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July 06, 2010

California Newspaper Finds Salvation in Vermont Business Law

A California newspaper once on the brink of collapse is being heralded as a new model for journalism — and it's largely thanks to Vermont.

The Point Reyes Light, a Pulitzer Prize-winning newsweekly serving Marin County, recently incorporated in Vermont as "low profit" limited liability company, or L3C. That means it can accept donations from charities while still remaining a for-profit company. It's a hybrid business model that Vermont passed into law two years ago and it's garnering widespread attention for its potential to save the struggling newspaper industry.

Like many newspapers, the Point Reyes Light was shedding reporters, editors and photographers as advertising and circulation revenues vanished, and the quality of news was suffering, says business manager Renee Shannon. In recent years, the newsroom went from two editors, two full-time reporters and several interns to only one of each and a controversial editor-in-chief was ruffling readers' feathers.

A group of journalists, educators and philanthropists wanted to rescue the paper by purchasing it and making it a nonprofit. But they found that federal tax code would make nonprofit status prohibitively complex. Through a colleague, the publisher of the alternative weekly East Bay Express, they learned that in Vermont, they could set up as a "low-profit" venture and still accept funds from nonprofits.

So they established the Marin Media Institute, a nonprofit that owns and directs operating funds to the Point Reyes Light.

The California-Vermont connection came courtesy of Warren Bingham, a media consultant who had a press in the Northeast Kingdom. Bingham was a client of the law firm Downs Rachlin Martin, which has offices in Montpelier, and has helped companies navigate L3C approval before. Bingham was consulted about appraising the Point Reyes Light's value and connected the new owners with Kim Butler, an attorney with Downs Rachlin Martin.

A search for "L3C" in the Vermont Secretary of State's online business registry turned up 99 businesses registered as low-profit companies, ranging from Robin Coles Unforgettable Sweets to the Vermont Haunters Club. No Vermont news organizations are on the list.

The Point Reyes Light, a 3600-circulation community weekly, won the 1979 Pulitzer Prize for Public Service for reporting on a cult, Synanon. Corey Goodman, chairman of the newspaper's board of directors, says Vermont's L3C program was a perfect fit for the Light.

"Our goal is not to make money," Goodman says. "It is to put out a great newspaper. Profit is not the motive at all."

Goodman, a biotech entrepreneur, suggests that with the L3C law, Vermont could become for newspapers what Deleware has become for big companies: the place to incorporate.

"When people ask me, 'Why are you in Vermont?', I say California doesn't yet do it, Vermont's one of six states that do and they really are very user-friendly."

Vermont is the place to go for majority of these cash strapped companies.

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