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Sept. 23, 2014, 10:31 a.m.
Business Models

What we know (and don’t know) about the plan to make San Diego’s daily a nonprofit

If it works, it’s a model that could be replicated in cities across the country. But it needs IRS approval first.

Editor’s note: In San Diego, a philanthropist is talking about buying up the local daily and turning its ownership into a nonprofit model. Local nonprofit site Voice of San Diego did this interview with prospective purchaser Malin Burnham, which they’ve kindly let us share with our readers.

On one hand, nonprofit ownership of local dailies feels like a natural endpoint to the torturous path metro newspapers have taken over the past decade. But reading through this, I fear Burnham may be overestimating the ease with which the IRS would sign off of his proposed deal. Though wait times are improving, built-from-scratch news nonprofits are still seeing lengthy, sometimes multiyear processes for getting 501(c)3 approval. And those cases seems far simpler from an IRS perspective than redefining the status of a longstanding for-profit. (Yes, the Tampa Bay Times pulled it off decades ago, but that involved creating the Poynter Institute, an educational institution, a class of activity explicitly deemed admissible for nonprofit status. I don’t see anything like that here.)

I don’t doubt that Burnham has extremely good lawyers and that they’ve thought through a strategy. But I think there’s reason to believe that, in three months, we’ll either still be waiting for an IRS judgment on this or hearing about how the deal didn’t work out.

If Malin Burnham has his way, San Diego would have a new model for how journalism is done here. Burnham, a longtime San Diego philanthropist, and a group of supporters is interested in creating a nonprofit that would own the U-T San Diego newspaper (formerly known as the Union-Tribune). The paper would continue to run as a for-profit enterprise. He first confirmed his interest in the paper to the San Diego Reader over the weekend. If he’s successful, the U-T would have its fourth owner since 2009.

I spoke with Burnham Monday afternoon. He insisted any deal is far from guaranteed, and the next step is getting approval from the Internal Revenue Service for his plan. He said U-T’s current owner, developer Doug Manchester, has encouraged him to do that.

“We don’t have a handshake or an agreement,” Burnham said. “We feel we can go back and get an agreement.”

Manchester told Voice of San Diego in an email that a lot of the discussions were premature. “Actually no comment as we have zero deal at this time!” Manchester wrote. “I have always admired and respected all that Malin has done for our community and continues to do. If Malin gets the necessary approvals then we will talk but we are a long way from any type of transaction if any will ever materialize.”

Manchester said that he respected and appreciated Burnham’s core philosophy, which Manchester described as “community before self.”

How would this work?

Burnham envisions the paper as a blend between a traditional nonprofit and a traditional newspaper. The paper would solicit donations, but also accept advertising and subscriptions. He got most excited talking about how the paper’s profit would be distributed.

“Instead of it going to the owner for the investment, we will, in effect, reinvest it into the community,” Burnham said.

He said that nonprofit civic organizations, such as the San Diego Foundation’s Center for Civic Engagement (which Burnham helped bankroll — it also bears his name) and arts groups and others could receive grants for projects. So could biotech and medical nonprofits. “The investments could not just benefit San Diego, but the whole world,” he said.

He said the paper was much more financially sound today than it was in the last days of the Copley family’s ownership in 2009.

Burnham was less specific about how the journalism would work. He said he recognizes that print is declining while online news consumption is growing. Over time, the paper could reflect that by cutting its size and the days of the week it’s published. He says he’s bullish on the news business, though. “We think that the distribution of news will continue to be a worthy enterprise,” he said.

He also emphasized the journalism aspect was a work in progress. “We’re not experts in journalism,” he said.

Burnham also confirmed that any deal wouldn’t involve the paper’s Mission Valley real estate, which has long been considered the most valuable part of the operation. He said the paper would be tenants in the building, not owners.

What about the editorial page?

The biggest stamp Manchester has put on the paper is his aggressive editorial stances for conservative political causes and building a new Chargers stadium. Expect that to change under Burnham’s group.

He said there’d be a firewall between the nonprofit and the editorial board — something that would likely be required under IRS rules, anyway. But he said he also would expect the board to be nonpartisan and less in your face.

He expected the board would continue to endorse candidates and political initiatives but decide on a case-by-case basis, not from a particular partisan perspective. He said that the board would make decisions based on “the best interests of San Diego.” I pushed him on who would decide what the best interests of San Diego were. But Burnham kept repeating that line.

“Hopefully that editorial board would be a cross-section of the community,” he said.

What’s the timeline?

Burnham said he expected IRS approval for the venture would take three months. Nothing could happen until his group had that in hand. After that, the timeline would depend on striking a deal with Manchester.

“It all depends if Mr. Manchester is willing to sell us the paper,” Burnham said. “He has encouraged us to seek the IRS opinion. We know we’re running the risk that he might sell it to someone else in the meantime.”

Are there other places like this?

This model for journalism does exist other places, most notably along Florida’s west coast. The Tampa Bay Times is a for-profit newspaper owned by a nonprofit. It has had a reputation as one of the best newspapers in the country for decades. But recently, it’s fallen on serious financial difficulties.

Burnham said his plan isn’t modeled after the Times or any other organization. He told me he read an article about the Times’ financial distress Monday morning.

“I don’t know anything about their situation other than that it’s a newspaper owned by a nonprofit institution,” he said. “Their financial status, their business climate could be very different than ours here.”

What don’t we know

A lot.

Burnham wouldn’t disclose the names of his partners pursuing the venture. Nor would he say whether he’s talked with Manchester about a purchase price. He said all those discussions were premature. Burnham did say that community members he’s discussed the plan with have been universally supportive of the idea.

Who is this guy?

Picture in your mind the stereotype of a longtime civic leader and philanthropist from San Diego. If you guessed an older white man, who worked as a developer, was a prominent sailor, and is a coastal Republican, congratulations, you just described Malin Burnham.

Now 86 years old, Burnham won an international yacht racing competition when he was 17 and has continued sailing since. He’s chaired nine major nonprofits and cofounded 14 organizations. He’s heavily involved with the San Diego Foundation, the region’s major universities and also the Sanford-Burnham Medical Research Institute in La Jolla, which he endowed. He also helped bring the America’s Cup to San Diego in the late 1980s and co-owned the Padres in the 1990s.

Burnham is hardly a shrinking violet politically, either. He’s given lots of money to political causes over the years. Most recently, he donated big to Nathan Fletcher’s mayoral campaigns, an unsuccessful city tax increase ballot measure in 2010, and the successful pension reform ballot measure in 2012.

He recently criticized the local right-wing Lincoln Club as “The Lynching Club,” a play off the club’s chairman Bill Lynch, and knocked the group for its aggressive attacks on Fletcher during the mayoral campaign. In the previous mayoral campaign, Burnham said he called district attorney Bonnie Dumanis to tell her to drop out of the race so Fletcher would have a shot at advancing. (Dumanis denies this happened.) Burnham also was behind a failed attempt to put a 500-foot statue of wings on the Navy pier.

Burnham also has, without question, the best head of hair in San Diego.

Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government.

Photo of San Diego harbor by peasap used under a Creative Commons license.

POSTED     Sept. 23, 2014, 10:31 a.m.
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