Charter Schools, Now Charter Cities?

July 1, 2011; Source: Reuters | Paul Romer says he is an ideas entrepreneur. At the Aspen Ideas Festival, Romer described his new nonprofit that is promoting the concept of “charter cities.”  Romer’s nonprofit provides independent advice to nations interested in the idea of establishing charter cities, defined as “special reform zones that allow governments to quickly adopt innovative new systems of rules, rules that can be markedly different from those in the rest of the country.” 

It might sound a little flippant, but the comparison with charter schools is apt, as charter schools are allowed to operate under purportedly innovative rules different than the rest of the schools in a public school district. Romer told his fellow idea entrepreneurs at Aspen that Honduras looks like it might be the first country to establish a charter city. The plan for these new cities has three fundamental elements:

  1. Land comes from a host country.
  2. People come from a source country.
  3. The assurance that the charter will be respected comes from a guarantor country.

At Aspen, Romer’s interviewer suggested that the guarantors of the new charter city judiciaries could be “lovely place(s)” like Canada or the Netherlands, and even on the Charter Cities website, a hypothetical charter city in Mauritania might be guaranteed by Norway. The concept has a big dose of utopian urban planning and even social engineering, but it is with a lot of private market concepts. For example, Romer suggests that charter cities’ “infrastructure could be financed by private investors who collect fees for the services they provide. For example, the municipal water system could be built and operated by a firm like Suez or Aquas de Barcelona that earns a return by charging users fees.” 

Romer’s (c)(3) says that it is supported by philanthropy and won’t take consulting roles paid for by governments or by an entity with “any financial stake in the development of a charter city.”  Romer’s nonprofit looks a little odd on its 2010 990: There are only four board members, including Romer (who himself is the son of former Colorado Governor Roy Romer), Dave Whorton (whose bio calls him a “serial entrepreneur” and lists his involvement in numerous venture investment and social entrepreneurial groups), and Anthony Bryk (Carnegie Foundation for the Advancement of Teaching). 

Its finances are distinctive: It was apparently started with a $345,000 loan from Romer, but as of August 31, 2010, it had a fund balance of negative $353,911, based on total revenue of $157 (down from total revenues of $325 in 2009) and total operating expenses of $50,675.  Evidence of the philanthropic support Romer hints at appears to be a little thin as of the nonprofit’s most recent 990.  Maybe the philanthropic support emerged after the 2010 fiscal year, and hopefully the incipient charter city in Honduras has a more robust financial statement to offer.— Rick Cohen