Why Does Summerfest Run a Private Company?

Summerfest South Gate. Photo by Jeramey Jannene.

Call it the mystery of Summerfest.

At some point the nonprofit festival’s parent organization, Milwaukee World Festival, Inc. created a separate, for-profit company, currently called MWF LLC, that it runs. Why it was created is unclear because Summerfest has declined to explain. The company has two managers, as listed in documents filed with the Wisconsin Department of Financial Institutions — businessmen Ron San Felippo and Michael White. But in interviews with Urban Milwaukee, neither offered much information about the company or why their services were needed. Perhaps even more mysterious is just how much money this company is taking in, as Summerfest’s annual federal tax forms offer wildly variable information.

When Urban Milwaukee first contacted Summerfest to ask who handled beer and liquor sales, its spokesperson Lisa Ehlke told me that Milwaukee World Festival “manages all bars at Summerfest.” Only after Urban Milwaukee asked about the existence of a separate private company, MWF LLC, did Ehlke send an email confirming that it was actually this company that “holds the license under which MWF may sell beer, wine, and other food and beverages for events produced by MWF,” while noting that this company “is wholly owned by” the nonprofit Milwaukee World Festival.

Records filed with the state report that San Felippo and White actually manage this operation, as Urban Milwaukee has previously reported. Only after Urban Milwaukee asked about the two men’s role in the company did Ehlke confirm they were managers of the company and had been since 2004, when the company was called Food & Beverage LLC.

For years the annual federal 990 tax form for the nonprofit listed total revenue for food and beverage sales. In the last two years (2002 and 2003) under Bo Black, the festival’s former leader, Summerfest’s food and beverage sales averaged $8 million or about 34% of $23.5 million in total annual revenue. After Don Smiley became Summerfest’s executive director and president, the food and beverage revenue began to decline, averaging about $6.6 million per year from 2005 to 2007. In 2008 it was down to $3.2 million even though total revenue for the festival was $27 million.

After that the revenue for food and beverage sales simply disappeared: the tax forms listed no figures for these sales for 2009 and 2010. It did list the private company Food & Beverage LLC for both years, but with no income or assets. In 2011 the company’s name was changed to MWF LLC and the tax form showed its total income as just over $3.6 million, though the festival’s total revenue that year was $28.4 million.

Is it possible the renamed company was now handling only alcohol sales? For the next five years, from 2012 through 2016, its total revenue ranged between $2.8 million and $3.7 million. But after that revenues exploded, jumping to $8.25 million in 2017 and nearly that high for the next several years before jumping to $10.1 million in 2022. In short, the private company’s annual revenue for food and beverage sales ranged anywhere from zero to $2.8 million to $10.1 million over a 13-year period.

And that $10.1 million figure was for a year, 2022, when the festival claimed total revenues of just over $44 million, while its bar license claimed 40% of all sales was for alcohol, 24% for food and 36% for entertainment. That would suggest that revenue from alcohol sales alone was $17.6 million.

Summerfest clearly didn’t want to discuss the income made from its sale of alcoholic beverages. When first asked Ehlke offered this statement to Urban Milwaukee: “As is common practice for a private, not-for-profit organization, MWF does not report the total number of beverages sold or total revenue.”

But why would a nonprofit need to keep this a secret? A festival like Great Minnesota Get-Together reported that its beer vendors brought in $11.3 million in beer sales and the fair’s 18.5-percent cut was $2.1 million. And the Wisconsin State Fair informed Urban Milwaukee that its total revenue from alcohol beverages sold in 2023 was $8.1 million. (The number is far higher than the figure reported by Summerfest for many years, even though State Fair is a more family-oriented festival with much bigger revenue from food sales.)

For that matter Summerfest is reporting its total revenue from beverages sold, though the information is typically buried at the end of its tax form. But any information about expenses or net income is not available because the operation is run by a private business. That would include if White or Sanfelippo get any compensation (which both deny, as does Summerfest).

Since the business’s records are not transparent, what assurance does the City of Milwaukee (whose land is rented to Summerfest), donors to Summerfest and the public have that it is run in a way that comports with the mission of the nonprofit MWF? Urban Milwaukee asked.

Ehlke’s answer: “The organization’s finances are approved by a Board of Directors and are audited on an annual basis by an independent auditor. In addition, as a wholly owned entity, the financial results of MWF LLC are included in the annual Form 990.”

But the 990s do not report the company’s expenses or net income. And the most recently released MWF audit (for the 2020 and 2021 years) doesn’t say a word about MWF LLC or beverage sales.

Then there is role of San Felippo and White. Records with both the city and state have listed them as managers, while both told Urban Milwaukee they just sign forms and Summerfest says they provide “technical oversight.”

Which raises ethical issues for both of them. Summerfest officials would have to know they were creating a conflict of interest for San Felippo, who as a member of the Harbor Commissioner would be voting on issues related to the festival’s lease with the City of Milwaukee.

White’s ethical issue involves his long tenure as a member of the MWF board, perhaps given him because of his role with the private company. The nonprofit’s bylaws say each director (board member) shall hold office for three years and can be re-elected or re-appointed to serve a second term of three years, but then must step down for a year before being eligible for reappointment. But White has served on the board from 2005 to 2022, for 17 straight years. When asked about this Summerfest declined to respond. White told Urban Milwaukee he has stepped on and off over the years, but records going back to 2003 show he stepped down only in 2004.

One possible explanation for the separate private company involves Wisconsin’s strict, three-tier system for alcoholic beverages governing the industry’s manufacturers, distributors and retailers like taverns and liquor stores. Under the law a beer manufacturer like Pabst can’t give anything of value to taverns, as that might curry favor, convincing the tavern to sell its products.

That creates a dilemma for Summerfest, which needs a tavern license for its vendors, but also has gotten donations from brewers that sponsor stages. In its early days there were stages sponsored by Pabst, Schlitz, Miller and Old Style. But any such donations “would be problematic,” notes attorney Frank Gimbel, who for many decades represented businesses seeking a tavern license.

So by creating a private company to hold the tavern license, Summerfest could create some separation from the donations from brewers and the sale of beers. That at least is one theory offered to Urban Milwaukee by an insider in the state’s beer industry. (Summerfest did not respond as to whether this was why it owns a private company.)

But there are several problems with this theory. For starters, Summerfest’s private business was originally called Food & Beverage LLC, according to records with the State Department of Financial Institutions. And even today, under the name MWF LLC, Summerfest told Urban Milwaukee that this company “sells food, alcoholic and nonalcoholic beverages because it holds both the food and liquor licenses.”

In short, at a time when Summerfest has only one major beer sponsor, Molson Coors, it is handling all its sales of food, soft drinks and alcohol through a private company. Why? The festival won’t say.

This is the third and final story of investigative series. Here is story 1 and story 2.