After rejecting severance to start a competitor, journalists seek funding for Knoxville Mercury

Three former editors for Metro Pulse, the Knoxville, TN, alt-weekly recently shuttered by E.W. Scripps, have rejected their severance payments in order to start a new publication in the city.

If all goes as planned, the Knoxville Mercury will launch in February, and it will be in many ways a resurrection of Metro Pulse–a mix of news, opinion, features, and entertainment, aimed at a civic-minded, well-educated, mostly 30-something audience. Like a typical alt-weekly, the Mercury will publish a free printed paper, plus a website with daily stories and an arts calendar. But its structure would be distinctive: The new publication would operate as a for-profit subsidiary of a new 501(c)(3) nonprofit organization devoted to the city’s history and culture.

The aim, editor Coury Turczyn says, is to fill a need for investigative and long-form journalism, and to create an independent publication insulated from the constraints of corporate publishing.

“If I’m writing a story I know is going to upset one of our advertisers, I would think, ‘I’m going to get a really bad review this year’—not that I really dwelled on it,” says Turczyn, recalling his tenure at Metro Pulse, where he also served as editor. He was one of eight staffers laid off when the Scripps Co. and the daily Knoxville News Sentinel, which had owned Metro Pulse since 2007, closed the alt-weekly in October.

Turczyn said he has refused a severance package worth more than $20,000–and its attendant non-compete clause–to start the new venture. Former Metro Pulse editors Matthew Everett and Jack Neely also rejected their packages to join the new project. (The Mercury’s Facebook page features a picture of Tuczyn’s shredded severance agreement, with the caption: “The non-compete clause is a lot less bothersome when it’s in tatters.”)

“Having a board of directors with different backgrounds… we don’t necessarily have to worry about one owner or publisher making it a dictum,” Turczyn says. “We can talk to our board about it and decide what our policies should be.”

Sign up for CJR 's daily email

So how would this all be paid for? The Mercury has projected annual operating costs of $1.2 million, and the founders say they need to raise $500,000 for start-up costs and the first four months’ operating expenses. The publication is seeking $350,000 a year in grants and donations–from foundations, wealthy individuals, reader memberships, and crowdfunding platforms. Ad revenues would cover the balance. The non-profit would receive a share of any profits the newspaper makes, as would any investors who might directly fund the Mercury.

The nonprofit organization, to be called The Knoxville History Project, has been promised a $250,000 donation from an individual who wishes to remain anonymous, for now. (The donor confirmed this commitment to CJR.) After a presentation to about 180 philanthropists and public leaders Thursday night, the organization counted commitments for about $65,000 more, according to Kim Trent of the local nonprofit Knox Heritage, who is advising the project. Though there are restrictions on the way money can move between a nonprofit and for-profit, the Knoxville History Project would help support the publication as an investor.*

The founders say that they will get strategy help from former Rolling Stone publisher Terry Hummel, and Ashley Capps, the AC Entertainment founder who runs the Bonnaroo and Big Ears festivals, plans to advertise in the paper. A Kickstarter campaign launched Thursday night, with a goal of $50,000, had raised more than $5,500 overnight.

The idea behind the dual tax structure is that a diverse funding base will make the organization more sustainable while keeping it from becoming beholden to one individual or company. The nonprofit could accept tax-deductible donations, while the for-profit publication could attract equity investors–though Turczyn says that’s not his preferred fundraising approach.

Greg Erickson, a Knoxville-based tax advisor, has been assisting the project pro bono. He says the proposed for-profit will also allow the paper to tie employee compensation to revenue–a big motivator for sales staff.

The Mercury aims to have three or four sales people at launch. The editorial staff is Turczyn and Everett for now, but the editors hope they can hire another writer once funding and business structures are in place, and they say the publication will feature “a roster of Metro Pulse’s most popular reporters, columnists, and photographers.” They’ve also appointed Tricia Bateman, former art director for the graphic design magazine HOW, to head design, and Jerry Collins, former head of creative services at the Tennessee Valley Authority, to head business operations.

The use of a history and culture-based non-profit to support a media outlet might seem unusual, but to Jack Neely, who will lead the Knoxville History Project, it’s a natural fit. Neely wrote Metro Pulse’s popular “Secret History” column and is the author of nine books about Knoxville and its history.

“Every thorough newspaper story is a miniature history. We’ll be interpreting ‘history’ broadly, as a narrative of events with analysis and context, across the cultural spectrum,” Neely says. “History and journalism are both, more or less, the study of everything. With a strong bias toward the important and interesting, of course.”

According to the plans, the new organization will not only help fund the Mercury but will produce books, conduct research, and offer talks, tours, and exhibits. While there are regional and county-focused historical groups in the area, Neely says, none focus on the city itself, which played significant roles in national movements from conservationism to bluegrass. And Metro Pulse was closely associated with the revitalization of Knoxville’s historic downtown, covering the ins and outs of that process and advocating for particular development options.

The structure is creative, but it could present some legal or logistical concerns, cautioned outside observers. Marcus Owens, partner at the tax law firm Caplin & Drysdale and former director of the exempt organizations section of the IRS, says publishers pursuing a dual structure must be cautious on several fronts. The two bodies must clearly be separate legal entities with separate management, the nonprofit must do more than just own the publication, and the for-profit arm cannot solicit tax-deductible donations, says Owens, an advisor to the Poynter Institute–itself a non-profit with a for-profit publishing subsidiary, the Tampa Bay Times.

In addition, he says, if the tax-exempt nonprofit were to want to make a grant to the for-profit publication, it must be designated for particular, discrete activities. “A foundation couldn’t just give a grant to the newspaper so the newspaper can continue publishing… The IRS will scrutinize that pretty closely.”

Owens also notes that nonprofits can’t endorse candidates, while for-profits can. For his part, Erickson says he’s erring on the side of caution, recommending that the Mercury shy away from endorsements.

The two organizations will have two sets of books, which Erickson acknowledges will increase administrative costs, but he says, “I don’t find that burdensome.”

Like Owens, Investigative News Network CEO Kevin Davis sounded a few cautions about the hybrid approach. Anyone who thinks they can commingle funds from the two types of organizations “might get a nasty letter from the IRS,” Davis says.

But he also welcomes new business structures, Davis adds. “We’re very encouraged by people wanting to start nonprofits… Generally people try to take a conservative approach to the IRS, because it’s so onerous. But if they’re onto something, God bless them, we want to know about it.”

*This line has been revised to clarify the planned relationship between the nonprofit and for-profit entities.

Has America ever needed a media watchdog more than now? Help us by joining CJR today

Tamar Wilner is a Dallas-based freelance journalist and researcher who writes about misinformation, fact-checking, science communication, and all things media. She tweets at @tamarwilner.