Burning Man 2017 Financial Analysis, Decommodification and Flysalen [UPDATE]

Every year we bring you a look at Burning Man’s financial performance.

This year we’re also going to take a deeper look at their major assets Fly Ranch and Decommodification, LLC.

Burners.Me Previous Financial Coverage: 2012201320142015, 2016

2017 Burning Man IRS Form 990

2017 Burning Man Annual Report

Some highlights:

  • Revenue from Burning Man event $42.8 million, up over $5 million from 2016
  • Annual Surplus (Revenue less Expenses): $3,733,876
  • Donations received almost $1 million
  • salaries (including contractors) increased $2.1 million
  • Cash and receivables: $11.75 million, up from $9.5 million in 2016
  • Total assets: $27.8 million

Sales of inventory was $1,605,516. That’s a lot of ice and coffee. Ice cost $596,177.

Medical expenses were $649,000.

Their stock donation program seems to be working, with a donation of $26,517 in marketable securities.

Most of the key personnel got pay rises in 2017, though some went down:

Overall payroll including contractors is $18,703,754 = 42% of revenues.

Grants as a % of revenues = 3.8% . Note this includes the cost of building The Man, the base structure, and partial funding of Playa art projects including the Temple.

The list of grant recipients contains many familiar names.

Burners Without Borders made 4 grants, totalling $4,900. [* this is for grants outside the US and has been disputed by BWB director Breedlove. See comments. I have asked him to provide the correct information, I will add it to the post – Ed.]

The annual Artumnal gathering took in $629,404 in 2017. About $100,000 of this went to pay for the use of the facility:

2017 Fundraising Event

This is a substantial increase on 2016:

2016 Fundraising Event

Commentary

A huge thank you to A Balanced Perspective, DS and Anonymous Burner for their contributions and thoughts.

  • Artists receive less than 2% of the budget (approx $800,000)
  • Regionals receive about 4% of the budget ($1,717,766)
  • About 9% of the budget gets piled up in the bank account as cash.

Anonymous Burner says:

The art funding is constantly presented as a central tenant of the event, but is actually getting funded like an afterthought.  Artists are the face and the creativity of the core of the event, but have to carry their art on their own backs while others claim credit for making things so great for them

What does an organization trying to “make the world a better place” through art need with so much cash, into the tens of millions of dollars? Why do they spend such a tiny amount of the money given to them by Burners every year on art? Why do the ticket revenues increase 10% a year but the art budget seems to keep proportionally shrinking?

How can they justify spending $1 million a year on insurance without providing insurance for the 10,000 or so workers on site building the city, art installations and camps? Would it really kill their vision to make $3.5 million a year instead of $3.9 million, and look after their workers better?

Why does the main “charitable” organization have to spend more on the Regional Events than they give out on grants? It’s about double the art budget. Is the purpose of Burning Man to spread Burner culture around the world through art, or is it to expand their inefficient bureaucracy? Can’t the Regional events support themselves?


Population Summary (note: includes 2018)

The number of paid participants according to calculations in the Pershing County Sheriff’s Office report was 69,493.

I filed a FOIA request to get the 2017 vendor list: 84 companies selling things other than ice and coffee.

DS has also been filing FOIA requests for information about Burning Man. He was able to get this heavily redacted information for 2017, the calculations used to pay the Bureau of Land Management’s 3% fee.

Why the need for such secrecy?

The bulk of the $4,349,723 in Permits, Taxes and Fees appears to be the 9% Nevada Live Entertainment Tax. [* see comments – Ed.]


Decommodification

One of the interesting things in the 990 is the listing of “related entities”. It includes Decommodification LLC, but the share of end of year assets is $0.

Decommodification LLC is the organization that was created at the same time as the non-profit Burning Man Project, to hold all the intellectual property. As far as we can tell, it gets paid $75,000 per year in royalties from the Burning Man Project for use of their trademarks. We have no information on what other royalties it earns, for example from sales of the documentary “Spark” or the “lines around the block” Smithsonian exhibit. Google recently commissioned Burning Man to design a $2 million art installation for their campus: where does this money go? Five lucky artists will get a share, most likely the “big names” who appear in the grants list on a regular basis. Is there a royalty component to deals like this?

Decommodification LLC made two filings to the California Secretary of State on January 16, 2019. One was that “nothing has changed”, and another one requested that the company registration be canceled. It seems strange to me to file “no change” and “cancellation” notices on the same date, if anyone has knowledge of how this process works please leave a comment.

The current state of the company shows “cancelled” at the S.O.S. web site.

According to the US Patent and Trademark Office, the trademarks were transferred from Decommodification LLC back to the Burning Man Project on 28 April 2018 – the day Larry Harvey passed away.

The “nunc pro tunc” is a retroactive assignment to correct an earlier ruling. Was this something to do with Larry’s estate?

What happened to the rest of the intellectual property, including the rights to future royalty streams?

Were the trademarks assigned back to the Burning Man Project for free, Decommodification LLC dissolved, and the accumulated cash of 6-7 years of royalties distributed to the members? Or was some of that $12 million cash hoard used to purchase them?

These transactions occurred in 2018, so perhaps will get covered in next year’s IRS Form 990. There is no mention of them on the Burning Man web site, despite this being perhaps the most significant thing BMorg have done since spinning off their non-profit in 2012. BMorg like to claim they’re a “leader in radical transparency”, but Decommodification Inc has always been a mysterious black box.

The 2017 Form 990 values the Burning Man Project’s intangible assets at $4.23 million, but this was before the trademark transfer. This amount first appeared on the books in 2014. We believe it represents goodwill on the acquisition of Black Rock City, LLC from the Founders.

For a good read related to Intellectual Property and Burning Man, see Culture, Capital and Copycats in a Globalizing Burnerverse by Ian Rowen, which was the keynote address at the 2018 Australia and New Zealand Burner Leadership Summit.

The “Burner Look” is not trademarked, so anyone can put an art car in a desert and appropriate our culture for “cool factor” and financial gain

Flysalen

In 2016 BMorg bought a 3800 acre parcel of land known as “Fly Ranch” with big donations and paid $6.5 million. This is why the 2016 donations were more than $8 million.

Around 42:30 in the above video, they start talking about “community ownership of land”. The communist social justice component of this vision is that “living off the land is a version of Universal Basic Income”.

Five minutes into the video, they reveal that the land has been sub-divided into 53 different parcels.

Who gets a permanent Burning Man lot? Presumably the 6 5 Founders and the millionaires who put up the $6.5 million. Will the rest be auctioned off to the highest bidder, or handed out to the most favored staff, artists, and camps? I’m tipping Dancetronauts are not on the short list.

This reminds me of an earlier post, Get Your Timeshare Slot in the Sultan. There, I postulated that the “ironic timeshare sales” brochures being handed out from a booth at the Man base was actually Burning Man’s way of bringing that in as a future reality.

The Occidental Oasis “ironic” timeshare sale was going on at the same time as very real hotel sales on Billionaire’s Row

The same thing happened with hotels, where BMorg director Chris Weitz opened an “ironic hotel” at Ashram Galactica, which paved the way for the proliferation of luxury Plug-N-Play hotel camps today.

Petit Ermitage, a boutique hotel in West Hollywood, were still advertising the pop-up Burning Man hotel they created with Cirque Gitane long after the event
People now pay up to $20,000 for hotel rooms at Burning Man with flushing porcelain toilets
Photo: Lost Hotel/Facebook

Fly Vision

Some information about the original intention for Fly Ranch is available thanks to the Wayback Machine

You can see from the plan above that the property is adjacent to another playa. Hualapai Flat is land administered by the Department of the Interior’s Bureau of Land Management.

Image: americansouthwest.net

The Bureau of Land Management is planning to dispose of some of its lands.

Source: BLM Winnemucca District Program Overview 2017, Page 7

From the January 2018 report, it looks like this deal is close to being done:

Source: BLM Winnemucca District Program Overview 2018, Page 6

Who else would want empty desert playa?


The original vision for the Fly Ranch site was a sustainable community of one acre lots for employees and affiliates, with its own airstrip. This plan talks about 9 parcels of 5 acres, each with their own access roads; and 73 parcels of 1 acre each.

Village and Residential sites

The two communities are based on Burning Man’s Ten Principles, and this will be it’s first year-round expression. Employees and affiliates may build on a ‘Homestead’ basis, or rent or buy into the Village community at the project’s north end. For others, one acre lots may be bought for home construction in the project’s central development (and separate H.O.A). These areas will be allowed to grow incrementally, with roads and utilities phased as required. Geo- thermal electricity will serve all the lighting and cooling needs of residents (and possibly the valley’s ranchers as well), and hot water will provide all heating.

Organic vegetable farming will be developed as an economic base for the village community. Geo-thermally heated greenhouse organic farming will be operated for local needs, and for transport and sale. This can supply Reno with organic vegetables throughout the year, while creating a wholly independent economy for the community.

Source: willroger.org, via Wayback Machine

Land Conservancy

Even with limited use, the grassy banks of the vernal pools are being sloughed in by bathers, the pools gradually churned into shallow mud holes. Bathers also leave tanning lotions, insect repellants, and
other contaminants behind to ill effect. The pond waters contain a species of pupfish which are isolated by the underground source and terminal outflow.

A nature preserve requires control and enforcement, accordingly this area must be properly fenced to admit access only to indigenous animals, but excluding horses or cattle which trample wetlands. Human access must be highly regulated, with trespass, hunting and public use of existing pools and hot springs banned.

Anticipating the utter destruction of too much love, together with the projected costs of controlling and insuring against increasing liability, it is suggested that a Land Conservancy that is affiliated with Burning Man be created to manage the Geyser and wetland area.

Source: willroger.org, via Wayback Machine

Restaurant, Lodge and Conference Center

Fly Lodge and Conference Center

This will epitomize the style of Fly Ranch, and become a beacon for the greater community. A restaurant, rooms and services will be available. Fly Lodge will be available for public and corporate use, while also serving as World Headquarters for Burning Man’s Regional organizations around the globe.

Source: willroger.org, via Wayback Machine

Burning Man Board Member Chip Conley’s experience with luxury boutique hotels and AirBNB would come in handy for a plan like this.


How Much For That Oasis In The Desert?

Burning Man’s balance sheet shows land, buildings and equipment of $11.9 million; net of depreciation, $9.9 million. Schedule D, Part VI lists the value of land as $7,233,545 and buildings at $979,870. In 2015, before the Fly Ranch purchase, land was $198,000 and buildings $979,780.

According to Nevada property records, Fly Ranch only cost about $2.6M. The Washoe sales records record two transactions for $2.377M and $0.240M. The water rights came under two different transactions and appear to not have specific value attached to them. The water rights transactions gave the prior owner only about 64 acre feet of water for livestock.

There were four transactions in 2016:

1)      sale of 3,381 acres that was the majority of FR,

2)      another 276 acres that was part of the FR with the geyser

These sold the mineral rights but not the water but referred to other linked sales of water rights.

3) transfer of water rights with a carve out for the prior owner for item 1).

4) transfer of water rights with a carve out for the prior owner for item 2).

Water rights in California and Nevada are fresh on my mind after all the research I did for my last podcast episode, CryptoBeast #17 – Fire, Water, Trains, Space Lasers: California Burning. It’s an arcane subject, but if you’re interested there’s a good overview here: History of Water Rights in Nevada and the Western States. This particular statement seems to be key:

Surface water rights initiated by applying water to beneficial use prior to March 1, 1905, and which have been perpetuated or continuously used through the years are known as vested water rights

The main water rights for the hot springs, Cottonwood Creek and Little Cottonwood Creek are the rare and highly coveted “vested water rights”, granted before 1905.

My source tells me that the Burning Man event draws 12 million gallons of water per year from this property (27 acre feet).


Setting Boundaries

We recently published discussion from the Washoe County Commissioner’s meeting about the possibility of redrawing district boundaries so that Burning Man would be part of Washoe County (which gets the economic benefits from event-related tourism) instead of Pershing County (which gets a massive spike in crime rates with no economic benefits).

Fly Ranch is next to Hualapai Flat. Burning Man was held at this location once, in 1997. Hualapai Flat is where Pershing, Washoe, and Humboldt Counties meet. Fly Geyser is in Washoe County.

Is the proposed Washoe Boundary move related to long-standing plans to purchase Hualapai Flat? Is BMorg sitting on $4 million from the Fly Ranch donations to acquire this land?

I guess time will tell.


[Update Feb 7, 2019 2:11pm]

The plot thickens, with this post saying that Burning Man was under contract to purchase Fly Ranch in 2009, and real estate developer Build SF helped organize their corporate restructuring to provide “personal financial security” for the 6 Burning Man founders.

In 2009, the BUILD partners were introduced to Larry Harvey and his partners at the Burning Man Organization. Burning Man was in contract to acquire a 4,000-acre ranch in the Nevada desert on which they planned to move the annual Burning Man event as well as develop a desert art center. 

BUILD facilitated a transaction that allowed Burning Man to adjust its corporate structure, manage tax requirements, protect trademarks, establish a permanent office, and provide personal financial security for the six Burning Man partners. Real estate provided an elegant solution for these complex, multi-dimensional challenges, while preserving and honoring the basic precepts of Burning Man. We are proud of the part we played as advisors to Burning Man in establishing a clear path and solid foundation for everyone’s long-term benefit, including the event itself.

I have another trusted source who drew the “intellectual property in a separate company” structure on a napkin for CEO Maid Marian. I will ask their opinion on this.

[Update Feb 13. 2019 4:06pm]

Breedlove head of BWB has updated us with some more detail:

It’s interesting to see the difference between Part III 4c & Schedule F Part 1. I don’t quite understand how they split the difference between those two sections.

What I can provide you with is that we gave 4 grants through our Civic Ignition Process coming out at 4,900$ and 21 grants through our Annual Community Micro-Grant Program coming out at 18,800$. Between the two programs that totaled $23,700.
(https://www.burnerswithoutborders.org/projects/bwb-community-grant-winners-2017)

We also provided grants for Hurricane Harvey Disaster Relief at $21,317.12

There was also a series of Fiscal Sponsor funds that were raised and given out. One of those being the $30,363 for the Camp Epic Santa Rosa Fire Relief (which is in one of your screenshots above)— but I don’t have the ability to pull up all those numbers at this time.

I’m also realizing while going through my data that it isn’t the easiest to find some of this stuff unless you know where to look. So taking a note on improving our reporting systems for the future– I appreciate the opportunity to look at how we can do better at reporting in a more transparent and better to find way.

2017 Black Rock City Official Numbers (via BLM)

We received this heavily redacted document from a trusted source today

Official tickets sold: 76,580

Official ticket revenue: $41,825,941

BLM fee: $1,254,778

Paid Participants: 69,596

Peak Population: 79,638

Staff/Workers/Volunteers: 10,042

 

We are waiting for the official IRS Form 990 for 2017, which will reveal more financial details.

Sheriff Asks Org To Pony Up for More Money and Officers

The Pershing County Sheriff’s office have published their Post Mission Synopsis report for 2017. It’s reproduced at the end of this article, along with a couple of appendices – one which gives an idea of where incidents occurred, which some Burners may find interesting.

Pershing County Sheriff Jerry Allen. Image: News4Nevada

There was some coverage of this story at the Reno Gazette Journal “Tensions rise between Burning Man and law enforcement, again”, but it’s light on details. We’ve re-blogged a more detailed story from the Lovelock Review Miner in this post. Huge thanks to our source for sending this in.

Some Highlights

Sheriff Allen agrees with me and the USPTO that it’s a festival.

I think this is the first time I’ve seen the size of the annual drug haul, something I’m sure many Burners have been curious about:

grams ounces pounds
marijuana > 639 22.82 1.43
psilocybin > 818 29.21 1.83
Ketamine > 120 4.29
Methamphetamine 13.5
Cocaine > 231 8.25
MDMA > 334 11.93
doses
LSD > 217

It’s interesting to see the population changes.

This is the essence of the Sheriff’s problems with the festival:

He brings up a specific incident where Burning Man didn’t want a particular person to attend a meeting, so they went straight to the Director in Washington DC rather than raising their objections with the Sheriff’s office.

One wonders who this objectionable individual was. Dan Love? Gene Siedlitz? CIA? DEA? FBI? CDC? Humboldt General?

The Sheriff is highly suspicious of the population numbers provided by the Org.

Later in the report he mentions that the gate count may not include all the people arriving via the airline and Burner Express bus. The numbers are key because peak population above 69,999 brings them to a higher payment level, from $240,000 to $275,000.

Reading further, we have BMorg employees wielding weapons in a car chase…

And an RV full of coke and a loaded gun in early entry:

We have already covered the arrest statistics 2017 Crime Scorecard, here is the summary:

“We continue to have negative enforcement” – is this police speak for laws are broken everywhere?

We wish Sheriff Allen luck in his quest to squeeze more money from the $45 million annual event. His requests seem pretty reasonable – the cost of one junket regional festival visit for one BMorg staffer – and his office has to deal with the consequences of Burning Man all year round, not just for a week.

Re-blogged from the Lovelock Review Miner:


Sheriff submits Burning Man budget request

Debra Reid, News4Nevada

Wednesday, July 11, 2018 1:00 AM

Sheriff Jerry Allen submitted his law enforcement budget for next month’s Burning Man while challenging county leaders to “dispose of” the agreement that restricts the budget. Allen is concerned that public safety is at risk due to inadequate county law enforcement at the event.

The 2013 Settlement Agreement between Pershing County and festival organizer Black Rock City, LLC, limits the private group’s payments to the county for law enforcement, criminal prosecution and other services impacted by the massive festival. The agreement sets the reimbursements according to festival attendance and law enforcement command status.

Allen limited his spending as required in the 10-year agreement. His budget request is based on a less desirable but lower cost “integrated” command with the BLM and this year’s expected attendance by 70,000 to 79,999 ticket-holders. The number still doesn’t include the thousands of staff, volunteers and contractors on playa for weeks before and after the nine day event.

With the population and inflation factored in, BRC’s $275,000 base payment pencils out to a total of $299,201.92 that should be paid to the county, according to Allen. Of that, $252,462.88 will cover payroll for up to 24 law enforcement officers and jail personnel plus supplies and permanent infrastructure needed during the event including CAD (Computer-Aided Dispatch) interface, body cameras, trailers and a possible air conditioning unit for off-duty personnel.

That leaves $46,738.74 left over for the county courts and administrative services needed for the event according to Allen’s budget request. Members of the county commission are reviewing the proposal and may vote to either approve or reject it at their next meeting on July 18.

Sheriff Allen also handed out his Post Mission Synopsis on the 2017 Burning Man event. The report explains why, in his opinion, the 2013 Settlement Agreement between Pershing County and BRC shortchanges county taxpayers and event participants.

“The Burning Man Festival has, for several years, far exceeded the resources of not only Pershing County, but the Law Enforcement resources of Northern Nevada as a whole. The Pershing County Sheriff’s Office has had to ‘contract’ with several different Law Enforcement Officers within the State to provide some semblance of law enforcement expected by the participants. This endeavor is becoming increasingly difficult to perform as the population of BRC continues to increase and the payment to Pershing County remains relatively stagnant.”

In 2019, the BLM may issue a ten-year Special Recreation Permit allowing the Black Rock City population to reach 100,000 including ticket-holders, staff, volunteers and contractors. As the festival grows, Allen says a sheriff’s deputy dedicated year-round to the event will be needed.

“This Festival has increased in magnitude to the extent that Pershing County should hire a Deputy to provide for planning, logistics and execution of the plan for this Festival as well as provide for continued investigations,” he said. “The Pershing County Sheriff’s Office continues to receive calls for service long after the active portion of the Festival has concluded.”
Property and personal crime reports after the event, including minor thefts and sexual assault, must be investigated even though the evidence has vanished along with the event, Allen said.

CRIME STATS

Allen’s written report was delivered long after the deadline specified in the 2013 agreement.

“The Sheriff shall, within fourteen days after the Event, provide an After-Action Report. If the information for the AAR is not yet available at that time, then the Sheriff shall provide the information as soon as it becomes available,” states the settlement agreement.

Allen said he’s been busy with important PCSO matters, such as the vacancies for two sheriff’s deputies, but he did comply with BRC’s request for crime statistics on citations, arrests and the “actual expenses incurred in connection to the event” during the 2017 Burning Man event.

Allen’s report lists 57 arrests at the 2017 festival, an increase of 11 arrests from the 2016 event. Burners were arrested for FTA (failure to appear) warrants, sexual assault, domestic battery, possession of illegal controlled substances and trespassing.

There was a total of 125 misdemeanor citations for assault, battery, reckless driving with 121 of those citations for minor illegal drug possession “not amounting to sales or trafficking.”

Drugs seized by the PCSO at the 2017 festival included more than 639 grams of marijuana, 818 grams of psilocybin mushrooms, over 120 grams of ketamine, 13.5 grams of methamphetamine, more than 231 grams of cocaine, over 334 grams of MDMA and more than 217 doses of LSD.

POPULATION IN DOUBT

Allen says he’s skeptical of Black Rock City’s daily population reports issued electronically by Ticket Fly. The number of ticket-holders is restricted by the BLM’s Special Recreation Permit.

“I am highly suspicious of these population numbers as there is no independent verification or audit system in place to perform a quality control check,” Allen says. “From previous Festivals, it appears to the naked eye, as if BRC is well beyond the reported numbers, but at this time there is no way to verify this…There is no reason for BRC to report any number above 70,000 paid participants, due to possible consequences from both PCSO and the BLM.”

Allen said the peak population reported at one point in the 2017 event was above the permitted level of 79,000 and, as a result, Pershing County should be paid more money for the event.

“It is my recommendation that the Pershing County Board of Commissioners submit a bill to BRC for the additional $35,000 plus CPI (Consumer Price Index) for the additional monies as outlined in the 2013 Settlement Agreement,” Allen said in his synopsis.

 

GUN CONTROL

Firearms are not allowed inside the festival by BRC or BLM but, in 2017, a loaded rifle was discovered during set-up and four days before the gates opened, Allen said. The weapon was found in a motorhome where a large amount of cocaine was also discovered by BLM officers. The vehicle had supposedly been searched for weapons and drugs by BRC gate personnel.

“We were contacted by BLM to assist with a traffic stop,” Allen states. “While we were on scene, a rifle was also found with a round in the chamber. This vehicle was allowed into the Festival early as a part of an agreement between BRC and BLM to allow ‘early entry’ participants to assist in setting up the city’s many amenities and large art structures.”

For Allen, the incident indicates that more county law enforcement is needed before and after the event and BRC should hire professional gatekeepers to search for weapons and drugs.

“These types of incidents could also be remedied by requiring BRC to hire an independent company to provide for proper screening of persons and vehicles,” Allen states in his report.

In 2017, a brush fire south of Gerlach created a potential crisis when it forced temporary closure of Highway 447, the primary ground emergency access into and out of the Burning Man area.

“The closing of Hwy 447 shut off the main artery to get people off the playa in the event of an emergency or evacuation,” Allen says. “It also had the potential to significantly delay or stop necessary resources from reaching the playa in case of an emergency.”

Allen said a permanent mountaintop repeater is needed for communications between the PCSO in Lovelock and sheriff’s deputies on playa and, in case of a major emergency at the event, inter-agency radio communication needs improvement between PCSO, BLM, NHP and WCSO.

Funding is needed for “a minimum of 40 Deputies per shift” according to Allen. He also suggested that Pershing County and BRC “dispose of the 2013 Settlement Agreement” and work out a new agreement or adopt a cost-recovery system such as that used by the BLM.

BEHIND THE SCENES

In his synopsis, Allen revealed some of the sources of ongoing tension between the PCSO and BRC. Planning for the event requires numerous meetings throughout the year between various agencies including the PCSO, BLM, BRC, NHP and the Washoe County Sheriff’s Office. One meeting was cancelled after it started due to what BRC considered an unwelcome participant.

“Planning became very difficult however, when a scheduled meeting was cancelled at the last minute (after the meeting was to have started) by representatives of BRC due to one invitee BRC did not approve of,” Allen states. “This issue was taken by BRC to the BLM director level in Washington D.C. without first attempting to rectify this situation locally and reschedule the meeting. This action further strained the tenuous relationship between BRC and PCSO.”

Allen said local BLM and BRC officials with decision-making authority would expedite the planning process and planning meetings should take place in the county that hosts the event.

“I would offer a suggestion to have all Cooperators meetings in the Lovelock area, since Pershing County is the County in which this Festival actually takes place. This would allow for more participation from other Pershing County entities which are vital for this Festival to operate,” Allen says in his synopsis. “It would be nice to have BRC become accustomed to the area as well as the resources available within Pershing County.”


Here is Sheriff Jerry Allen’s report.

PCSO 2017 Burning Man PMS without Apendixs

Apendix B Cases PCSO 2017 PMS

Apendix D graphs PCSO 2017 PMS

Apendix D Drugs grams PCSO 2017 PMS