The big worry is that this doesn't work for local news at all. The nitty gritty details of governance happen at the local level - municipal and state/provincial legislatures. Journalism on that stuff doesn't scale.
Local news, supported locally is possible.
Berkeley has 350,000 people in it. It's also eighteen square miles in size. The entire Portland-South Portland-Biddeford MSA in Maine is about half a million people and it's two thousand square miles in size. And it certainly wouldn't in my hometown in the Lakes Region of Maine, with a population across four towns in the school district of about 15,000 people across a little under two hundred square miles.
The problem devolves to income inequality and the unsustainable nature of community-driven efforts because of it--nobody can afford it!
The Guardian has 300,000 members [this article], which is 0.4% of the population of the UK. (And arguably, the better denominator would be the entire anglophone world.)