February 19, 2012; Source: New York Times | Just a few weeks after California’s Bay Citizen decided to pursue merger talks with the Center for Investigative Reporting in Berkeley, the Chicago News Cooperative (CNC) has announced it will suspend its operations as of February 26, citing problems with funding and uncertainty about its potential to receive tax-exempt status from the Internal Revenue Service.

While the Bay Citizen is rumored to be “flush” with cash but suffering from a leadership void, the CNC apparently found itself underfunded for the rigorous and challenging business development effort a sustainable media site would have required.

Here is a letter from James O’Shea, the CNC’s editor and CEO, explaining the decision to suspend operations. The move came, reportedly, in the wake of a decision by the project’s main funder, the John D. and Katherine T. MacArthur Foundation, to change the types of grants the CNC could qualify for, thus limiting its funding potential. Like the Bay Citizen, the Cooperative has been in a close relationship with the New York Times. Both outlets have recently been contributing multiple pages of content to regional editions of the Times on a weekly basis. After the Cooperative’s philanthropic dollars petered out, the CNC did ask the Times to contribute more financially but apparently both concurred that such an arrangement was not wise.

Media blogger Robert Feder suggests that the problems at the CNC go beyond troubles with funding, but we are not close enough to the situation to judge the accuracy of any of his assessments.

As these two very young models of nonprofit journalism have both failed in their first attempts, a more comprehensive look at their finance and leadership models is deserved, despite the fact that the stories appear quite different on the surface. –Ruth McCambridge