Is it just me or did KGY completely go to hell when they let go of Dick Pust?
It probably didn't help. Dick had his followers, and the way the station let him go made for some hate and discontent. Of course, the media magnified that part. In defense of the station, they felt they were at a point where the move had to be made. You could debate whether they managed it well, but it was their right to do what they did. It was unfortunate that, given the career he made of the station, Dick's departure wasn't more amicable.
Beyond that, KGY wasn't keeping up, the situation with Dick notwithstanding. A couple of people there were making very good salaries, based on their years of service, and some attitudes about how radio should be run weren't keeping up with reality. If I had been smart, I should have stayed there myself... but I was a dumb kid back then. KGY was a family operation, and the Olsons had very strong ideas about how to take care of their staff. The ways they rewarded loyalty would be very hard to do today.
Until Dick was let go, very little attention was paid to their FM. It sat in a corner studio, playing a satellite-delivered country format, while the AM, maybe with fewer listeners and an older demographic, got most of the attention and was predominately live. I hadn't seen that treatment of an AM/FM combo since the early '80s. By itself, that might have helped push things downhill.
Other factors might have been the new owners' relative lack of experience when the station needed it most, and maybe some unusual programming concepts. Add the expense of the FM power increase, which might not have given them the coverage and advertising boost they were hoping for, the costs of building new studios for the FM and the construction of a new tower for the AM. They put a LOT of money into the property and then, with respect to the person involved, had to hire outside talent to promote the place.
Pick your reason. Probably, there are more. Aside from the small price they got for the AM, letting it go might help them focus on the asset(s) with the most potential. Guess we'll see how that works out.