I would, of course, argue that it doesn't, but in a society where people still debate whether kids should learn about their own sexuality, and where much of society continues to see the body as "dirty" and sex almost as a necessary evil (while simultaneously being obsessed with it), the notion that there are children at an event where people are running around free and naked gives law enforcement people the willies. There is an association of nudity with indecency. To them, any of this harms children.
When Burning Man started, it was free. Information about it was spread by word of mouth and in various forums on the internet (as I understand the history of the festival). It was specifically put into the New Mexico desert so that it would be far away from anyone who might be offended by the free spirits attending. Apparently that didn't work out for very long.