Why the Chicago News Cooperative is closing

James O'Shea, founder and editor of the Chicago News Cooperative, told his staff that on February 26 the CNC would shut down. Or to be more specific, it would stop publishing in the New York Times and stop maintaining its website, the two forums in which it publicly exists.

Two pieces of bad news drove this decision. O'Shea was counting on a substantial grant from the MacArthur Foundation, which had helped put CNC on its feet in the fall of 2009 and had already given it a total of a million dollars. But a problem arose. The IRS has yet to rule that CNC and similar web-based news operations in other cities deserve the not-for-profit 501(c)(3) they've applied for. This hasn't been a problem for these operations, which have been able to receive through fiscal agents — which in the case of CNC has been WTTW. But a couple of weeks ago a MacArthur staff attorney said, wait a minute. He advised the foundation that until the IRS ruled for CNC, MacArthur grants should be earmarked for specific programs rather than simply to sustain the co-op. This didn't mean that CNC had no way to use the MacArthur grant to stay afloat, but it did mean a different approval process and a longer wait for the money to arrive. O'Shea found out about the delay early this past week. He was in no financial position to wait. Meanwhile, CNC had been in conversations for several months with the New York Times, for which it has produced four pages of Chicago news a week. The Times knew that CNC's financial position was precarious. O'Shea hoped the Times would pay more for the service; but instead the Times decided not to go forward at all with a shaky partner in a publishing experiment far more important to CNC than it was to the Times. On Feb 16 the Times called O'Shea and they called off the relationship. But the closing of CNC is about more than a delayed foundation grant and a canceled contract. CNC has suffered throughout from a lack of development muscle.