Updated: The New York Times (NYSE: NYT) will rely on a new public news co-op for coverage when its expanded Chicago edition launches Nov. 20: the Chicago News Cooperative, a nonprofit by a group of Chicago journalists including Jim O’Shea, former managing editor of the Chicago Tribune. Lead funding comes from the John D. and Catherine T. MacArthur Foundation. The startup will have a standalone newsroom but will be part of the nonprofit that operates public television station WTTW, Ch. 11, which is a founding CNC partner. (The release is embedded below.)

CNC will be paid to provide two pages of commentary and news twice a week to the Times, but the startup has more ambitious plans—including launching a subscription site of its own in early 2010 to be called Chicago Scoop with local and state news, commentary and investigative reporting. The subscription will take the form of a “small membership fee” that will include other benefits.

The NYT relationship with CNC may bode well for the Warren Hellman-backed Bay Area project with KQED and UC-Berkeley. The paper launched its expanded Bay Area Report with coverage by its San Francisco bureau but Scott Heekin-Canedy, NYT president and GM, told me he prefers local partnerships. Unlike the Bay Area Project, which will rely heavily on students CNC emphasizes “technologically-sophisticated journalists and commentators who adhere to high journalistic standards as they cover the city, county and state.”

CNC plans: CNC starts life under the wing of the nonproft but the founders plans to switch to a different kind of setup in 2010 they describe as a “private social entrepreneurship corporation.” The low-profile limited liability corporation, or L3C, becomes an option in Illinois Jan. 1. CNC hopes to be self-sustaining within 5 years by raising money with fees of less than $100 a year, advertising and services.

Staci adds: The way I phrased the distinction between the two projects is not meant to suggest that the Bay Area Project’s goals are any less professional or that it is a purely student project. KQED’s staff is an important part and the project plans to hire professional journalists, some well known. Interviews and conversations with some of those involved or considering it highlighted the potential value of the School of Journalism’s contribution (many students are pros returning to school). But a project spokesman who contacted me downplayed student involvement, writing, “some of their students may make some contributions—much like interns make contributions to any newsroom. However, the vast bulk of reporting will be done by pros.”

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Public Service News Cooperative is Launched in Chicago

A group of Chicago journalists committed to public service journalism announced Thursday the formation of the Chicago News Cooperative (CNC), an organization designed to provide high quality, professionally edited news and commentary to the Chicago region on the Web, in print and over the airwaves.

CNC Editor James O’Shea, the former editor of the Los Angeles Times and former managing editor of the Chicago Tribune, said CNC’s official start coincided with the acquisition of its first customer, The New York Times. CNC journalists will provide two pages of CNC branded news and commentary to The New York Times twice a week in its Chicago editions on Friday and Sunday. The coverage is scheduled to start Nov. 20.

“At a time of declining resources in newsrooms across the nation, journalists must adapt to new technologies and devise some creative, innovative ways to fulfill our obligations, “ O’Shea said, “so we can hold our government accountable to citizens and restore to our journalism the standards desperately needed in these troubled times.”

CNC will operate a stand-alone newsroom while developing arrangements to collaborate with other media in Chicago to share resources