Is a newspaper so vital to a community that to keep it alive the people who labored in good faith to build it should be left to shoulder the price when it collapses?

This is the question a federal bankruptcy court judge will face Thursday in the first step toward trying to sort the tangled and unknown future of the Alaska Dispatch News, the state’s largest newspaper and home to the state’s largest news website – ADN.com.

It’s an interesting question that reflects on both the value of reliable information in the age of fake news and the smug arrogance of the powers that be in journalism and the mainstream media.

“A purchase of the assets of ADN will allow for the continued publication of

Alaska’s largest newspaper, which is vital to all of Alaska,” publisher Alice Rogoff said in a sworn declaration submitted to the court on Tuesday. “At stake are the livelihoods

of employees, contractors and vendors, but also the continuing existence of a deeply

rooted civic institution that plays a critical role in having an informed citizenry and that

provides a town square for all Alaskans.

“Without a sale, there is little choice but to cease ADN’s operations to the detriment of its subscribers, employees, advertisers, and the state of Alaska as a whole, due to a shutdown of ADN’s print operation.”

The thought of Alaska’s largest city without a newspaper sends shivers down the spines of avid readers.

“I would be sad,” said Helen O’Harra, an Anchorage school teacher and devoted consumer of her morning newspaper.

Differing views

That’s all well and good, said Mark Miller, the owner of M&M Wiring and a small businessman who straps on a work belt to join his crew on the job site. Miller’s company is owed almost $500,000 for work on Rogoff’s Arctic Boulevard print shop.

Given Rogoff’s support of Alaska Natives – she was one of the founders of the now defunct Alaska Native Arts Foundation that it was hoped would turn art into a rural industry – he sent her an email wanting to know specifically why she was sticking it to a work crew that included two Alaska Native tradesman.

For his efforts, he said, he got a letter from Birch Horton Bittner & Cherot – Rogoff’s lawyers – threatening they’d slap him with a harassment suit if he ever contacted her again.

And now this.

“She’s saying: Don’t bother paying the contractors as long as you get the newspaper,” he said. “How immoral is that?”

As for that “critical role in having an informed citizenry,” he added, where was the Dispatch News with its team of 52 reporters and editors when that “deeply rooted institution” – not to mention a significantly sized Anchorage business (court documents claim 212 employees at ADN) – was unraveling beneath its newsroom? Not a word was heard from the cracker jack team of journalists, he noted.

They sat silent until just days before the company was in bankruptcy.

The first Dispatch News mention of financial problems – though the problems had been reported elsewhere in some detail, including on this website – came on Wednesday when reporters Annie Zak and Suzanna Caldwell slipped a hint into a story about GateHouse Media buying some Alaska newspapers owned by Morris Communications.

Twelve graphs down in that story, there was this:

“Alaska Dispatch is dealing with the challenges of the industry as well. ADN owner publisher Alice Rogoff is ‘in discussions with several potential new investors’ in the company, she told staff in an email last week.

“‘(W)e’ve (sic) been challenged by changing economic and financial circumstances, to say nothing of evolving news reading habits,’ Rogoff wrote. Deliberations with potential investors ‘are private and must be kept that way, so I cannot comment on their status. The goal is simple: to keep the state’s major newspaper in the business of delivering both printed and digital news of, and for, Alaskans.'”

Phantom investors

There were no investors at the time. A cash-short Rogoff – the estranged wife of David Rubenstein, one of the world’s richest men – was actually scrambling madly to find a buyer for the newspaper as she had been for weeks. On Aug. 3, she’d been forced to sign a $100,000 promissory note to Premera Blue Cross Blue Shield of Alaska to prevent it from cancelling the employee health insurance plan, court records now show.

Eight days later, she was in court with GCI, the Alaska telecommunications company that owns the building in which rumbles the newspaper’s only working press. GCI wanted to evict her from the premises she’d promised to leave three years earlier and collect almost $1.4 million in back rent and electric bills.

After the eviction notice and lawsuit were filed, Zak wrote a 14-paragraph story reporting that “Rogoff, in a prepared statement, said she has always wanted to ‘keep Alaska’s largest newspaper alive and robust for the sake of our readers and the community.’ She added that she and the newspaper ‘are in active discussions toward that end,’ but didn’t elaborate.”

The story provided not a hint of how deep and dire the ADN’s problems at the time. The company had lost $8 million since the start of the year, it would later be revealed, and faced cash-flow problems that had it on the verge of being unable to cover the costs of printing the next week’s paper.

Saturday negotiations with the Fairbanks-based Binkley Company and Alaska Media LLC finally led to an agreement on a loan that kept the Dispatch temporarily in operation.

On that Saturday evening came the announcement, via the Dispatch News, that “Alaska’s largest newspaper filed for Chapter 11 bankruptcy protection…and (the) new owners — an Alaska family that made its fortune hauling freight and tourists on the Yukon River and its tributaries, and a company that owns rural newspapers in the state — have been lined up.”

The Deal

The declaration Rogoff filed with the bankruptcy court on Tuesday explains the deal she cut. She now proposes to solve all the newspaper’s problems by executing what is called an “Asset Purchase Agreement” negotiated with the Binkleys, who will loan the Dispatch money to keep it printing until the company can be officially reorganized.

The bankruptcy declaration says a $125,000 per week subsidy is now required to keep the Dispatch News functioning. That amounts to an operational loss of $500,000 per month.

“Under the APA, the purchase price for the business under the APA is

$1 million less whatever is actually due under the Debtor-in-Possession Credit Agreement,” Rogoff said.

“This means that, if the newspaper is sold to the Binkley Company, all or virtually all of the sale proceeds would go towards repaying the DIP loan, and there would be little or no cash proceeds paid to the bankruptcy estate. Obviously, this is not the outcome I would prefer, but the reason I agreed to these terms is that my primary desire is to see that the newspaper continue in operation.”

Bankruptcy lawyers consulted on Tuesday said they think it could prove hard to convince a judge that the value of keeping an Anchorage newspaper in business trumps any sort of payback to contractors and suppliers owed millions of dollars.

In financial documents attached to Rogoff’s declaration, the company reported assets of about $19.4 million and equal liabilities, but about $10.3 million of assets are reported as “goodwill.”

Rogoff’s declaration added that the paperwork she signed gave “the Binkley

Company the right to install a manager, immediately following the petition date. The

Binkley Company has not given me any details on this provision, so I cannot comment

further on it.”

The manager is question is Jerry Grilly from Denver. Grilly is something of a legend in Alaska publishing history. He was the man who helped resurrect a once near-dead Anchorage Daily News and lead it into battle against the Anchorage Times, the dominant Alaska newspaper from World War II through its years of successfully championing Statehood and on into the early 1980s.

In one of the country’s last great newspaper wars, the underdog Daily News, led by Grilly, overpowered the Times of Bob Atwood, another publishing legend. The Times closed in 1992. Its assets were sold to the Daily News. A few of the Times’ employees were hired by the News, but most were forced to find work elsewhere.

Shortly after Rogoff bought the Daily News, Grilly was suggested as somone she might want to bring in as an interim publisher. He was willing. She rejected the idea.

Mini replay

Less than 20 years after the war between the News and Time, Rogoff financed a new Alaska journalism battle. This time the News was the Alaska powerhouse and the opposition was a tiny website named AlaskaDispatch.com that journalists Amanda Coyne and now ex-husband Tony Hopfinger had started in their living room in 2008.

Rogoff bought a controlling interest in the operation in 2009 and added funding to help bring more reporters to the Dispatch staff. By 2010, it was attracting national attention that would only increase in the years to come.

The News was at the same time struggling under the burden of trying to help its California owner, The McClatchy Company, survive. McClatchy bought the Knight-Ridder Newspaper chain for $4.5 billion in 2006 just as journalism was about to start a light speed move from print to the internet.

McClatchy has been battling financial troubles ever since. It shrunk the Daily News to almost nothing to maintain profit margins. The newsroom was managed from 104 people down to 34.

When it was finally pumped up in an effort to up the competition with the aggressive Dispatch, Rogoff decided it was time to make a bid for her competitor. She bought it in 2014 and paid what everyone involved with the business would later say was too much – $34 million.

To make the deal work, she borrowed $13 million from Northrim Bank and sold the building housing the newspaper’s offices and press to GCI for $14.5 million plus $500,000 in prepaid advertising. She got the other $6 million from her husband back in the Lower 48.

Court documents indicate Rogoff still owes about $10 million on the Northrim loan, but that is being paid off by Rubenstein indirectly.

“All payments that I receive from a marital settlement agreement with my husband, David Rubenstein, were directed and paid into my account at Northrim Bank,” the declaration says.

The sworn declaration goes on to say that “from the time of the purchase, I was willing to operate ADN at an operating loss to both maintain robust journalism in Alaska, and as an investment in the future of the company.”

The problem was that those operating losses quickly snowballed.

The newsroom swelled from the 34 reporters and editors of Daily News days to 52 editors, reporters and videographers. And costs increased with the restoration of the 40-hour work week for Daily News employees who’d been cut to 37.5 hours, and the end of required, unpaid annual furloughs. Both of those were McClatchy cost cutting measures.

In 2015, the $14.5 million in wages, salaries and benefits paid by Dispatch exceeded the $13 million the advertising department earned in revenue, according to court documents.

Bad decisions

Travel costs went up as well. The newspaper footed the bill for some of Rogoff’s Arctic initiatives. And a website that had originally operated out of cramped, funky and low-overhead headquarters in an old aircraft hangar along Anchorage’s Merril Field moved the operation into upscale offices in Midtown.

In her financial statements, Rogoff said the rent on the Midtown offices cost almost $50,000 per month. She had plans to consolidate the entire operation in cheaper digs in an old, oilfield services warehouse on Arctic that housed the newspaper’s new press, but that plan blew up.

The concrete pad in the building was inadequate for the press. There were construction hang ups. Money ran short. And Rogoff stopped paying the bills.

“Complications and delays were encountered in completing the improvements at the Arctic Road location with substantial cost overruns,” her declaration summarizes. “Currently the Arctic Road property is not ready for occupancy and the GCI lease has expired,” leaving the newspaper in a tough spot.

The estimated cost of fixing the Arctic press have been pegged at $2 million or more, and the building is tied up in a lawsuit filed by Miller.

Meanwhile, Rogoff is scheduled for a court hearing on GCI’s request to evict her press from its building. If GCI is granted the eviction, which appears more a formality than anything else at this point given how far behind its tenant on the rent, the Dispatch could be a newspaper solely dependent on the goodwill of cable TV company with its own news operation – KTVA.com and KTVA-TV.

But even if the paper finds a way to access a press, and even if a bankruptcy judge approves the request to let the Binkley group into the deal to help sort it out, the prospect of maintaining an Anchorage newspaper going forward looks to be an uphill battle.

Alaska is in a recession, making it difficult to increase revenues. The reality cannot be ignored that what the new owners will have to do is what Rogoff adamantly refused to do: cut their way to, if not to profitability, at least to stability.

And even then it’s a tough road. Alaska Public Media on Tuesday reported that ADN had 41,684 subscribers, but the figure was clearly inflated.

“Print circulation of the newspaper has continually declined since the 2014 purchase, with annual losses of between 7 percent and 10 percent,” Rogoff’s declaration says; she does not provide circulation figures.

But a report from the Alliance for Audited Media, a service sold to publishers of newspapers, does. It reported a total paid average circulation of 29,725 daily and 36,018 as of June 30, 2014. At a decline of 10 percent per year, the average circulation would now be in the range of 21,000 to 22,000 papers daily and 26,000 to 27,000 on Sunday as of June 2017.

Anchorage Daily News circulation in Anchorage was once three times that. A lot has changed in a couple of decades. But Alaska simply reflects a national trend.

These are tough times for anyone wanting to get into the newspaper business. But the latest to give it a try in the 49th state are not the kind to give up easily.

Alaska Media is headed by Jason Evans from Nome. An Alaska Pacific University-educated Inupiat, he traces his ancestors back to some of the toughest people on the North American continent. And Ryan Binkley is the Binkley leading the charge for a family that tracks it Alaska roots back five generations to the Klondike Gold Rush.

Charles Binkley came over the Chilkoot Pass with others bound for the Yukon River, but he was chasing not so much gold as his own dream. He made his fortune not in the mines but in the steamboats hauling gold seekers up and down Central Alaska rivers . His son, Capt. Jim Binkley, followed in his wake along the Yukon and Tanana rivers in the 1940s and 1950s.

Over time, as Alaska changed, the Binkleys shifted from moving gold seekers to hauling freight to transporting tourists, which is what they are still doing these days.