Wednesday, August 22, 2007

You Gave to the Raleigh N&O

If you read the liberal/leftist Raleigh News & Observers editorial page, you know the N&O speaks out against takes breaks for big corporations like IBM, and Wal-Mart.

The N&O says “average citizens” have to pick up the costs of the tax benefits that “high paid lobbyists” and “big campaign contributors” influence Congress to grant big businesses.

True enough.

Now with that in mind and remembering the N&O is owned by The McClatchy Company, please read the following from the latest issue of the American Journalism Review and then answer a few questions that follow.

From the AJR [excerpt]:

The [Minneapolis] Star Tribune was for generations the pride and joy of the Cowles family, who continue to exert an enormous influence on the economy and the culture of the region. Given what was to follow, the warm nostalgia for the Cowles era is understandable.

The family sold Cowles Media Co., including the Star Tribune, for $1.2 billion to McClatchy in 1998. If the newspaper had to be sold to a chain, the common wisdom went, you couldn't do much better than McClatchy, with its reputation for putting the newsroom first.

The romance lasted eight years. Gary Pruitt, McClatchy's chairman and CEO, stunned Star Tribune employees the day after Christmas last year by announcing the paper was being sold to a private equity firm in New York, Avista Capital Partners. The billion-dollar company was now a $530 million property. Pruitt explained that McClatchy got a great tax break by selling.

Shortly before the sale was announced, Anders Gyllenhaal, editor of the Star Tribune for almost five years, told his staff he would be leaving in early March to take over as editor of McClatchy's Miami Herald.

A few weeks before Gyllenhaal left, Star Tribune Publisher J. Keith Moyer announced that Nancy Barnes would replace him. Barnes had been a protégé of Gyllenhaal's when he was editor of Raleigh's News & Observer, also a McClatchy paper. Gyllenhaal had lured Barnes to Minneapolis to serve as assistant managing editor for business in 2003, and by 2005 she had become a deputy managing editor.
Estimates of the tax breaks McClatchy will receive are mostly in the $300 million range with one as low as $160 million.


Can you recall the last time the N&O or any newspaper you’ve read mentioned in an editorial that it was a beneficiary of “big business tax breaks?”

Have you read a newspaper editorial even once in your life attacking “big businesses use of high paid lobbyists to gain favors” that added: “And then there are newspapers such as this one whose ability to influence news reporting and make political endorsements is not lost on Congress when it goes to dole out tax favors?”

If you’re an “average citizen,” did you know you’d just been helping the McClatchy Company with its tax bill?

I didn’t read anything about it in the N&O. What about you?

You can read the entire AJR article here.


Anonymous said...

Actually, a search of the N&O's online archives shows a story that does mention the tax break:

December 28, 2006
MINNEAPOLIS -- Big-city newspapers, once held in high regard on Wall Street for their dependable earnings and advertising clout, have never looked so cheap.

On Tuesday, The McClatchy Co. agreed to unload the Star Tribune for $530 million -- less than half the $1.2 billion it paid for the newspaper eight years ago. A tax break of $160 million resulting from the sale makes the deal worth $690 million to McClatchy.

And I believe the tax break actually is a result of the company selling the paper for less than the purchase price -- just like if you sell stock at a price lower than you bought it. There's a benefit come tax time.

Anonymous said...

Still looks like they lost at least $370 million plus here.

I'm lost on the benefit of that transaction.

Jack said...

Perhaps McClatchy felt the the fire sale price, plus tax benefits, were better than the future operating losses on an asset that may be declining in value.

JWM said...

To Anon @ 5:48,

Thank you for pointing out the N&O did report the Trib's sale and the tax break.

As I understand it, the tax break comes in as a result of large short-term capital gains McClatchy reaped when it sold some of the K-R chain papers it bought.

The loss on the Trib sale offset the gain on the K-R sales.

The Trib sale had to be done in the '06 tax year to take advantage of the K-R gains which occurred in ty '06.

Anon @ 9:59,

It is complex and don't bet the ranch on what I say, but I think my post above gives you part of the answer.

The other part of it, as I'm told by people who know the newspaper business and tax laws, is that if McClatchy sold this tax year, '07, or later they wouldn't have had the K-R short-term profit sale gains mentioned about to use to recoup some of the loss on the Trib.

See also Jack at 9:13's comment.

Jack @ 9:13,

Nice work. You're saying in a few words what I'm saying I've been told.

Thank you all three.