New Yorkers taker heed: When local newspapers close, taxpayers will suffer.
A recent study from researchers at the University of Notre Dame and the University of Illinois found that the closure of local newspapers was associated with higher costs shouldered by the taxpaying public. The researchers looked at roughly 1,600 English-language newspapers in the U.S. and studied the difference in how local tax revenue was spent before and after nearly 300 of those publications closed, merged with other publications, or reduced how often they published.
These higher costs can manifest themselves in many ways, the study found. For starters, the researchers found that the costs associated with local municipal bonds shot up as a result of a local newspaper closing, increasing by as much as 5 to 11 basis points in the long run. That can equate to as much as $650,000 in additional interest on the loans.
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In particular, when the Rocky Mountain News in Denver closed in 2009, the yield of new local municipal bonds rose by 5.3 basis points, a sign that the government’s costs to borrow money had gone up. The researchers noted that while the Denver Post is still in business, it too was hit with massive budget cuts during that time.
Higher taxpayer costs can come about in other ways. The closure of a local newspaper was also shown to lead to high government wages, more government employees and higher taxes per capita. “Local newspapers hold their governments accountable,” the researchers wrote. “The loss of monitoring that results from newspaper closures is associated with increased government inefficiencies.”
In New York City, where 50% of the Daily News staff was laid off this week, less local coverage will almost certainly mean less reporting about how city taxpayers’ money is being spent or, in some cases, wasted. Former New York City public advocate Betsy Gotbaum, who's now executive director of the good government nonprofit Citizens Union, pointed to several examples of when the News helped expose government waste or financial shenanigans that ultimately saved taxpayers money. The paper was instrumental in covering the CityTime payroll scandal, in which a contractor responsible for overhauling the city’s payroll system overcharged the city, costing taxpayers hundreds of millions of dollars. “How else would we have known all about it? They shed a light about what was going on,” Gotbaum said.
A Daily News reporter who was laid off this week recently got the city to rescind a $48,000 tax break given to President Trump’s Trump Tower development.
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And it was local news coverage of the city’s financing proposal for the massive Hudson Yards real-estate development that drew politicians’ attention to the issue, saving local taxpayers “hundreds of millions of dollars,” said Doug Turetsky, a spokesman for the city’s Independent Budget Office. (The Daily News’ parent company Tronc TRNC, +0.38% did not immediately return a request for comment.)
There is some good news though for residents of New York, which still boasts the New York Times and the New York Post. The effects of these closures or operational hurdles are most pronounced in places that become so-called “news deserts” after the local newspaper folds, based on the findings in the University of Notre Dame and the University of Illinois study. (The Post is owned by News Corp. NWSA, +0.27% the same company that owns MarketWatch.)
