≡ Menu

Some good news in Newspaperland?

vintage newsboyI did a little happy dance today because of some encouraging newspaper news out of the east. If you’re interested in journalism and public affairs, you might want to look for your tap shoes too.

The good news is that Apollo Global Management has ended its effort to acquire Digital First Media, the newspaper chain that publishes 70 some papers across the country, including the Monterey Herald and the Santa Cruz Sentinel.

It’s not that there’s anything wrong with Apollo. It is a very successful investment fund and it has made sizable profits for its many investors. It manages some $160 billion in assets and it apparently is very good at what it does. But what it does is make money, not run newspapers.

If Apollo had completed the deal, worth somewhere in the universe of $400 million, it would have been one large investment fund buying the newspaper group from another large investment fund, the Alden Global Capital hedge fund. Months of talks broke down, however, apparently because the parties couldn’t agree on price. Which is a good thing, I believe, because the transaction very likely would have led to continued shrinkage of the staffs and contents of the newspapers. I’ll explain my thinking in a bit.

This leaves the future of the Herald, the Sentinel and their various stablemates in a limbo of sorts. Digital First Media officials said two rather contradictory things Thursday — that the chain isn’t for sale but that they may be selling off pieces, either regional clusters of newspapers or individual papers.

As we and others have reported previously, there are local groups interested in buying both the Monterey and the Santa Cruz papers. One is headed by Geoff Dunn, a writer, educator and filmmaker who has been involved with alternative weeklies in Santa Cruz and elsewhere for decades. He was involved last year in brokering the sale of small dailies in Santa Clara and San Benito counties along with a Santa Cruz weekly and he continues to pursue Digital First Media operations on the Central Coast and elsewhere in Northern California.

Other groups have expressed interest in other Digital First holdings around the country, but DFM has deferred discussions with most of  them while pursuing a package deal with Apollo. If it starts negotiating with groups here and elsewhere, it is likely to become a complicated financial chess game with other newspaper groups proposing trades and other newspaper operations making plays for various configurations of newspapers. (As it stands, the Monterey and Santa Cruz papers are part of Digital First Media’s Northern California group along with papers in Chico, Red Bluff, Vacaville, Vallejo, Red Bluff, Fairfield, Eureka, Mendocino, Ukiah, Clear Lake, Woodland and Paradise. The San Jose Mercury News is part of the company’s Bay Area News Group along with the Contra Costa Times and several closely affiliated papers in the East Bay. At different times, the Sentinel has been part of both groups, as has the Marin Independent Journal.)

I am encouraged for several reasons. I believe local ownership could help restore at least some of the quality at the local papers. Corporate operators are by definition far more interested in profits than in journalism. Also, I believe the right kind of local ownership would be in much better position to make improvements.

Here’s why. As the U.S. newspaper industry has suffered large losses in advertising, circulation and revenue, the impression has been created that they are barely profitable if at all. The reality is that many newspapers have made respectable profits in recent years, not by increasing circulation or their advertising linage but by cutting expenses. With the Apollo deal falling apart, there already is talk of new budget cuts for the DFM papers starting in July. If the deal hadn’t fallen apart, budget cuts would have been on the near horizon anyway, or at least that’s what I think.

What sets local ownership apart from investment banker ownership is that local investors would have much less incentive to cut in order to create the kind of returns that hedge funds and other asset managers proudly offer their clients. Potentially, local investors motivated by public spiritedness might even be able to reinvest some of the profits and rebuild the newspapers.

Am I dreaming? Probably so. But until today, I was expecting to watch the continued decline of most DFM newspapers, including the Herald, where I once held the editor’s title. Now, I feel there is at least a possibility of recovery and the public benefit that goes along with it.

In the past few months, I have given talks to various community groups, including the League of Women Voters of Monterey County, the Gentrain Society at Monterey Peninsula College and the Carmel Valley Association and each was keenly interested in the future of the Herald. The people in the audiences are more involved in public affairs than most folks and a relatively high percentage of them still subscribe to the Herald even as they complain about its dwindling daily report.

I told them about the potential Apollo purchase and the local possibilities, which at the time seemed remote. After each talk, several people came up to me or called or emailed to say that newspapers remain extremely important to them, that they would be following the sale process closely and would be pulling, pulling hard, for local ownership. For the sake of the Herald and the Sentinel and the communities they serve, for the sake of the readers and the advertisers, for the sake of all, let’s hope it works out.


Business fraudThe author of a recent Partisan column proposed stronger transparency rules for state public utilities commissioners, who already are required to publicly report any contacts with utility representatives. The existing rules haven’t stopped commissioners from becoming overly chummy with those they regulate but at least they have helped show ratepayers what they’re up against.

The proposal likely won’t go anywhere, but it raises a thought. If California lawmakers thought such disclosures were needed in the utilities arena, why shouldn’t there be similar rules for other officeholders, starting with county boards of supervisors?

Monterey County’s handling of the Ferrini Ranch development provides real support for the idea and it also raises important questions about the roles of individual supervisors. While making land-use decisions, are they unbiased arbiters making tough calls in the name of the public good, after all sides have had their say? Or are they negotiators, expediters, accommodators, empowered to make private deals even while the public process plays out as though it mattered?

In other words, should they do what then-Supervisor Lou Calcagno did, work behind the scene for months—actually years, it turns out—in order to help a favored developer and campaign contributor win a vote worth millions of dollars? Can a supervisor quietly lobby other government agencies on behalf of a proposed development and then assume a posture of neutrality while voting in favor? Or should there be rules to prevent such a thing?

The proposed 185-lot Ferrini Ranch development straddles Toro Regional Park along Highway 68. Neighbors and environmental groups protested vigorously on several grounds, especially the lack of a sustainable water supply and the impact on Highway 68, easily the most congested roadway in the county.

In the midst of the formal vote on the plans Calcagno announced that he had negotiated a side deal calling for the developer to put money into escrow for potential use in recycling area wastewater if area residents agree to form a community services district for that purpose. Suggesting that he had found a magic solution, Calcagno offered that the arrangement could help ease the project’s impact on the dwindling Salinas Valley water supply.

If anyone in the audience wondered about details of the recycling plan or about the propriety of one supervisor crafting a special deal that had received no public airing of any sort, there was no chance to raise those issues because the public hearing had been closed.

If any of the other supervisors knew about Calcagno’s negotiations over the recycling idea, they didn’t let on. As arranged by Calcagno, the developer is to put $425,000 into an escrow account that would be used toward wastewater recycling if and when residents of the Toro Park and Las Palmas areas agree to form a community services district for that purpose. Chances of that seem remote, however, because such a project would at least double sewer bills for each residence in the area.

If the district isn’t formed, the developer gets the money back—assuming that county officials actually require the money to be deposited in the first place.

That was not the only example of Calcagno’s behind-the-scenes work to accommodate the venture. Newly disclosed county email records indicate that Calcagno’s office organized a July 2013 meeting between the head of the development team, Mark Kelton, and John Laird, director of natural resources for California. Calcagno also attended, along with a biologist working for Kelton, a county planner who is now the chief planner on the Ferrini project, and Sherwood Darington of the Monterey County Ag Land Trust.

As natural resources director, Laird oversees several key state agencies, including Fish & Wildlife. Although the Monterey County supervisors have approved the Ferrini Ranch project, Kelton and state Fish & Wildlife officials are still discussing the ramifications of sensitive clover and salamander habitat on at the project site, the foothills overlooking Highway 68.

At the time of the meeting in Santa Cruz, the environmental impact report for the Ferrini project was still in the works and state Fish & Wildlife officials had raised concerns about how Kelton would mitigate the project’s impact on the salamander and clover. Fish & Game also was concerned about the project’s potential for blocking the movement of other wildlife on the hilly property. Theoretically, the project still could be stopped if Fish & Wildlife declines to issue the appropriate permits.

Laird said last week that he could not recall details of the meeting other than that Kelton expressed concern about the positions of state agencies. The Partisan was unable to determine whether the meeting resulted in any softening of the Fish & Game stance on habitat protection despite Calcagno’s effort.

Mike Novo, head of the county department, said Friday that planner John Ford of his staff attended the meeting in order to discuss Fish & Wildlife issues on the Ferrini property and elsewhere.

Derrington, a managing director of the Land Trust, said he was looking for help obtaining a state grant to help the trust pay for Kelton-owned land that could qualify for protection under an agricultural easement. Discussions about that possibility continue even now that the subdivision plans have been approved.

“There were other discussions that day that I was not involved with,” Derrington said.

Calcagno declined to comment on the meeting. Over the telephone, his wife told the Partisan, “He says he is out of politics now and doesn’t want to talk to you.”

Supporters of Calcagno and the Ferrini Ranch project will say he did nothing wrong, and it is almost certainly true that he broke no laws. But in these instances, and who knows how many others, he certainly stretched the definition of representative government. Getting the Ferrini Ranch project this far has required discussions, negotiations, with highway officials, parks officials and many others. It would be a surprise if Calcagno let the county staff handle all that without his hands-on guidance.

“I don’t think county supervisors should lobby on behalf of private interests at the expense of community interests,” said Chris Fitz, the former director of LandWatch Monterey, which is suing to stop the project.

“The Department of Fish & Wildlife is charged with protecting the public interest. If Calcagno participated in lobbying Fish & Wildlife to go easy on the developers of Ferrini Ranch, he put the interests of the landowners above those of the public. It appears that Lou Calcagno made up his mind to support this project before the environmental analysis was complete. Indeed, it looks as if he wanted Fish & Wildlife to go easy on the project so that his support of the project would not look so egregious.”

Throughout his three terms on the board, Calcagno was known as a backroom negotiator, something that brought him both praise and criticism. Over time, the public and other officials seemed to accept his role as a dealmaker, even when it clashed with widely accepted government practices. However, his backroom dealings on the Ferrini matter raise serious questions about the private actions of public officials acting in a quasi-judicial role. The Ferrini project had been narrowly approved by the county Planning Commission but that recommendation had been formally appealed to the Board of Supervisors, by a planning commissioner, no less.

It has long been considered a legal requirement that local governing bodies avoid “pre-judging” any issues until the public has had its say. For Calcagno, any pretense of abiding by that basic principle evaporated well before the Ferrini Ranch project came up for a vote.

What good would it do if supervisors were required to publicly declare their contacts with developers or their representatives, or representatives of companies wanting county contracts? Directly, probably not much. But if a supervisor had to disclose repeated private meetings and communications with the same interests, one of two things would likely occur. Fewer private discussions would come about, or disclosure of the contacts would make it obvious that the supervisor had a conflict of interest and should not vote.

In fairness to Calcagno, the roles of county supervisors are not nearly as clear cut as the roles of city council members and some other elected officials. City council members are supposed to act solely as legislators, adopting policies and making decisions but staying out of administrative matters at City Hall. Technically, similar restrictions apply to county supervisors, but they receive full-time salaries and often work at their county roles full-time. It is not unusual for them to insert themselves into administrative matters despite the presence of professionals assigned to those duties.

Not surprisingly, Calcagno received a series of campaign contributions over the years from Kelton and related parties, who also contributed to the other two supervisors supporting the project, Simon Salinas and Fernando Armenta. Calcagno’s take topped $10,000. The others received smaller amounts.

Kelton contributions also went to Supervisor Dave Potter, who voted against the project, which is in his district. Project opponents have criticized him, however, for not doing more to block it. Some have even characterized his no vote as a sham. Glen Robinson, former president of the Carmel Valley Association, accused Potter in a letter to the editor of voting against the development only after being assured by his colleagues that it would be approved no matter how he voted.

The developers also contributed to the campaign of Calcagno’s successor, John Phillips. There is no record that they ever contributed to any of Laird’s campaigns but they did make a series of contributions to the legislative campaigns of a Laird ally, former Salinas Mayor Anna Caballero. She is now secretary of the California Business, Consumer Services and Housing Agency.

Coincidentally, the Ferrini developers are represented by well-known land-use attorney Tony Lombardo, who also has done private legal work for Calcagno and Potter.

Two groups, LandWatch Monterey County and the Highway 68 Coalition, have filed lawsuits aimed at blocking the project. The litigation challenges the adequacy of the environmental impact, particularly as it pertains to traffic, and challenges the county’s decision to approve the project under provisions of the county’s 1982 general plan rather than the 2010 plan.

Two supervisors, Potter and Salinas, announced late last year that they planned to pursue tighter limits on campaign contributions to supervisorial candidates. It’s an idea that seems overdue. At the same time, though, it could prove to be an even better idea to consider regulations barring supervisors from voting on matters affecting contributors, like the rule in place for members of the Pacific Grove City Council. And, better yet, activities surrounding the Ferrini Ranch project suggest that rules should be put into place requiring supervisors to tell the public what’s really going on and requiring them to stop pretending that it’s a level playing field.