FAQ

Why would it be good for MBOTMA to own a permanent site as opposed to continuing to rent a festival venue?

There are concerns about the sustainability of operating our program plan as it has been. In recent years, MBOTMA more than once came close to financial collapse. While we are in a much stronger financial condition now, we must consider the long-term sustainability of the organization.

We face:

     Ongoing decline in membership revenue

     A hefty annual lease fee ($25,000) for our biggest event, which does not actually bring in much net revenue as a result

     Declining event attendance

     Insufficient volunteers

This is a known issue that has been explored by the organization's board for years, and key questions have been identified, including:

     What revenue opportunities exist to offset the ongoing loss in membership?

     Are there non-event-related revenue streams that can be generated to support the organization’s programming?

     Can we decrease the need for volunteers and the cost of our current festival site?

     What are the barriers to attending the August festival and other MBOTMA events and programs?

In answer to these questions the idea of owning our own festival space has been explored as both a way to decrease event costs and increase organizational revenue.

What is the purchase price? How can MBOTMA afford this? What is the business plan? What about insurance, and upkeep over time?

The purchase price is $1 million. More details on why we believe this purchase is both manageable and prudent, including a 5-year cash flow analysis, are provided in this presentation

Owning our own venue requires careful planning and a commitment to a new way of thinking.

Our historical business model does not support our current programming, let alone an investment of this magnitude. The presentation offers a summary of how we can accomplish purchasing and developing this land.

The current rental opportunities, plus applying the rent we currently pay to ERM starting in year 3, mostly covers the mortgage on this property. Holding smaller events until the land is ready for our largest event will help fund improvements, along with an aggressive capital campaign, made up of many sources.

The additional insurance and holding costs are being considered as we work through our due diligence on purchasing this land.

Just as important, if this endeavor did turn out to be too much to handle, there are several exit strategies, such as selling off part of the land, or selling all of it. It is in a very desirable location and has had several offers on it in the past couple of weeks, as we have worked through our purchase agreement with the seller.

“Revenue streams” for a nonprofit? Are nonprofits allowed to make money? What are the implications for our nonprofit status?

Nonprofits cannot survive and cannot carry out their missions without money. In fact, there’s a common saying in the nonprofit world: “No money, no mission.”

Nonprofits are often advised to diversify their sources of income – not put all their eggs in one or two baskets, so to speak. We currently raise funds in a variety of ways, including membership dues, grants, donations, ticket sales and other program fees, sponsorships, selling MBOTMA merchandise, raffles, renting exhibit space to vendors, and selling ads in our magazine.

Some of these sources have increased in recent years (e.g., grants) and others are continuing to decline (membership, attendance at our events). To remain viable over the long term we must continue to find other sources of revenue or cut back on what we do.

As long as income is related to carrying out the nonprofit’s mission, it is not taxable. Income that is not directly related to carrying out the mission is considered “unrelated business income” and may be subject to tax if unrelated income exceeds associated expenses.

This land includes farm acreage that is currently rented out. There are also a house and other structures, as well as the grounds and eventual camping sites, that can serve our program needs but might also be rented out for other events or leased longer-term. Renting out farm fields or a house on land we own would be considered unrelated business income.

Some revenue opportunities on our own property would of course be mission-related and therefore not taxable – for example, if Grass Seeds became a summer camp, or if we held more bluegrass and old-time music events where MBOTMA could sell tickets and collect camping fees.

Some unrelated business income is allowable as part of a diversified funding approach. Our executive director and board would need to monitor the amount and sources of income to ensure ongoing compliance, as we do today.

How much will MBOTMA rely on volunteers to make this happen? We already face a declining volunteer base.

We certainly hope to engage volunteers as we develop the site. But, with more permanent infrastructure on site, we anticipate fewer volunteers will be needed on an annual basis to keep the events going.

Is this location geographically convenient to most members / festival attendees?

The site is two miles from I-35, between Pine City and Hinckley. For many attendees, the distance will be either closer or not greatly different from the distance to El Rancho Manana. Of course, any change in location will mean some attendees will be further away.

The site is approximately:

     1 hour from central St. Paul or Minneapolis

     1 ¼ hour from Duluth or St. Cloud

     1 ½ hours from Brainerd or Hayward, WI

     2 hours from Grand Rapids

     2 ¼ hours from Rochester or Eau Claire, WI

     2 ½ hours from Mankato

     3 hours from Bemidji

     4 hours from Moorhead

     4 ¾ hours from Sioux Falls, SD

Our location target is definitely a balancing act between affordability and easy access for the largest numbers. This includes attracting curious first-timers or casual fans who may just come for a day or for a headliner concert and thereby discover MBOTMA. Or families who might come for a musical “Family Fun Day” or other family-friendly programs. A destination much more than an hour away is much less likely to be seen as a reasonable day trip.

Perhaps we could find a beautiful piece of land at a significantly lower cost, much further from population centers. To lock into a location that is never likely to be a day trip destination for the majority of state residents would not serve MBOTMA well.

Other important aspects of location include nearby amenities (shopping, restaurants, hotels, recreational opportunities) and the ability and interest of the local community to provide partnership and sponsorship opportunities. This location is good from those points of view.

What is the current zoning of the property and when will an application for change (if needed) be made? Will the neighbors object?

The current zoning is agricultural. We will start the zoning and permitting process as part of our due diligence, to ensure we would be able to hold the types of events we want to. If necessary permitting doesn't work out, we can walk away without incurring significant financial costs (apart from staff and board time and minimal fees).

Part of the land that is cropland already generates a revenue stream, and we may keep this portion zoned this way until it is determined we could better use it as part of our intended site. There are options, which is why this site stands out.

There are not many close neighbors. Certainly if we move forward we will want to cultivate good relationships with them.

Will MBOTMA be free to re-sell the property without restrictions if that becomes necessary?

There won't be any significant restrictions that we are aware of at this point. Exit strategies have been considered and one of them is simply re-selling the land. Current demographic information indicates an increase in the land's value over the next 5 years. If that holds true, even if this site falls through as a viable option for our festivals there are still options to minimize loss or even come out ahead. There will always be risk, but so far the long-term benefits warrant further exploration.

Why are we moving so quickly? What’s the rush?

This opportunity certainly came up sooner than we expected. We had expected to share more information about our planning and objectives and invite more member input before being in the position of discussing a specific land purchase.

But this is an extraordinary opportunity, worth thoroughly exploring for feasibility. The location, infrastructure, local amenities and opportunities, and other factors all meet or exceed our hopes for a permanent festival site.

Interest rates are going up from historic lows. They rose half a percentage point in May, with more increases likely as the year goes on. The higher the rate, the more expensive any property becomes.

Land rarely gets cheaper, unless the owner is distressed, in which case infrastructure will likely be distressed as well.

This seller is offering a tremendous amount of support we may not find elsewhere. The seller wants us here and is offering help, connections, and ideas.

 

 

 

 



Minnesota Bluegrass & Old-Time Music Association
P.O. Box 16408, Minneapolis, MN 55416

info@minnesotabluegrass.org

601-651-3694   

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Our Mission: To preserve and promote bluegrass and old-time stringband music in and around the state of Minnesota.

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