2014 Afterburn Report: The Death of Transparency

spend_money_good_time_442305We’ve been duped, Burners. For 4 years now, we’ve been sold on a “pie in the sky” vision. Burning Man would no longer be about exploiting volunteer labor and the financial and artistic contributions of Burners, to create profits for a small group operating in near-secrecy without oversight. Instead, it would now be a charity, with our tax-free deductions supporting an altruistic vision to bring Burning Man’s Principles to the world. The Founders would step down, but leave the infrastructure in place to maintain the integrity of Burner values into the next century.

A noble vision, but here’s what really happened:

  • the Founders set up a private company and transferred the main assets of the business to it; this company earns royalties for the use of the Burning Man name, logo and trademarks
  • the Founders each got a $1 million+ tax break for passing their share of future profits from the LLC over to the new tax-exempt non-profit
  • transparency was removed, except for public IRS Forms which were filed late.
  • people who had given substantial amounts of their lives volunteering for Burning Man, were arbitrarily shunted out the door to make room for new, paid employees.
  • ticket prices went up, revenues doubled
  • it got harder for veteran Burners to attend, while remaining relatively easy for Virgins

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Rather than the transparency we’ve been promised for so many years, and a new BMOrg focused on charitable works, we get higher ticket prices, more revenue streams, and more secrecy. I’m not so sure that Burning Man has jumped the corporate shark – it seems more like it’s been eaten by it.

The new Afterburn report is buried deep in the new web site. If you read “Voices of Burning Man”, the section of the new site that seems to actually update, you’d have no clue about it. If you go to burningman.org, there’s nothing on the main page. If you navigate their menu system – The Culture, The Event, The Network, Stuff & Things – you will have to really dig to find anything about it (the correct sequence is Menu, The Culture, Historical Archives, Black Rock City History, Afterburn Reports, 2014 Afterburn Report). Basically, to read the Afterburn, you need to subscribe to the Jackrabbit Speaks or click this link.

This year’s report begins with the type of statement we’re used to seeing from this crew:

Our AfterBurn reports will continue as they have since 2001, except they’ll now be consolidated, and focus exclusively on the production of the event in Black Rock City.

“Continue as they have since 2001” in OrgSpeak means “be completely different from how they have been since 2001”.

The word “consolidated” in this context means “much smaller”. Significantly, BMOrg are no longer publishing Burning Man’s financial chart. This was always an incomplete document, since for some reason they didn’t share their revenues; we had to make assumptions based on ticket and ice sales. At least it highlighted things like BMOrg spending more on travel and costumes for themselves than they did on donations and art for the community. Read our analysis for 2013 and 2012, as well as the IRS returns for Burning Man Project 2013 and Black Rock Arts Foundation 2013.

BMOrg continue to insist that transparency is still “coming soon”:

Separately, Burning Man will begin producing an annual report, in addition to the yearly IRS Form 990 financial reporting. That report will focus on Burning Man’s nonprofit activities and year-round global programming, as well as updates about Burning Man’s organizational infrastructure and support departments (such as Communications, Technology, Legal, Accounting, Human Resources, etc.).

Given that we just got the 2013 information in February 2015, it seems unlikely that we will be able to have any meaningful discussion about Burning Man 2014 for a year and a half after the event. What’s the point of that? It seems like it would be fairly straightforward to ask the various department heads to write a brief report on the event by December 1, then post these to burningman.org. What do we gain by waiting a year and a half? This is all for charity, right – so why not have openness, sharing, participation, communal effort, civic responsibility, radical self expression, radical inclusion? Why run it like a typical profit-driven corporation, where any disclosure of information must be signed off by the Board and PR team? The event is sold out, so it’s not like their revenues are at risk. At this point, the global culture will grow from participation and authenticity, not exclusion, hypocrisy and secrecy.

BMOrg have just had professional auditors going through the books for 2013 and 2014: will these accounts be published? It seems very, very unlikely.

It is now well more than a year since Larry Harvey said

larry worldIt has been asked if we intend to reveal the financial records of Black Rock City LLC. The answer is yes; that too will happen at about the same time as the Burning Man Project reveals its information—these two entities will then become a clean well-lighted suite of rooms thrown open for inspection.

So will there be an event in the future when “the Burning Man Project reveals its information”? Or did he just mean the IRS Form 990 filings? I’m not holding my breath. Right now, it seems that there is no intention to EVER reveal the financial records of Black Rock City LLC.

In January, Communications Director Megan Miller told the Reno Gazette-Journal:

megan miller“It is definitely incomplete information,” said Megan Miller, communications director for Burning Man Project.

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

The audit has been signed off, so what are they waiting for? Still counting the money? Or perhaps, so busy counting the $30.5 million from 2015’s ticket sales that what happened in the past doesn’t occupy much attention any more.

The increase in ticket prices and population cap over the last few years has led to a massive windfall for BMOrg, but only a slight increase in the number of art projects sponsored by Burning Man. Artists still have to raise funds themselves, half to two-thirds of project cost.

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For 2014, $800,000 was spent on art, across 61 projects – an average of $13,115 per project. There were another 200 art installations placed on the Playa without any financial support from BMOrg.

And what of the giving back to the community? It’s now more than halfway through the 2014-2015 Burn year, and more than a year since BMOrg “fully completed their transition to a non-profit”. So we should be able to point to lots of great outreach activity, right? Maybe I just can’t find that section of their website. There’ve been a few TED talks and panel discussions.

They’ve gone from “the only things we sell are ice and coffee, and all proceeds from that go to local charities” to “the Arctica volunteers donate their tips to charity” – which was about $13,000 last year.

Perhaps when we finally get to see the 2014 financial information for the Burning Man Project, it will describe some wonderful things that the self-appointed custodians of Burner culture have done to promote it, and we can all feel like we’re saving the world together. Maybe we’ll see a new, fair contract for the artists, when the art grant recipients for 2015 are publicly announced.

Remember 6 months ago, when the community was outraged about the Burning Man Project Director running an expensive Commodification camp with dozens of paid employees? The Minister of Propaganda told us:

(shhhh, just between you and us …) we’re working on a really really BIG project that will serve to tell the Burning Man story as it is today and into the future, and it’s gonna be RAD. You’ll know it when you see it.

Could we get the rad thing now, please? Pretty please?

tanabaumBuried within the latest Jackrabbit was the news that Jim Tananbaum has stepped down from the board of the Burning Man Project. This could’ve been a positive, if it had happened in response to the crisis, showing that BMOrg listened to the community.  Instead they published his statement blaming all his paid employees for his camp’s problems, and lecturing us on what a great example of the Ten Principles it all was. The resignation now comes as too little, too late to have any meaning. We’ve seen what BMOrg’s real response to the AirBnB-ing of Burning Man has been: “camps that get placement have to have an interactive element”. Or, in OrgSpeak: “all systems go, plug-n-players! Charge as much as you like, employ as many sherpas as you like, just buy the $800 VIP tickets. Get your Citibank Gold festival packages now!”

 

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 NewsRedditRon’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.