Public Support Saves Paper p.14

By: DORI PERRUCCI ADRAMATIC show of public support for the Peekskill (N.Y.) Herald and some quick-thinking business strategy saved the independent weekly from foreclosure earlier this month by the Internal Revenue Service.
"The response from our readers has been overwhelming," said the paper's editor, Kathy Daley, sitting in the Herald's South Street offices the day after the IRS lifted its threat. "We always felt that the Herald was making a difference ? now we've heard it loud and clear."
The agency had notified the Herald in a phone call March 21 that it owed $20,000 in back taxes. After detailing their financial problems on the front page of the April 10 issue, headlined, "Can this newspaper be saved?" many of the Herald's subscribers (3,800) and supporters answered with a resounding "yes."
By May 23, supporters contributed $16,687 to fight foreclosure and help the paper stay open, walking in with, or mailing in, donations ranging from $18 to $500, and from as far away as Maine, California, and Florida ? where a third of the paper's subscribers have retired. A special advertising section on May 8 raised an additional $18,000 from local retailers.
Daley and her partner, Regina Clarkin-O'Leary, the paper's publisher, also attracted the pro bono services of Edward Hartley of Hartley & Co. in Tarrytown, N.Y., a financial analyst and tax arbitrator, whose initial study of the Herald's tax records "uncovered some $8,000 in misapplied, or unapplied, payments by the IRS," said Hartley.
That, along with payments of $11,000 by the Herald since April 10, have persuaded the IRS of the Herald's "good faith" efforts, he said, and convinced them to change their minds about foreclosing pending further review.
In the meantime, the Herald's management view their "stay of execution" from the IRS as an opportunity to put a successful business plan into place. The IRS tax bill is only the tip of an iceberg of debt that Daley and Clarkin-O'Leary are facing. They also owe $10,000 to New York state and another $25,000 to suppliers.
From its founding in January 1986, with a $7,000 credit card advance, the paper has "always run in the red," said Clarkin-O'Leary. "We were former reporters. What did we know about starting a business?"
By using freelance reporters and sales staff, and paying themselves $20,000 salaries, Daley and Clarkin-O'Leary (a third partner sold out in 1992) keep expenses low.
"We bring in about $90,000 in subscriptions annually, and another $100,000 in sales. It costs $27,000 monthly to put out the paper, but that still leaves us with a shortfall" that runs to $6,000 every month.
The small Westchester city (19,546, according to the 1990 census) has a low-to-middle-class population and a declining advertising base.
Said Clarkin-O'Leary: "Business wise, it was a dumb thing to start a newspaper in Peekskill . . . "
" . . . but we always had a sense we're making a difference," said Daley, finishing her partner's sentence. That's why we started the paper."
There was a need, the two believed.
"Peekskill needed a strong voice," said the publisher. "It's a place that seriously needed its own paper to link the lives of its residents."
That need grew apparent, she said, in late 1985, when Gannett Co. bought the Peekskill Evening Star, followed by the daily in nearby Ossining ? and then promptly closed both of them, merging operations, and news coverage, out of a central office in Yorktown.
"Even though the banner still says the Star, they're covering Peekskill from 20 miles away. It's just not the same as publishing a paper for Peekskill out of an office in the middle of Peekskill on South Street," Clarkin-O'Leary said.
By 1992, however, as the recession deepened, "Advertising sales took a nose dive. Steinbach's moved out of downtown Peekskill, and several other shops either went out of business or their owners retired," she said.
In April 1996, the weekly's financial standing grew worse, when Malibu, Inc., a publicly traded company on Nasdaq, entered into extensive negotiations to acquire the Herald, pay its debts, and invest in its future. By last October, however, "when they started falling behind in their payments, Clarkin-O'Leary said, "We knew we were in trouble."
Although it didn't feel that way at the time, that phone call from the IRS "was the best thing that could have happened to us," said Clarkin-O'Leary. "It was kind of ironic ? that same week, we also won a First Place in Editorials from the New York Press Association (NYPA)."
After they clear up any debt they owe the IRS, Hartley & Co. will computerize the paper's financial records and have them stick to a monthly schedule of tax payments. The two partners intend to collect some $20,000 owed by Herald advertisers.
They're also exploring alternative forms of ownership for the Herald through a nonprofit foundation, or a group of local owners, because it's a good question, they say reluctantly, whether Peekskill has the advertising muscle to fund a newspaper.
"We don't really want to make that decision, but we will if we have to," said Clarkin-O'Leary. "The important thing is to keep the dream of publishing a local paper for Peekskill alive."

?(Regina Clarkin-O'leary (lef), the Peekskill (N.Y.) Herald's publisher, and Kathy Daley, editor.) [Photo & Caption]

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?copyright: Editor & Publisher May 31, 1997