Local journalism is important but I am not really sure how to fix it. Lets say we make a big fund to pay for "independent journalism" at the local level. That only works for so long until people get inside with their own axe to grind and take control. The activist class will eventually get in, become managers and corrupt the organization if its a non-profit. If its a political organization it will have political pressures. If it is a for profit it will have financial incentives that probably cant survive in the modern day in small markets.
There's no such thing as an "activist class", just people with opinions. But people with opinions are enough to kill good journalism if they can't keep them in their pants.
I think that supporting a wide spread of newspaper on the local level will alleviate all these issues in aggregate. This is what we do in Norway and I think it works quite well to be honest. My municipality of around 250k inhabitants has 4 newspapers that I am aware of, none of which feels very overtly influenced by activists nor political or financial pressures.
There are quite a few newspapers who are political and receive subsidies, but overall I think our system works quite well at providing high quality local reporting at affordable prices.