Local Newspaper Closures Come With Hefty Price Tag For Residents

Hundreds of newspapers have closed across the country. The loss of local reporting means fewer investigations into fraud and waste. That has had an impact on the budgets of cities and towns.

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Travel to a town with a good local newspaper and you feel it. A good paper helps a town feel vibrant, open, accessible. In recent years, many towns have fewer papers, smaller papers or no paper. And you feel that, too. NPR's Shankar Vedantam found a financial consequence.

SHANKAR VEDANTAM, BYLINE: In February 2009, Colorado's oldest newspaper, the Rocky Mountain News, shut down. Investigative reporter Laura Frank remembers that day. As she left the newsroom for the last time, Frank says she worried not just about her own financial future but also about the work she was leaving behind.

LAURA FRANK: I had all of these stacks of documents on my desk at the Rocky Mountain News, each representing some issue that I thought needed investigating.

VEDANTAM: One of those issues was electronics waste, or e-waste. Frank was looking into a Colorado company that was allegedly sending e-waste to a village in China.

FRANK: Where people were dipping parts in acid and burning them over open flames to get little bits of gold and other metals. And they were exposing the village to dangerous levels of lead.

VEDANTAM: The federal government was also investigating these allegations.

FRANK: So here you had an ongoing federal investigation into the role a Colorado company allegedly played in endangering kids in a foreign nation. And my newspaper was shutting down; we couldn't investigate. But the worst thing was, no other local media had the capacity to investigate it either.

VEDANTAM: This, of course, is what happens when a newspaper shuts down. Some stories, especially the long and costly ones, simply don't get done. Where there once was reporting, there's now a void. And it was this void that piqued the interest of three finance professors, Dermot Murphy, Paul Gao and Chang Lee. They had a hunch that the loss of a newspaper might be bad for the financial health of a city or town. Specifically, they thought it might harm a municipality's ability to borrow money. So they investigated. Murphy says they started by looking at old newspaper almanacs.

DERMOT MURPHY: So we combed through almanacs for the period 1996 to 2015 to figure out the newspaper closures over time.

VEDANTAM: It turns out that in that period, about 300 papers closed across the country.

MURPHY: And then we cross-referenced this information with government borrowing costs data.

VEDANTAM: They also looked at the borrowing power of cities and towns with thriving newspapers. When they were done crunching the data, they found there was a significant difference between places that had local newspapers and those that lost them. When a newspaper closed, the cost to borrow money for projects like schools and roads and hospitals, it went up.

MURPHY: In the long run, after a newspaper closes, the borrowing costs for governments increases by about 10 basis points, or 0.1 percent.

VEDANTAM: You might be thinking here, that doesn't seem like a lot. But it adds up when loans are for huge amounts of money.

MURPHY: On average, a loan will be for $65 million in our sample.

VEDANTAM: With a 0.1 percent increase in a loan that size, taxpayers have to pay an extra $65,000 in interest. That's every year for the life of the loan, which could be 10 years or more. In addition, cities and towns usually have more than just one project in the works.

MURPHY: So if the government funds several projects in one year, then just multiply that by the number of projects, basically.

VEDANTAM: The bottom line? That little rate increase of 0.1 percent can cost taxpayers millions. So why are lenders charging more when towns don't have newspapers? Dermot Murphy and his colleagues had an idea.

MURPHY: So our intuition was that if a newspaper closes, then they are no longer performing a crucial watchdog role for keeping local governments in check.

VEDANTAM: And if local governments are not being kept in check...

MURPHY: Then they are more likely to engage in bad behavior and just generally be more inefficient.

VEDANTAM: And that makes it riskier to lend money to that city or town.

MURPHY: And so when a lender is more nervous about lending to an inefficient government, than they're going to have to ask for a higher interest rate on the money they're lending to compensate for that risk.

VEDANTAM: And of course, there's an irony here. People who cancel their newspaper subscriptions to save money will be among the taxpayers who bear the cost of higher interest rates.

MURPHY: It's an interesting trade-off, really. If the local newspaper is no longer around, then the local news consumer no longer is paying for that newspaper. So I suppose they save dollars in that sense. But in the other sense, borrowing costs go up for the local governments. And they, as a taxpayer, are ultimately going to be footing that bill. So we think that the net cost is definitely higher.

VEDANTAM: Former Rocky Mountain News supporter Laura Frank is well aware of the value of investigative reporting to a community. So after the Rocky shut down, she came up with a new project to keep investigative journalism alive. She used money from a fellowship to start a nonprofit. She called it I-News.

FRANK: And the I stood for investigative. And the idea was that we would do investigative stories and share them with other newsrooms. And that's what we did.

VEDANTAM: And one of the four stories that Frank reopened was that one about e-waste. Not only did Frank's team confirm that electronics waste from Colorado was being illegally exported and smelted abroad, they discovered something else.

FRANK: We found that some of the same kinds of dangerous practices that were happening in China and Hong Kong, it was happening right here in Colorado - on a much smaller scale but completely under the radar of state regulators.

VEDANTAM: Eventually, Frank's team produced a hard-hitting report. It was widely picked up by other newspapers and TV stations. It was a victory for great journalism. But Frank says the two years it took to get the work published was simply too long.

FRANK: So how many children were exposed and wound up with high levels of lead in their blood while we were trying to figure out a way to get the story out?

VEDANTAM: And then, Frank says, there are all the other stories no one is even aware of. They simply remain untold.

FRANK: It's the unknown unknown that is also very worrisome to me.

VEDANTAM: Those unknown unknowns, they can end up costing us the most.

Shankar Vedantam, NPR News.

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