When local newspapers shut their doors and no reporters are there to watch school boards, city councils, and county commissioners, taxes go up, according to a new study.
The increase is $12 million a year in Ohio and $1.1 billion nationally — and that doesn’t even count the money that gets stolen or the cost to investigate and prosecute corruption, the report released earlier this month by Rebuild Local News says.
Those costs represent increased interest on municipal bonds as lenders worry that without a reporter on the beat, local officials w±ill misappropriate funds.
“Local journalism performs a core fiscal function: continuous, external oversight of public institutions,” the report said. “When that oversight erodes, governments face less scrutiny over spending and procurement decisions, increasing the likelihood of wasteful spending and corruption.”
It added, “For these reasons, bond markets perceive greater risk of lending to unmonitored local governments and thus demand a higher interest rate as compensation for bearing the additional credit risk. The higher borrowing costs for local governments are ultimately borne by local taxpayers in the form of increased taxes and reduced spending on public services and infrastructure upkeep.”
Rebuild Local News is a nonprofit organization that advocates ways to make local journalism sustainable.
That sustainability has been under dramatic assault over the past decade.
The Medill School of Journalism at Northwestern University last year reported that 50 million Americans had limited or no access to local news — an all-time high. It said Ohio had lost 54.4% of its newspapers since 2005, the seventh-most of any state.
In Ohio, 1.04 million, or 8.7% of residents, live in 21 news desert counties, the Rebuild Local News report said. Those counties have $1.3 billion in bond debt, and the fact that they’re news deserts makes it $12 million more expensive each year to service it, the report said.
The Rebuild Local News report was written by the group’s research director Matthew Baker and Dermot Murphy, an associate professor of finance at the University of Illinois Chicago. It builds on a 2020 study by Murphy and two other academics that found that newspaper closures are associated with higher municipal borrowing costs.
“Following a newspaper closure, municipal borrowing costs increase by 5 to 11 basis points, costing the municipality an additional $650,000 per issue,” that study said. “This effect is causal and not driven by underlying economic conditions.”
Baker and Murphy defined a news desert as a county with no local newspaper, and used census data to determine how many people live in them. They also looked at total issuance and the mix of municipal bonds.
Using the 0.86% news-desert premium estimated in the 2020 study, they determined how much more people in news deserts are paying, assuming that those counties were borrowing in the same proportion as non-news deserts.
The researchers said the higher costs aren’t just a matter of coincidence.
“Critically, this estimate is causal rather than correlational: neighboring counties with similar economic conditions but still-robust news coverage do not experience an increase in borrowing costs,” it said.
In addition to higher interest rates come other costs, the report said.
“The stakes of this watchdog function are not abstract,” it said. “The Youngstown Vindicator, a 150-year-old daily that closed in 2019, had spent decades exposing organized crime and public corruption, contributing to dozens of convictions. Its absence removed a check that no internal control replaced.”
It just makes sense that without a reporter sitting in public meetings, making open-records requests and roaming government halls, an unscrupulous public official would be more likely to try something sketchy.
The report gave an example.
“In Bell, California, a low-income, predominantly Latino community of approximately 36,000 people in Los Angeles County, city officials spent years raising their own pay with almost no public scrutiny,” it said. “By the late 2000s, the city manager was earning $787,637 a year, the police chief $457,000, and city council members nearly $100,000 for what was officially part-time work. All of these raises were approved at public municipal meetings that lacked robust newspaper coverage.”
The Los Angeles Times later learned of the situation and reported it out.
Ruben Vives, one of the reporters who broke the story, said it was too late in the game.
“Someone would have got wind of this earlier had there been a reporter there,” the report quoted him as saying. “This is just a prime example of when you turn away, and you let something like this just kind of grow and grow, and it becomes sort of a cesspool of corruption.”
This story is republished from the Ohio Capital Journal under a Creative Commons license. View the original article.
