Two local papers have accepted money from City Hall in 2014. Is this a thing now? (UPDATED)

Deals raise ethical questions--and in one case, complaints from rival news outlets

CHARLESTON, SC — Last month, a story popped up about local officials in a suburb of Madison, WI, voting to help relaunch a community newspaper with public money. The Fitchburg Star had shuttered its print run five years ago, but maintained an online presence covering Fitchburg, a town of about 25,000 people. Now the city government is kicking in $30,000 to get the printing presses rolling again and mail free monthly copies of the Star to every businesses and residence in town for the rest of 2014.

Here’s a description of the deal from a Feb. 16 write-up in The Wisconsin State Journal:

The partnership between Fitchburg City Hall and Unified Newspaper Group speaks to the value of community newspapers, city leaders say, as well as to the difficult financial realities facing the publishing industry. As part of the agreement, the city will no longer publish its advertiser-supported newsletter, so as not to compete for revenue with the newspaper.

Supporters deem the newspaper’s return a victory for the community, though one journalism expert questioned whether the publication will be able to retain its editorial independence.

You can read more details on the deal here, from the newspaper company itself.

It was an interesting story in its own right, but it stood out for a particular reason: Just a few weeks earlier another city council, this one in Winston-Salem, NC, moved to financially support a local paper in its community. That deal involved even more public money.

“On a unanimous vote, the council on Tuesday approved a $100,000 low-interest loan to the Winston-Salem Chronicle, a weekly newspaper that focuses on news in the black community,” the Winston-Salem Journal reported on Jan. 22. More from the Journal’s article:

The newspaper plans to use the new loan to increase its sales staff and improve sales and circulation. According to the letter that the newspaper’s publisher, Ernie Pitt, wrote to the city in December, the money would be used to create three to five jobs at the newspaper. The average salary would be about $30,000.

That loan is actually the second one the city has made to the paper. The prior deal came in 1984, when the Chronicle borrowed $50,000 to renovate its building. The paper paid that loan back in full. (Update: For an interesting discussion of the original loan, see this column in the Greensboro News & Record.)

A closer look shows that, despite the superficial similarities, the details of the two deals are pretty different. Some of the specific ethical questions they raise are different, too. And it’s very possible that these are isolated developments, not the start of a new trend in which local governments prop up commercial news organizations. CJR consulted several news historians and industry observers, none of whom knew of similar recent cases. (Update: though see this Boston Globe article from January, via Richard Prince, who adds some context on the particular financial challenges of black community newspapers.)

Still, the timing of the deals was striking. And with many local media outlets around the country still struggling in the wake of major disruptions to their business models, it’s worth asking: Is this going to be a thing now?

A local government seeks coverage of its community

In Wisconsin, the deal had a surprising source—it began not with a newspaper company asking for public funds, but with a local government eager to restore print coverage of its community.

Fitchburg is a diverse, rapidly changing city struggling with its identity, its mayor, Shawn Pfaff, told me. Local officials believe a regular print paper might help foster public discourse and a sense of community, and had approached Unified Newspaper Group several times since the Star ended its print run in 2009.

But at the same time, the city was publishing a product that competed for advertising dollars: a 20-page bimonthly newsletter, with ads, that was delivered to every city residence and business. The city’s offer to kill the newsletter, at least for the time being, was key to making the deal happen.

“In order for us to crack that nut to make sure that we have somebody following city hall … we had to pull back the city newsletter, take the cost that we incurred sending it out to every mailbox, turn that over to Unified Newspapers Group [and] send the advertisers to Unified Newspaper Group,” Pfaff told me. “So we’ve set up a 10-month arrangement where they’re going to print 10 monthly newspapers. After Jan. 1, 2015, they’re on their own.”

The Fitchburg City Council voted unanimously for the deal, and the mayor says the move was backed by the local Chamber of Commerce.

That doesn’t mean it’s without controversy. “It is absolutely a conflict of interest” for a newspaper to be receiving financial support from a government it is covering, said Katy Culver, a professor of media ethics at the nearby University of Wisconsin-Madison and a Fitchburg resident. She added that to the best of her knowledge, the deal was “unprecedented.”

That’s not to say there’s no precedent for government support of commercial media in the US. Not long after the Star ceased print publication, the USC Annenberg School for Communication & Journalism noted in a report that public support for print media has a long history, including postal subsidies, paid public notices, and federal and state tax breaks related to newspapers and magazines that totaled nearly $1 billion in 2008. The Newspaper Preservation Act of 1970 also made joint operating agreements possible by exempting papers from antitrust rules. In 2009, the state of Washington even passed a new $1.3 million tax break to help its struggling newspapers.

The report’s authors urged policymakers to consider new ideas in that tradition, in response to the declining value of traditional subsidies and the crisis in the newspaper industry. But government support for media should generally be indirect rather than direct, and distributed by formula rather than as subsidies for particular outlets, they wrote. Fitchburg’s deal with the Star raises eyebrows because it doesn’t follow either of those guidelines.

At the same time, said Culver, “clearly the Star, without the subsidy, could not circulate in Fitchburg.

“They went under trying to do it. And it’s anecdotal—I haven’t surveyed residents—but people weren’t happy about that,” she said. “They wanted news from the Star. So we’re in this era of such uncertainty in business models that we have emerging ethics.”

For his part, Jim Ferolie, editor of a group of newspapers that includes the reborn Star, hardly sees his paper as being on the cusp of some innovative funding model for community news. He also doesn’t worry about potential conflicts. “As an editor I have no problem with this,” he told me. “I know how to separate.”

Without the deal with the city, “there was not enough information for us to take a risk” on returning the Star to print, Ferolie acknowledges. But the way officials at the paper sees it, they’re getting a year’s worth of help to make sure their product hits every home in Fitchburg, and to offer a guaranteed delivery rate to advertisers. After that, the Star will return to a regular subscriber model—if it has enough customers. (UNG publishes three other papers on a subscriber-based weekly schedule, without government subsidy.)

“The term my general manager used was ‘seed money,’” Ferolie says. After the deal expires, “we’re back to being a startup newspaper. But at least we can say, ‘This is what our paper will look like. Do you want it or not?’”

In that regard, he’s on the same page as the mayor.

“Ultimately the private sector’s going to determine this,” Pfaff says. “We already have the mechanism in place. Every mailbox is there. We pulled back our postage costs, gave them to the paper, and said, ‘You’ve got 10 months to make this work.’”

I just stuck my hand up and said, ‘Okay’

The deal in Winston-Salem is more controversial, and different in a number of ways—starting with the fact that, while the Chronicle serves a particular community, the city of 230,000 is hardly a news desert. The Winston-Salem market is home to three TV stations, the daily Winston-Salem Journal, the alternative Yes! Weekly, and a robust online daily news outlet called Camel City Dispatch. A new regional weekly, Triad City Beat, just launched in February.

Those other outlets covered—and even led—opposition to the loan, made through an existing city program to support businesses in distressed neighborhoods. Carissa Joines, managing editor and co-owner of Camel City Dispatch, spoke out against the loan before the council. Because the city loan went specifically to help hire three new sales representatives, she argued, it puts her own news outlet and others at a disadvantage.

In an open letter sent to the mayor and every council member, CCD editor and co-owner Chad Nance made the same points, and added:

There are the obvious ethical questions of having the very government that journalists are Constitutionally charged to watch having their hands on the chain. The fact that The Chronicle is beholden to the City of Winston-Salem will remove any credibility they ever had as an honest broker of news and information….

The fact that The Chronicle cannot be counted on for unbiased city reporting while the city holds their pink slip is not the only problem. What kind of political calculations would have to be made if it was up to the City of Winston-Salem to pull the plug on The Chronicle should it fail? Would the city own some more empty commercial real estate or would they own a newspaper? These questions need and deserve to be answered.

At its core, Nance said, this story is about insider local politics as much as it is about media business models. “There was never a public discussion about it until Carissa made her statement at city council the night they voted,” he told CJR. “There was no press release, there was no ‘Hey, we’re going to do this.’ It simply went through the finance committee… if we hadn’t have been given a tip by someone, we would never have even known it was going to happen.”

Jeff MacIntosh, one of the newest members of the city council, said he was unsettled by the deal and wondered how his vote might affect coverage of him in the future. He ended up voting in favor.

“I’m a rookie. I’m going, ‘Okay, it doesn’t feel right to me, but is it illegal, is it improper?’ So I just stuck my hand up and said, ‘Okay,’” he says. “But I did comment on the fact that it troubled me.”

Following the vote, another council member told Yes! Weekly that the Chronicle qualified for the loan under the city’s program, and “I assume they are prepared to respond to… questions of appearance of potential influence.”

After I made several attempts to contact Chronicle publisher Ernie Pitt beginning late last week, he left a message at CJR’s New York offices late Monday. Reached by phone Monday evening, Pitt said he was busy but would call back later. He did not return the call, and attempts to reach him Tuesday morning prior to publication were unsuccessful. Articles in both Yes! Weekly and the daily Winston-Salem Journal also said he couldn’t be reached for comment.

Will more deals like these emerge?

Though the council’s vote in Winston-Salem was unanimous, the response there shows the resistance to deals like this in the news industry. In addition to opposition from Camel City Dispatch, the Journal’s coverage included a quote from its own publisher raising concerns about a conflict of interest and declaring, “The Winston-Salem Journal would never seek a loan from a government agency for any reason.” The city council is now considering changes to make media companies ineligible for the loan program, according to Yes! Weekly.

Still, as business pressures on local news outlets persist, it bears watching whether more deals like this—on either the Fitchburg or the Winston-Salem models—emerge.

In the early days of American publishing, the “free press” was often attached to a political party. It was the growth of mass readership and commercial advertising that laid the foundation for professional norms of objectivity and independence from parties, and eventually for “accountability journalism” that scrutinized government.

“As long as the money was coming in,” says Mark Feldstein, a professor of journalism history at the University of Maryland, “journalists could afford, at least in their ideology, to be pure, to be independent.”

For awhile now, the money hasn’t been coming in at the same rate, and many of the other sources newsrooms have turned to—corporate sponsors, nonprofit foundations—bring with them their own set of questions. If underwriting from city hall does turn out to be a thing, too—no matter how well-intentioned the government officials putting up the funds—it may be time for yet another discussion of journalism’s emerging ethics.

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Corey Hutchins is CJR's correspondent based in Colorado, where he is also a journalist for The Colorado Independent. A former alt-weekly reporter in South Carolina, he was twice named journalist of the year in the weekly division by the SC Press Association. Hutchins recently worked on the State Integrity Investigation at the Center for Public Integrity and he has contributed to Slate, The Nation, The Washington Post, and others. Follow him on Twitter @coreyhutchins or email him at [email protected]. Tags: , , , , ,