AFTERBURN REPORT 2001Financial Report
Introduction by Larry Harvey
In 1997, it became apparent that Burning Man needed to create some kind of legal entity to do business in the world. As Black Rock City continued to grow, no single organizer could be expected to personally assume the legal and economic risks that were created by an event on this scale.
Our chief organizers briefly considered forming a non-profit, and we have recently helped found the nonprofit Black Rock Arts Foundation in order to support the efforts of our community's artists. As lifetime activists, however, we felt uneasy with the legal structure such an entity would impose on the project. Nonprofit status requires that a board of directors be created to assume responsibility for the organization.
In particular, it becomes the fiscal duty of this body to ensure that all funds be applied for purposes that can be said to benefit the public welfare. This presented no problem to us. Burning Man has always operated in an altruistic fashion. We've spent a far greater portion of Burning Man's income philanthropically than the average nonprofit.
If anything, we joke, we are more aptly termed a "no-profit". We have never had investors. We accept no commercial sponsorships, endorse no products, and we have disallowed vending except for the sale of coffee and ice at the event. All of these activities are typical sources of income and funding for a normal business that exists to create a profit.
Nonprofit status, however, is a tax category, and strict rules apply to what is called "self dealing". This means that a nonprofit entity cannot exist for the purpose of enriching its directors. We had no difficulty with this concept. None of us have been particularly financially enriched by this enterprise. Our problem, however, was that we could not afford to work at guiding and creating Burning Man without being paid.
The Project requires a yearlong effort and, for many of us, a normal workweek often exceeds forty hours. We could have stayed on as hired managers of a nonprofit and ceded ultimate authority those who could be deemed "disinterested", but we are a society of activists who are very interested in guiding the essential mission and purpose of Burning Man. A governing board made up of non-participants who are detached from the day-to-day toil of creating a community seemed inappropriate.
We elected, instead, to form an LLC, a limited liability company. This, in our case, is essentially a partnership of managers that confers the status of a corporation. The members of what is now called Black Rock City LLC are co-owners of an enterprise. As a private corporation - and unlike a nonprofit -- this entity pays taxes. As a corporation, however, we are also granted certain legal rights and protections. The company that rents portable toilets, applies for permits, signs contracts with businesses, maintains a bank account, and is represented by lawyers is Black Rock City LLC.
By the year 2000, however, it also became apparent that if Burning Man were to survive, we also needed to acquire property. For years we had grappled with the perennial dilemma that besets the poor: if one hasn't any money, everything is dear. Rented equipment, for example, costs much more over time than goods that are purchased. Even more urgently, we needed to acquire other kinds of property.
We could not afford to buy an office space in San Francisco and thus have remained renters. Acquiring property on which to permanently locate the workshops, housing and storage facilities that are needed by our community, and by our Department of Public Works, remained a high priority. Finally, in the spring of 2001, we purchased a 200-acre tract, now called Black Rock Station, utilizing income we received from ticket sales that year.
Because of the many restraints we have placed on money making, Burning Man has never earned a significant profit. Tickets sold early in the year following an event immediately fund critical activities early in the next yearly cycle. This fact was reported in public financial reports I wrote in 1997 and '98 The following financial report will also make clear that this applies to 2001.
We have always talked of creating a "nest egg", a capital fund derived from profit that could be invested and put aside as a buffer and potential source of emergency funds, but we have never been able to achieve this goal. In purchasing land, however, we acquired assets.
This idea of assets was for us a kind of novelty (unless one counts several dozen semi-derelict vehicles and trailers that have been housed on the 80 rented acres we have occupied immediately adjacent to this new property). As described in the Department of Public Works section of this report, we also undertook to improve this land, creating further assets.
Our purchase of Black Rock Station created a new problem for the organization. According to the laws of Nevada regulating the operation of LLC's, the members of our board owned equal shares of this new capital asset, and, like any property, it was alienable. It could be sold and traded like any other sort of commodity. This made all of us uncomfortable, and, in response, we invented a very unorthodox agreement.
We decided that any assets that the partnership acquires would be deemed non-transferable. If any member of the LLC dies or elects to leave the partnership, their interest cannot be transferred or sold to another party. Whoever leaves will lose all right of ownership. In other words, we have annihilated equity.
Should any member of the LLC depart, he or she will receive, as sole compensation for many years of service, a golden parachute of $20,000. Their share will then revert back to the group. It is also our intention to continue to recruit new LLC members over time from trusted colleagues within our organization. The LLC will not become what is called a "tontine", a form of partnership in which all assets can revert to a surviving member. In effect, the property of this corporation will not belong to independent individuals, so much as to the culture of Burning Man.
I have told this story because I am proud of my colleagues for doing this. But I also relate the story because it demonstrates a basic principle. We have never imagined that Burning Man is or should be property in any ordinary sense of the term. Everyone feels that the Project should not be treated as a commodity. The idea that any one of us might possess the right to transfer these assets onto the market felt aberrant.
We've labored so long in the radically decommodified world of Burning Man that this agreement represents a form of common sense. Millions of dollars may stream into Burning Man each year, and millions may flow out, but Burning Man is not for sale.