By: Mark Fitzgerald
For the past couple of years there’s been a lot of buzz about the so-called L3C ownership model, which theoretically would let papers continue to operate as if they were for-profits, but also allow them to accepted tax-deductible donations and foundation money. Theoretically, because no newspaper has actually tried organizing that way — until now.
Perhaps fittingly, the pioneer newspaper is the Point Reyes Light in west Marin County, Calif., a 3,000-paid circulation weekly that over the decades has gained outsized attention from the rest of the industry. In 1979 under the ownership of Cathy and Dave Mitchell, who was also its editor, the Light won journalism’s highest honor, the Pulitzer Prize for Public Service, for its reporting on the violent activities of the Synanon cult. After selling the paper for $500,000 to Robert Plotkin, Dave Mitchell had a bitter and very public falling out with the new owner, who also managed to alienate some former readers and advertisers.
In June the Light was sold to a group of journalists, scientists, activists and sundry community members, led by biologist Corey Goodman and former Mother Jones Publisher and Editor Mark Dowie, who formed the Marin Media Institute as a low-profit limited liability company, or L3C.
And so the eyes of the industry are on Point Reyes again, to see if this latest idea really can be a replacement for newspapers’ traditional, and possibly foundering, business model of selling ads and audience.
An L3C was the only logical ownership possibility for the group, which badly wanted to wrest the paper from Plotkin, says Goodman. After all, in 2007, a rival weekly, the West Marin Citizen, entered the thinly populated market, where both Mitchell and Plotkin had been unable to turn a profit with just one local paper. “We were networking with different appraisers who told us, you’re market isn’t even big enough for one for-profit paper,” Goodman recalls.
But with an L3C, a high net worth individual could donate to a newspaper and get a 50% tax break. And the newspaper is allowed to turn a profit, so long as its primary purpose is to advance some public benefit.
The hang-up has been that the IRS has generally refused to recognize reporting on the news as the kind of social or educational benefit necessary to qualify for tax-deductible donations.
But Kim Butler, the Vermont attorney who set up the Light L3C, believes this structure will work not just in Point Reyes but for other newspapers, too. “There are certain parts of the newspaper component that work well with in the educational benefit of an L3C,” she says.
And there was a model that Butler’s firm, Downs Rachlin Martin PLLC , could borrow from, though it isn’t strictly an L3C: “Frankly, we were taking a cue from how the Poynter Institute operates the St. Petersburg Times in terms of its social and educational purposes.”
“Kim told us if the only thing we were doing is operating that newspaper, it’s not going to fly,” says Goodman, who is MMI’s chairman. “Like the Poynter Institute, you have to have publications and other educational things. Well, that’s exactly what Mark and I want to do.”
MMI, for instance, is establishing an arts magazine and intends to run frequent education programs on journalism and media. Directors are talking about a partnership with the school of journalism at nearby University of California Berkeley.
The mission is to encourage “village journalism,” says Light Editor Tess Elliot.
Vermont is the leading state in recognizing L3Cs, which can be organized in four states and two American Indian nations. It also shows the range of businesses that have been able to organize under the L3C structure. Some 95 companies —including a book publisher, agriculture ventures such as a milk company in Maine, and real estate companies — operate as L3Cs under Vermont law, Butler notes.
Meanwhile, back at Point Reyes, the honeymoon between the paper and its new ownership continues. “One of the immediate changes is I have a budget, which I haven’t had for four years,” says editor Elliot. She’s hired a staff reporter and has more money for freelancers and interns.
For its launch, Marin Media Institute raised $350,000, and spent only “a fraction of that” to buy the Light, says Goodman, whose non-disclosure agreement prevents him from saying more about the price for now.
Advertisers and subscribers are coming back to the paper, adds Elliot, who says Light circulation dropped to 3,000 from about 4,500 under the previous ownership. “Everybody is very enthusiastic about it, which is, uh, empowering,” says Elliot, a poet who was recruited to the paper during the Plotkin ownership.
“If this becomes a model for newspapers around the country,” says Goodman, “that would be wonderful.”