Should Boston have bailed out the Bay State Banner?

In 2009, the city made $200,000 in loans to save the troubled newspaper. Four years and only one payment later, was it the right thing to do?

Melvin Miller and the Bay State Banner celebrated the paper’s 40th anniversary in 2005.JANET KNOTT/GLOBE STAFF/FILE 2005

Over the years, Melvin B. Miller plowed thousands of dollars of his own money into the Bay State Banner to shore up the weekly newspaper he founded and owned. But by the summer of 2009, the longtime voice of Boston’s African-American community was on the brink of failure.

Then, Mayor Thomas M. Menino, in the midst of a contentious reelection campaign, threw a lifeline to the Banner, engineering a pair of loans totaling $200,000 from an arm of the Boston Redevelopment Authority.

Some four years later, Menino has completed his fifth and final term, and left office. But the Banner has made only one payment on the loans, which, with interest, have ballooned past $280,000, according to documents obtained by the Globe through the state’s public records law. Those documents also show that the paper continued to lose money in subsequent years even as its debt to Miller, from earlier loans he provided to the paper, shrank by more than $200,000.

This history has not only spurred concerns from a city financial watchdog about how the Banner loan was made and administered, but also raises the broader question of under what circumstances taxpayer money should be risked to support private enterprises. At the same time, it shows that the economic forces battering daily newspapers across the country are also squeezing weekly and community publications.

The Banner lost more than $400,000 between 2009 and 2012 before returning to profitability last year, when it earned about $40,000, according to financial records. Miller, meanwhile, has put a second home in New Hampshire up for sale to pay back the city. Miller did not respond to repeated interview requests, and, when finally reached, hung up on a reporter.

The Boston Loan Development Corp., the BRA affiliate that made the loans, said its decision was based on sound financial analysis and it has protected taxpayers’ investment. But the Boston Finance Commission, the city’s fiscal watchdog, has called for an audit of the process that approved the loans.

“It certainly looks like the city did everything possible to help this gentleman through a tough time,” said executive director Matthew Cahill. “But this sounds like across the board this is an example of bad business practices and an example of what not to do.”

Founded by Miller in 1965, the Banner claims to reach more than 180,000 people a week through print and Web combined. Malia Lazu, executive director of Future Boston Alliance, a nonprofit civic and economic group, said the paper continues to be relevant and influential with African-Americans. People from the Financial District to Mattapan’s church pews want to be seen on its pages, Lazu said.

“This is a paper that’s read in the black community,” said Lazu.

But the Banner, like newspapers everywhere, has struggled in recent years, hurt by the last recession and technological changes that have transformed reader habits, undermined advertising revenues, and created more competition.

The Banner was barely profitable in the year ending June 2008, according to financial statements submitted in support of the loans. By the time Miller turned to the city for help in the summer of 2009, the Banner was on track to lose more than $170,000 on revenue of about $1.3 million, and had briefly shut its doors.

Miller, 85, has long played a prominent role in Boston. In addition to being the Banner’s editor and publisher, he sits on the boards of OneUnited Bank, one of the largest black-owned banks in the country; MassINC, the Boston think tank; and the Huntington Theater Co. He is a Boston University emeritus trustee and an original commissioner of the Boston Water and Sewer Commission.

Menino strongly supported the loan, despite criticisms that it could compromise the editorial independence of the Banner as it covered the mayoral election. The paper did not make an endorsement in the race between Menino and City Councilor Michael Flaherty.

“This is about me trying to help a business that is very important to the minority community,” Menino said in a 2009 interview. “I will step up anytime and help any business in trouble in this city. I’m trying to help a business survive. Tell me if that’s wrong.”

The BRA says it did the right thing.

“The loan to The Bay State Banner was made to support an African-American community institution as it weathered a bad economy and transformed itself to meet the new realities of the publishing world,” spokeswoman Melina Schuler said in a statement. “The newspaper is still in operation today.”

The Boston Local Development Corp., created in 1979 to help Boston businesses create and retain jobs, acted quickly to approve the Banner loan. It typically takes the agency 30 to 60 days to approve a loan; the Banner’s loans were approved in 19 days.

The loans, which carried a 9 percent interest rate, were described as a bridge to private financing, according to the application prepared by Next Street Financial LLC, the Boston firm retained by the Banner to recruit investors. They were scheduled to be paid off in two years.

But investors Next Street lined up eventually pulled out of the deal, although it is unclear why, according to the BRA. Ronald L. Walker 2d, the Next Street president, declined requests to be interviewed.

Meanwhile, conditions for the newspaper industry remained challenging. The Banner’s advertising revenues fell 17 percent to about $900,000 in 2013 from $1.1 million in 2009.

The Banner did not pay off the loans when they became due in November 2011. The following January, the Boston Local Development Corp. restructured the loans and set monthly payments to about $1,500. The Banner made only the first payment, according to the BRA.

During this period, the Banner cut its obligations to Miller substantially, although it’s unclear how they were reduced. Not long before the Banner sought the city’s help, the paper owed Miller about $369,000, according to financial records. By the summer of 2012, that debt had shrunk by $210,000 to less than $160,000.

The Banner lost another $162,000 in the year ending June 2012. In October of that year, the Boston Loan Development Corp. declared the paper in default.

Miller pledged as collateral his second home in Plainfield, N.H. Built around 1990 on 205 acres, it is an unusual, 5,000-square-foot log home with five bedrooms and three bathrooms. The house, priced at $1.45 million, has been on the market about six months.

The BRA said it expects the home to sell and the loan, plus interest and penalties, to be paid in full. In a Jan. 9 letter — after the Globe began inquiring about the delinquent loan — the authority asked Miller to agree to a plan to pay the interest on the loan until the home is sold.

The Banner’s future is unclear. It regained profitability last year, but only after slashing expenses by more than 25 percent, according to financial records. In addition, Miller also appears to be putting his own money into the paper again. The Banner’s debt to Miller increased by about $19,000 last year, records show.

Some analysts suggest the paper could succeed as a Web-only product, which would save hundreds of thousands of dollars a year in printing costs. But whatever the model, it’s clear the Banner can’t lose money at the rate it did in recent years, said Rick Edmonds, a media business analyst the Poynter Institute, a journalism education center in St. Petersburg, Fla.

“I don’t think that’s sustainable,” Edmonds said. “The question is, does the publisher want to go on indefinitely putting his money into the paper?”