land Management (BLM) as part of a Special Recreation Permit (SRP) issued by BLM to Burning Man each year.  Fees are set by Congress and are currently 3% of revenue related to the SRP.  For Burning Man this includes 3% of ticket sales, ice & coffee sales and other miscellaneous revenue.  The funds go toward BLM’s overall program management within the Winnemucca District with a priority in the Black Rock Field Office.

Burning Man also reimburses (cost recovery) BLM for all reasonable and justifiable costs related to BLM’s administration of the SRP.   Processing includes, but not be limited to, the following: coordination, administration and approval of any necessary NEPA compliance; consultation with appropriate Federal, State, Tribal, and local officials; preparation of the administrative record and resolving any protests, appeals and litigation that might result from the proposal, preparation of all decisions and authorizations resulting from those decisions, monitoring the construction, operation and termination of any resultant authorization; and other necessary processing actions consistent with a final decision.

It seems that those costs jumped, big time, between 2012 and 2013:

In 2012 BLM did a comprehensive analysis of the 2011 operations after the event and determined the BLM needed and would enhance the BLM planning and implementation in 2013 to ensure public health and safety for an event of 70,000 participants in a remote environment was adequately addressed.  As a result BLM’s costs increased from $1.2 million to $2.8 million that year. This was the largest jump in BLM’s costs in the history of Burning Man. Before and since the cost increases have been more incremental and were the result to inflation, growth of the event, etc.

So did the BLM charge Burning Man $4.5 million in 2013, or less?

BLM charged BRC approximately $2.8 M  for costs and approximately $685,000 were the 3% revenue for 2013

Did the BLM do anything to enforce the Vehicle Pass restrictions, or was this something Burning Man came up with?

BRC instituted the vehicle pass program.  This was not something that BLM enforced.

We wondered if the 35,000 vehicle passes were counted in any way by the authorities. It appears not, so it was up to BMOrg to issue them and regulate itself. If they sold more than the stated limit of 35,000, their punishment would be to have more profit forced upon them. If enterprising BMOrg insiders wanted to make some cash on the side, all they needed to do was sell a few vehicle passes on the black secondary market. From the moment they were released, they were for sale for 4-5x face value on Stubhub, and remained at a premium right up until the week of the event. We’ve heard no stories of people being rejected at the Gayte for not having vehicle passes, so I think we can safely assume that they sold more there to whoever required them. Whether or not the new vehicle tax did anything about the environmental footprint of the event (which we were told was the reason for the initiative) is unknown; it definitely was a nice $1.4m+ cash drop to the bottom line for BMOrg (which we speculated was the reason for the initiative).

2014 vehicle pass pricesComing back to the BLM figures, we have:

Costs: $2,800,000

Revenue share: $685,000

At 3%, this means the event revenues were $22,833,000.

We said:

According to the official numbers, in 2013 there were 61,000 tickets sold ($23.23 million). This includes a last minute release of 3000 “OMG” tickets, when the BLM approved a population cap increase. Also according to the official numbers, 69,613 attended the event. What gives? Did anyone at BMOrg make money from the unexpected 8,613 extra people (ticket value: $3.3 million)? Or were these tickets handed out for free to volunteers, who sold them on Stubhub or STEP for personal gain? How much was made from gate sales?

At the time, we were pooh-poohed, “there are no gate sales”. Of course there are, and it has now come out from independent sources that they are called Exception tickets.

In theory, the BLM revenue share should also include sales from ice, coffee, gasoline, propane, Plug-n-Play camps, and any of the other things for sale on the Playa – in 2013, there were 44 licensed vendor permits issued for Burning Man. We have estimated ice and coffee sales as above $1 million annually.

Either BMOrg gave out 1000+ free tickets that they were supposed to sell, in addition to the 8,613 free tickets from the population cap…or there is some discrepancy in the revenues being reported to the BLM.

Could the discrepancy come from the 3000 “Holiday tickets” ($650 – this year, sold at the end of January), and 4000 Low Income tickets ($190)? Back in the day, there was a suggestion that Burners paying the enhanced price were subsidizing the low income Burners. If you count the $650 tickets as $380 (the difference being a donation off-Playa to BMP, perhaps), and keep the Low Income at $190, you get $22,420,000 – which allows for a further $413,000 of additional on-Playa revenues. It seems like ice and coffee alone would be more, and the BLM is supposed to get a share of gross revenues, not net.

In a speech in Tokyo earlier this year, BMOrg CEO Marian Goodell said their revenues were $30 million a year. If she was referring to 2013 – and why wouldn’t she be, since 2014 hadn’t happened yet – then there is $8,167,000 that BMOrg makes off-Playa, in addition to the annual Black Rock desert event. Where does this money come from? It’s hard to imagine it’s from donations, since according to the Burning Man Project’s IRS Form 990, their funding for 2012 was $591,672.

The true figure for “BLM fees” in 2013 is $3,485,000.

Which means “other” is $1,037,952.

Where does this money go?

We have no direct proof that it is to Decommodification, LLC, but I can’t think of any other candidates. The State of Nevada imposes a 5% “live entertainment tax”, but Burning Man and EDC are exempt as outdoor festivals. There are separate line items for taxes, anyway. “Taxes and Licenses” also made a massive, unexplained leap: from $154,994 (2012) to $1,021,851 (2013) – an $866,857 gain. Possibly, some or all of this increase could be going to license the trademark in addition to the Mysterious Other. We know now that Decommodification, LLC permits them to call their 30-year old party “Burning Man”, by licensing “their” intellectual property back to Black Rock City LLC. It seems strange that BMOrg would mis-state their own figures by 23%, and the way the Where Does My Ticket Money Go “announcement” was made is suspicious.

To put the Mysterious Other in context, it is more than the payments for art ($830,280) and donations to local charities ($199,329) combined.

As always, if anyone has any further information, explanation, or details, please share.