The one loss that would be felt the most if newspapers went away:
I understand that there are hyper-local blogs run by gadflies who can cover some of this stuff. But the institutional support of a newspaper, while not technically necessary for local coverage to thrive, is nevertheless very important. A financially healthy newspaper has some institutional memory, so that when the lone hyper-local blogger goes on vacation, or moves to a new neighborhood, or gets paid off by the local developer, someone is there to continue important coverage.
A healthy newspaper has an attorney on retainer so that when a powerful local threatens a frivolous liable suit if a controversial story runs, the story gets run -- I've known local news bloggers who uniformly didn't publish such stories when confronted, though they were in the right, because who wants to get sued over their blogging hobby?
A healthy newspaper bundles content that people want to read, like the score of last night's Lakers game, with content that few want to read -- the complicated story about the conflict of interest the city attorney has as he negotiates the retirement compensation of the fire union members, for example -- but that is useful to have in the newspaper because it forces elected officials to be more accountable.
Finally, no matter how dedicated a reporter you are, it isn't fun to sift through a 400 page planning commission agenda or search through an archive of property deeds 50 miles away at the county seat. People do these mundane tasks for pay, not as a hobby. One or two local blogs might attract enough advertising to support a half-time reporter, but none can support anything approaching the staff of a healthy newspaper.
As newspapers continue to lose money and layoff employees, the loss of local government watchdogs is what concerns me.
Perhaps in time, bloggers will organize. One will do the school board and another the planning commission and somebody else the county council and so on. Reading all the blogs would be the same as reading the newspaper. Until then, though, nobody can really duplicate what the newspaper does in its local-government-watchdog role. Nobody else has the dedicated stafff, the institutional memory and the experience in news bundling.
That doesn't mean newspapers do as good a job as they could or should in reporting on local government. We report too much routine stuff and don't do enough digging. That's where dedicated bloggers with the time and interest can start to fill in the gaps.