BURNILEAKS: 2018 Bureau of Land Management Cost Recovery

Thanks to our source for obtaining this paperwork. Once again, the details of ticket sales are completely redacted. Why is this considered a State Secret?

BLM are expecting their 2018 costs to increase by half a million. BMorg want to know why.

Both the 2017 and 2018 events were oversold by several thousand tickets.

Charts and Tables


Pershing County generates 7,300 cubic yards of waste in a year. Burning Man generates more than that every day.

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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.

A Permanent Utopia?

Fly Ranch Geyser, Washoe County

In NYMag, Nellie Bowles reports that BMOrg have their sights set on a permanent community, and once again will be bussing investors from First Camp out to the nearby Fly Ranch property.

Burning Man’s leadership, nicknamed “the Borg,” has been quietly pushing the entity toward a new phase.

Quietly? As quiet as you can be with half a dozen people in your media team, a Minister of Propaganda, and staff flying all around the world for panel discussions.

As the six founders who built the festival and still guide it start to age, a new generation of leaders is being tapped, including the charismatic and ambitious Bear Kittay, now “Burning Man’s social alchemist and global ambassador.” The Borg is cagey about plans, secretive about money, distrustful of the press (whose Wi-Fi they’ve shut down this year). But co-founder Marianne Goodell has hinted at another major change…developing a private tract of land as a permanent Burning Man community. 

 

Time for a change? Bear Kittay, Marian Goodell and Danger Ranger. // Photo by Christoper Michel

Is this Burning Man’s future? Bear Kittay, Marian Goodell and Michael Mikel. // Photo by Christoper Michel

Last year, the Borg renewed efforts to purchase and develop a nearby property, the geyser-filled Fly Ranch, which they’d been eyeing for years. As Goodell recently said on a podcast called Positive Head. “For the long-term survival of the culture, we are going to need a physical space…We will, as time goes by, find it hard to only be in the Black Rock Desert. We may need to find a place that would allow for infrastructure. I’m certain that’s in our future.

fly geyser mapFly Ranch is, by all accounts, spectacular: it’s about 4000 acres (880 of which are wetlands) with 23 hot and cold springs and around 40,000 feral horses. There’s one 104 degree lake that’s a couple hundred feet wide. Rod Garrett, one of the original architects of Burning Man, had drawn up plans for a Burning Man Fly Ranch city, a mix of homes and communal spaces built to blend into the desert.

“Employees and affiliates may build on a ‘Homestead’ basis, or rent or buy into the Village community at the project’s north end,” he wrote, in his lengthy proposal.

According to one plan, Fly Ranch buildings would be made with unpainted, rammed earth and sod. No fences would be allowed, and all members of the community, who could either build homesteads or buy into a communal village, would live by Burning Man’s “Ten Principles”...Organic vegetable farming and a Burning Man-like conference business would serve as the economic base of the community.

Growing organic crops in the Alkaline desert, hundreds of miles from the nearest small town. A conference center in the middle of nowhere, in a place with notoriously harsh physical conditions and world famous bug infestations. Sounds like a lot of smart business planning has gone into this idea over the decade+ they’ve been developing it.

FlyGeyserFestival co-founder Will Roger writes of this new Burning Man city in utopian terms: “I fondly hope that this concept can develop rapidly, and become not only a destination for learning and wonder, but a model to the world of a community, although remote, that is ideal and sustainable. It is for the Burning Man Project to create this wilderness paradise.” 

Development of this scale would require a lot of money, and last year, the organization began giving tours of Fly Ranch to potential investors. People around the playa whispered that well known burners like Elon Musk, Sergey Brin, and hotelier Chip Conley were among those shown the property (though none have confirmed that they actually were). 

Burning Man first tried to buy it in 2005. They tried again a few years ago, but the asking price was around $11-12 million, and they only raised about a half a million dollars, he said. But last year, the landowner Sam Jasick passed away, leaving his son Todd in charge, and Todd said he’d welcome another offer. Roger, who lives in the nearby town of Gerlach, decided this time he would get it right.

During last year’s festival, he said they were leading two tours a day. They had set up a little camp there for prospective investors to lounge and get a sense of the area’s energy.

Because nothing says “Decommodification” like 2 busloads a day of investors going to the real estate sales lounge. And nothing says “sustainability” like building a 70,000 person city for the purposes of entertainment, creating art just to burn it down, and in a week producing the amount of CO2 emissions of a small country

From Roger’s perspective, buying land means Burning Man can serve more people — the demand for tickets already far exceeds the supply. “This year, 60,000 people didn’t get tickets to this,” he said. “By owning our own property, it means putting in our own infrastructure. It could be a retreat center or an art park.” He said the plan would be to build that retreat center and a museum, hold smaller events, and create a city to test out what it would be like to live on Mars (guess which tech billionaire could be thinking of that?). “What interests me is the experiment in a permanent community,” he said, adding that the tech titans felt the same way. “They’re interested in that too, yes.”

So far, not interested in it enough to fund a Series A for this 30-year old start-up. But maybe this is the year.

Part of the appeal of the site is recent moves Will Roger has made on the board of a local Advisory council to get the BLM to re-designate land so that it can be sold.

burning_man suitsAdjacent to the Fly Ranch property is, Roger said, “a playa, public land.” He had joined a political group: the Sierra Front-Northwestern Great Basin Resource Advisory Council. In this position, he helped to declare that land disposable, defined by the Bureau of Land Management as “land that can be sold.” He added, “Getting it on the disposable land list was crucial because we could have our own playa then, something smaller for five to 10 thousand people.” The property is “A-rated solar, A-rated wind,” and Roger said the income from that power generation would become the foundation for a community. “If you look at a 100-year plan, it could be remarkable as a planet changing culture,” he said.

If someone can figure out a way that you can put solar panels miles away from industry or population, and that itself makes so much income that it could sustain a growing community, then that could indeed be planet-changing. Usually, local generation offsets costs rather than creating revenue – and industrial-scale facilities are built near the main power transmission grid.

As Burning Man emerges as an emotional and intellectual center for the tech world, Roger thinks the chances of a deal going through are higher than ever. His employees were leading tours while he hung out at First Camp — “I don’t swim in that world, but my staff swims in that world,” he said. He said he was just thrilled the vision to create a town has finally come closer to fruition. “I’ve had my dream in this and my heart broken so many times,” he said. “Now I’m 66 years old, I’m almost retiring, and it might happen.”

Emerges? Isn’t that how the whole shebang has been marketed, since DARPA first unleashed their Web weapon on the general public in the 90’s?

Although Roger says he doesn’t swim in that world, 4 years ago when they bussed me out to the site on one of these investor tours he was the man in charge. Swimming in the world of hot springs was part of the sales pitch – everyone was encouraged to get naked, of course. The details about how investors would get a return on the most expensive desert land on earth were sketchy…“we’re going to run a business based on the Ten Principles“. Ummm, which ones? Gifting and Decommodification? Leave No Trace? So how does that work again? Everyone volunteers for free, pays to stay in a conference center where you bring your own bedding and catering and take out your own trash, the Founders get the ticket revenue (which of course “isn’t enough due to all our costs”), and investors donate the money?

A year has passed since we sat together in the playa, and it hasn’t quite happened yet. When I asked a Burning Man representative about their plans, the website they had up saying that they’d begun to develop the land came down. But on the Wayback Machine you can still see their statement: “The Burning Man Project is pleased to announce the initiation of the preliminary stages of the development of the Fly Geyser property.”

A quote on the site from Will Roger reads: “The Fly Ranch Project is a key component of a broader plan for economic and community development in the Northern Nevada area.”

Read the full story at NYMag.

Permanent infrastructure for Burners is a great idea. Destruction and pollution is so 1980’s. Leave It Better trumps Leave No Trace. A Center for Philosophy, to spread the culture around the world? I could see that happening. Putting these things together, a couple of dozen miles further out into the wilderness from Gerlach? That leaves me scratching my head. I always thought the key to real estate investment was location, location, location.

If you build it, they will come…maybe they should build it in Colorado and sell weed to tourists to pay for the thing.

 

drug-war-cartoon2

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:
.
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.
.
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.
 .
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.
.

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’

All We Want For Chri$tma$ Is Your Money [Update]

image: Susan Averello/Flickr (Creative Commons)

image: Susan Averello/Flickr (Creative Commons)

Remember Burning Man? That unique experimental city, free from the commodification of commercial transactions? Well, now that the owners have transferred it into a complicated corporate combination of tax-free and for-profit companies, that seems to be a thing of the past.

Welcome to Burning Man 2.0 – where new revenue streams are the raison d’etre. The latest one? Taking a cut of our spending on Christmas presents. Taxing our gifting.

While most of us were enjoying our Thanksgiving turkeys, grateful to family and friends and counting our blessings, Burning Man’s Minister of Propaganda Will Chase was counting the cash. Looking at all the money that was about to be spent for “Black Friday” and “Cyber Monday”, and wondering – “how do we get a piece of that action?”

He posted at Voices of Burning Man a plea to use Amazon’s Smile feature, to divert funds away from needy charities and give it to BMOrg’s non-transparent non-profit.

The post immediately encountered criticism, and was quickly yanked from the site, replaced with a heartwarming Halcyon story about taking his Mom’s Virginity. One of our eagle-eyed readers spotted it and saved it. We wrote about it here: Boycott Commodification – Or Just Give Us Your Money.

We thought they pulled it because they realized it was a lousy move, and inconsistent with the Ten Principles. Taking a percentage of peoples’ Gifting, WTF? Sadly, though, it now seems to have been more about keeping negative comments off their precious new site.

Yesterday, they sent out a “Special Edition” of the Jackrabbit Speaks newsletter. Was it wishing us Season’s Greetings and a Merry Christmas? Was it thanking us for everything we’ve done for them over the years, all the art and talent and spectacle we’ve brought to the Playa, to help their Directors fill their Commodification Camps?

Nope. There’s not a Merry Christmas or Happy Hanukkah to be seen. Not even an invitation to buy above-face value tickets as Christmas gifts, to help the poor. It’s all about them.

This time, they sent it out as an email, no doubt to mute criticism of further acts of Commodification from a corporation that increasingly appears to be focused on the almighty dollar. It’s more of the same thing as before. “Give us your money. And give us a cut from your Christmas shopping too”:

Now is the time for Burning Man to grow its capacity to have a transformative global impact. With your generous support, we will make the Burning Man experience accessible year-round and across the globe; nurture the network of Regional Contacts who build our community; provide more grants, training, and support to creators of radically interactive art and events both on and off the playa; and fund civic programs that teach communities the power of collaboration.

Together we can turn our growing potential into programs and experiences that will help transform people’s lives throughout the world. But we need your support to make it happen.

How will they transform peoples’ lives? So far, by speaking for a few minutes about themselves in panel discussions at conferences, and helping get an art car into Zappo’s HQ lobby. It’s very meta: “we do good in the world by telling people that we do good in the world”.

Burning Man’s gone through a significant structural change in the last year, and that’s created some confusion as to who’s who and what’s what … so who are we now?

The short answer is that we are proudly Burning Man. Burning Man Project is simply the legal name of the umbrella organization for all of our programs and activities, including Black Rock City, LLC (which runs the annual event in Nevada) and the Black Rock Arts Foundation (now Burning Man Arts).

A bit confusing right? So for simplicity’s sake, we call the whole thing Burning Man, representing all that we are, all that we do, and all that we hope to create in the world. And when we say ‘we,’ we really mean YOU. In fact, we created the non-profit to support and proliferate the wide variety of Burner-initiated programs and projects we saw springing up spontaneously all over the world.

Oh great. We can call it Burning Man now. And donate more money to them while we’re at it, in the name of transforming peoples’ lives.

“Support and proliferate” is an interesting synonym in BMOrg- speak for “sue and claim credit for“.

What about the significant structural change that saw the main assets of the business being transferred to Decommodification, LLC? That doesn’t get a mention. Should we consider this private, for-profit, non-transparent company “proudly Burning Man” too? I mean, it’s the thing that actually “owns” Burning Man. When we give to Burning Man, are we helping its owners, or Burners?

Damn right, it’s confusing. Perhaps sending our money to them will somehow help make it less confusing. Or – here’s a thought – maybe if they provided the transparency they’ve been promising for years, instead of propaganda, spin, and misdirection, we could look at what’s really going on for ourselves and be less confused.

While ticket sales cover the cost of producing the event in Black Rock City, all donations support our year-round programs, projects and initiatives. And since Burning Man is, in its totality, now recognized as a non-profit, all donations are tax exempt.

If you read the fine print, they actually say donations are tax deductible to the amount recognized by law. The burden is on the giver to figure out what that means.

As for ticket sales covering the cost of producing the event in Black Rock City? As recently as last weekend, BMOrg CEO Marian Goodell said that their annual budget is $30 million.

Thanks to their recent revelations, we can recalculate ticket sales:

bm ticket calcs dec 2014

Revenues will be at least a couple of million dollars higher than this, because it is solely based on official ticket numbers. It does not include Exception Tickets that are sold at the gate and last-minute Bitcoin ticket sales. The only official number we have for how many tickets were re-cycled by Burners through STEP is a statement from BMOrg on July 17; STEP kept running for a few weeks after that, so there may have been more, leading to more handling fees. The vehicle passes were not a requirement from the Feds and are not transparent, so we have to take their word that they only sold 35,000. So far we haven’t heard a single instance of someone being turned away at the gate because they didn’t have a pass.

On top of these revenues, Burning Man also sells ice, energy drinks, coffee, merchandise, gas, propane, takes a cut on fine art sales, earns a percentage from movies and their soundtracks…and accepts donations.

They say that “ticket sales cover the cost of the event”. What does it cost to put on the event? We have covered this in some detail for 2013 and 2012, taking the numbers from their Afterburn reports.

BMOrg’s Afterburn chart breaks down their expense into “Event-Related” and “Year Round”. We don’t have information for 2014, and won’t for probably another half-year; but we know that despite the sale of at least 69,735 tickets, the population was 65,992 – down from 69,613 in 2013. It seems unlikely that it could have cost them more to support less people, so the costs are probably comparable between 2014 and 2013.

Total “Event-Related Expenditures” for 2013 was $11,232,928 

Total “Expense categories that include both event-related and Organizational” was $11,169,506

As you can see, $28.6 million of ticket sales is more than enough to cover the costs of putting on their annual crowd-sourced event. Most of the cost of Burning Man, including the art, music, art cars, costumes, and spectacle, is actually paid for by Burners, in addition to the money we give the bureaucrats in ticket sales.

The largest single event-related expense Burning Man has is their fees to the Federal Bureau of Land Management. They have to reimburse the agency’s costs, as well as pay a 3% cut of their revenues. For 2013, this amount was $3,450,000. The BLM also gets a 3% cut of revenues from the 45 licensed vendors who are conducting commercial transactions on the Playa. There is an unexplained “Other Usage fees” discrepancy of $1,072,952, which we have speculated is the license payment to Decommodification, LLC, and BMOrg have never bothered to clarify.

The largest “both event-related and Organizational” expense is payroll and contractors: $8,194,389.

The next largest is lawyers and accountants: $1,427,177.

What do all these people do all year, except picking the theme, trolling and doxing their critics, and inventing ever-increasing ways to stick their hands into our pockets?

Jackrabbit repeats their claim:

Together we can instigate cultural change in the world.

While the costs of operating the annual event in Black Rock City are covered by ticket sales, the work we do through our year-round programs is supported by community giving.

In 2013, Donations to Nevada schools and other Local Organizations was $199,329 (funded by ticket sales)

2013 Grants given out by BRAF were $101,556 (funded by the Artumnal party)

We’ve covered the merger of Black Rock Arts Foundation into Burning Man Arts in Art World Rocked by Burning Man’s Latest Move and 2013 Charity Results Released. Basically, these non-profits seem to accumulate more cash than they distribute out in grants.

Admittedly, we’re shooting in the dark a little here, because BMOrg’s transparency leaves a lot to be desired. We’re comparing 2014 ticket sales and unknown extra revenues, with what information we do have about 2013 expenses.

The latest plea for cash suggests Burners find out if their employer has a donation matching program. Bank details are provided for you to wire your funds directly to them. This statement also raised some eyebrows from Burners:

STOCK
Bank: Wells Fargo
WellsTrade account number: [snip]
DTC number: [snip]
First Clearing/Wells Fargo Advisors

Yes, they don’t just take cash – you can give stock to them as well. This could be useful, for example if you invested $10,000 in a start-up, which got a subsequent funding round at an increased valuation, meaning your stake on paper is now worth $20,000; but perhaps the startup is seeking more funding and has a questionable future, so you want to give the stock to BMOrg. Writing off the investment at a loss probably has to be done at cost price ($10k), but donating the stock could perhaps be done at market value ($20k). As always, I’m not an accountant or lawyer, get your own advice – I’m just pointing out a hypothetical way that this new offering from BMOrg could potentially help Burners. I guess they figure that with so many tech people coming, they might as well get a share of all the startup action they can get their hands on (for free, of course).

Some Burners thought that this meant you could buy stock in “Burning Man”. This is not possible in “The Burning Man Project”, which is a 501(c)3 non-profit. It acquired 100% of Black Rock City, LLC, which is the operator of the annual Nevada event. Black Rock City, LLC has a license from Decommodification, LLC to use the Burning Man name and logo in its marketing and sales activities. Can Decommodification sell stock? Unknown, but unlikely – since most LLC’s don’t have stock. The Articles of Incorporation and Bylaws of Decommodification, LLC are secret – we don’t know if it is possible for them to add new members or sell the company (and thus all the assets of Burning Man). Apparently Danger Ranger created some sort of “deadman trigger” in this company which means that its assets are transferred to the Burning Man Project in 3 years unless the Directors vote otherwise; however, we have to take his word for that, since they are not sharing any of this documentation with Burners.

Interestingly, in doing the research for this story, I found out that one of the members of Black Rock City, LLC is now yet another private, secretive corporation:  “NV Event Production Co”. If anyone has any information about who is behind this entity, please share.

Finally, the “Special Give Us Your Money Edition” of the Jackedrabbit asks us to give them a cut of our Amazon purchases:

If you’re in the throes of getting your holiday shopping done, maybe consider making some good stuff happen with your purchasing power?

If you shop on Amazon, do it through AmazonSmile, and Amazon will donate .5% of your sale price to the Burning Man Project, supporting our year-round efforts to share Burning Man culture with the world. You get your stuff, and more people get to experience Burning Man. Win win.

How does this make “good stuff happen”, or “more people get to experience Burning Man”? Veteran Burners who want to go already struggle to get tickets if they’re not on some special list, and the recent mainstream marketing in The Simpsons and the Daily Mail is not going to help with that. It’s hard to see how giving money to this tax-exempt structure will.

I nominated Reallocate for my Amazon Smile. They’re a real charity, all Burners, doing really good things. In 2013, for every $1 given to Reallocate, about $10 of engineering time from its volunteers was applied to help needy charities with technical expertise.

If you want to do good, donate your money to causes that actually are doing good.

Ho, ho, ho. Merry Christmas and Happy Hanukkah, Burners – I hope you have a wonderful holiday season and a fantastic New Year.


 

[Update 12/14/14 8:18pm]

It’s not Gifting, if they have to ask for it. Larry Harvey said:

in the culture created by Burning Man, the value of a gift, when rightly given and received, is unconditional. Nothing of equivalent value can be expected in return; this interaction shouldn’t be commodified

Larry Harvey in The Atlantic:

Gifting, says founder Larry Harvey, emerged as the preferred system because “participants were unwilling to distance themselves from others through economic transactions.”

“Burning Man is like a big family picnic,” he told me. “Would you sell things to one another at a family picnic? No, you’d share things.”…

“People give because they identify with Burning Man, with our city, with our civic life,” he says. “The idea of giving something to the citizens of Black Rock City has enormous appeal to them because it enhances their sense of who they are, and magnifies their sense of being. That’s a spiritual reward.”

He says gifting—defined as the act of giving without the expectation of anything in return—alters the notion of value.  

“What counts is the connection, not the commodity,”

The spirit of Christmas is not asking for presents.

One of our readers pointed out that since SherpaGate and DangerGate, we’ve added a lot of new audience members who may have missed our earlier coverage of the Burning Man 2.0 non-profit.

Related Posts:

We’ve looked at the efficiency of their charities before, here:

The Art of Giving went through everything Burning Man Project (BMP) has done since they came up with it 4 years ago.

Art World Rocked By Burning Man’s Latest Move looked at the merger between BRAF and BMP, and the poor track record of both charities in giving grants out to the causes they support, versus accumulating cash in the bank and spending it on overheads.

2013 Charity Results looked at the performance of BRAF from the latest IRS filing. We’re still waiting on the 2013 IRS Form 990 for BMP.

Art Versus Money looked at the terribly one-sided Arts Grant contract, that seems to treat artists with contempt.

Charity Versus Tax-Free considers the idea that “non-profit” is not the same as “charitable”, and looks at some of the clauses in the organization’s new Bylaws that don’t seem consistent with Directors running lavish Commodification Camps.

Burning Man’s Gift Economy And Its Effect On Mainstream Society talks about the hypocrisy of BMOrg claiming credit for the charitable efforts of Burners, and pretending they gave financial support to charities that they actually didn’t – including a couple that were substantially funded by myself, and received $0 from BMOrg who promoted them as examples of “all the good Burning Man is doing in the world”.

 

image: Flava Claus/Flickr  (Creative Commons)

image: Flava Claus/Flickr (Creative Commons)