MAYOR MILAN BANDIC, THE KING OF ZAGREB

C O N F I D E N T I A L ZAGREB 000120 SIPDIS E.O. 12958: DECL: 03/04/2019 TAGS: PGOV HR SUBJECT: MAYOR MILAN BANDIC, THE KING OF ZAGREB REF: A. ZAGREB 00098 ¶B. ZAGREB 00059 ¶C. ZAGREB 00005 Classified By: Poloff Daniel Meges for reasons 1.4 (b) and (d) ¶1. (C) SUMMARY Zagreb Mayor Milan Bandic of the Social Democratic Party (SDP) will be running for re-election to his fourth term. He has a comfortable lead in recent polls and is an experienced campaigner, which will make him very tough to beat in the May election. Frequently criticized for his authoritarian and at times secretive management style, Bandic is being pushed by SDP leaders to increase the transparency of his administration, especially concerning his almost complete executive control over Zagreb Holding (ZH),the quasi-private city investment corporation. We expect that, should he gain a fourth term, it would feature a greater role for the city assembly and more accountability to the public regarding spending levels and priorities. END SUMMARY Media Savvy, While Co-opting Critics ¶2. (SBU) Bandic has consistently cultivated an "Everyman" image. Photographed nearly every day meeting with the common man, women, or child, Bandic leverages his Herzegovinian working-man roots to burnish his credibility with Zagreb's blue-collar voters. He attends everything--receptions, openings, charity functions, civic events, etc--typically staying for 15 to 20 minutes, where he makes a few positive comments, shakes hands, and then moves on to the next event. Bandic also frequently co-opts prominent critics by offering them lucrative positions in his administration. Last year Bandic hired former critic Pero Kovacevic into Bandic's public investment vehicle Zagreb Holding. (Note: Kovacevic was previously a Croatian Party of Rights (HSP) Zagreb branch member who still flirts with the notion of running for mayor of Zagreb as an independent. End Note) In late 2007 he asked a charming but openly critical member of the city assembly, Iva Mia Erak, to become his new primary press spokesperson. (Note: Erak, a former beauty queen and represented Croatia in the Mrs. Globe International beauty pageant in 2005. End Note) Critics Point to Style Rather Than Substance ¶3. (SBU) Bandic's critics argue that he runs the city in an authoritarian and at times secretive manner, keeping major decisions and projects out of the deliberative process of the city assembly and confined to a small loyal inner circle. Changes in the law on local municipal financing that took place in 2007 greatly increased Bandic's reliance on the quasi-private city investment corporation Zagreb Holdings (ZH) to facilitate public investment. ZH's board consists only of Bandic, and in the past all key executives were picked by the mayor. (Note: A separate legal entity--or special purpose vehicle--wholly owned by the city, ZH consists of 22 separate companies, including the city railways, water utility, etc. End Note) Bandic uses the ZH to absorb many of the city's borrowing and liabilities, removing them from the formal city budget where they must be approved by the city assembly. In this way Bandic can more easily control public spending. For example, ZH will borrow from local banks and build new schools with a contract in hand that leases the schools back to the City of Zagreb for twenty-years. The city budget will show the expenses associated with the leases, but the loans for schools remain off-budget. ¶4. (SBU) Bandic also closely manages the zoning decisions to allow for new construction--both residential and business. Many suspect that Bandic leverages zoning decisions to generate political support for both him and the SDP party-coffers. The main players in these decisions, all members Bandic's inner circle, hold powerful city executive positions they gained as result of Bandic's nominations. They are deputy mayor Ivo Jelusic, director of city finances Slavko Kojic, director of city zoning Davor Jelavic, and the director for education, sport, and culture Dusko Ljustina. Together, these personalities manage nearly every major project that leads to the city's modernization and expansion. Scandals Haven't Tripped Him Up ¶5. (SBU) Bandic has maintained his popularity despite a steady stream of minor scandals that have marked his third term. Some of the most notable controversies include the refurbishment of the interior courtyard at Cvjetni Trg, the beating of former city road manager Igor Radjenovic, and the construction of the new Zagreb arena. Bandic suffered months of negative press in mid 2008 when he pushed through the re-zoning and myriad of permits for his personal friend and local developer Tomislav Horvatincic to renovate the interior courtyard of one of Zagreb's main squares--Cvjetni Trg. The project, including a controversial underground garage, was approved despite a grassroots campaign against the project which gathered 50,000 signatures and nearly 236 legal motions to deny the project various permits. Bandic either ignored or legally pushed aside the obstacles to this project. In the fall of 2008, SDP insiders forced Bandic to oust his close associate Slobodan Ljubicic from his position of CEO of ZH. Ljubicic's resignation came several months after a vicious attack on Igor Radjenovic, a former director of Zagreb Roads--a city-owned entity responsible for city road construction and maintenance that is also part of ZH. Widely viewed as mob retaliation for a business deal gone wrong, the attack showcased some of the under-handed business dealings that took place under Ljubicic's watch at ZH. In December 2008 and January 2009 "irregularities" in the construction of the new Zagreb sports arena--recently showcased during Croatia's hosting of the World Handball Championships--left the new arena over budget, behind schedule, and lacking a final permit only days before it was due to host events. Could City Finances Eventually Be His Achilles Heel? ¶6. (SBU) The economic crisis certainly will not spare Zagreb, and the off-budget maneuverings of Bandic could lead to some unpleasant surprises over the next twelve months. Moody's downgraded the city water utility--part of ZH--in November 2008 owing largely to a significant increase in ZH's indebtedness in the past year as well as its inability to maintain cash-flow levels and meet its debt repayment obligations in light of the softening economy. Because the City of Zagreb has guaranteed most of ZH's borrowing (and would ultimately assume most of its liabilities),the city's credit rating also diminished. Local media have also commented on the unrealistic projections that are part of the 2009 budget for Zagreb, which assumed that growth of the city economy would be over 4%. However, officials claim that the city still has comfortable levels of cash reserves resulting from unspent funds from previous bond issues. Tough to Beat ¶7. (U) Early polls put three-time mayor Bandic well ahead of all other candidates for the mayorship of Zagreb. Polls conducted by the PULS agency in early January showed that he would easily get to the second round, where he would garner around 60% of the vote. In polling simulating the first round of local elections, only Radimir Cacic, a member of the Croatian Peoples Party (HNS),came close to matching Bandic's first round support, but would only garner approximately 40% in the second round. Other candidates for mayor, independents Tatjana Holjevac and Miroslav Rozic, would be unlikely to reach 10 percent in the first round. The candidate of the Croatian Democratic Union (HDZ) Jasen Mesic (no relation to President Stjepan Mesic) polls just over 6%. Other public opinion polls conducted by Promocija Plus in early February further indicate that Bandic has the highest popularity of any of the contenders for mayor of Zagreb. Only Cacic, who dropped out of the mayoral race in mid-February (reftel A),is close to Bandic in terms of national popularity and name recognition. ¶8. (SBU) The HDZ's strategy to create an anti-Bandic block that would seriously undermine Bandic's re-election prospects seems unlikely to materialize. The HDZ looks to have the support of the Croatian Peasants Party (HSS) and the Croatian Social Liberal Party (HSLS). But it failed to rope in the HSP and the HNS, the second strongest party in Zagreb, which will make it difficult for the HDZ to secure Mesic a place in a second round run-off election. SDP city-assemblyman Jurica Meic noted that the Zagreb branch of the Croatian Pensioner Party (HUS) would also back Bandic's candidacy. Furthermore, without Cacic it is more likely that Bandic could win an outright majority in the first round. However, should Bandic fall short of the 50% needed to win outright in the first round, the absence of Cacic makes it possible for one of the independent candidates to squeak through. At that point the HDZ-HSS-HSLS and HNS will either be forced to let Bandic win easily, or push their backers to get to the polls and support an alternative independent candidate. ¶9. (C) Last year's dQtente between SDP chief Zoran Milanovic and Bandic provided Milanovic with internal support for his continued leadership of the party, while Bandic gained full support of party leaders for re-election and access to the party election infrastructure. In a lunch with the Ambassador in February, Milanovic discussed at length the attention the SDP has paid to improving the effectiveness of its party infrastructure and its ability to turnout the vote in May, and nowhere is the SDP's party machine more developed than in Zagreb. Slim Prospects For Larger Stage In Near-Term ¶10. (SBU) It is unclear if Bandic harbors dreams of higher office; however he is unlikely to get full SDP support in the near-term for moving on to higher political offices. SDP General Secretary Igor Dragovan emphasized that it would not be feasible for Bandic to ask for the party support for his campaign to be reelected mayor only to seek the SDP nomination for the Croatian Presidency a few months later. Bandic, while quite popular in Zagreb, doesn't poll that high nationally and in questions that directly reference Bandic as a presidential choice, he polls in sixth place with about 6% support. We also expect that any Bandic presidency campaign would be heavily burdened by some of the scandals and controversies that clutter his past. Biographical Points: ¶11. (U) Born in December 22, 1955 in Grude, now part of Bosnia-Herzegovina, Bandic received his diploma from the Political Science Faculty of University of Zagreb in the late 1970s. He met his now (ex)wife Vesna while attending university, and they have one daughter, Ana-Marija. The couple officially divorced in 1996, but the divorce was only a formality to facilitate his wife's purchase of a long-time family apartment in Zagreb that she would have forfeited if she were married. The couple continues to live together, and Bandic typically introduces Vesna as his wife. The local media does not characterize him as philanderer. He is known to work long hours and once was hospitalized for more than a week after what has been described as minor stroke during a city assembly session. He frequently walks his two golden retrievers in Zagreb and regularly runs to the top of the local mountain, Sljeme, on Sundays after church. ¶12. (C) COMMENT We expect that a fourth term Bandic administration would look quite different than his third. The senior SDP leaders have insisted that more accountability be brought to ZH's inner workings, and the installation of Ivo Covic as the new ZH CEO brings a no nonsense business approach to its management. Since then, spats between Covic and Bandic over the level of ZH spending in 2009, management reshuffles that sidelined some Bandic loyalists, and the funding a handful of specific projects clearly show that Covic is not beholden to Bandic. Furthermore, Milanovic told our Ambassador that the SDP has carefully selected "honest and decent people" to run for Zagreb's city assembly in May. This represents an obvious step by senior SDP leadership to lessen Bandic's singular grip on city management and to instill greater transparency in city governance. Likely HNS mayoral candidate Alenka Kosisa Cicin-Sain recently lamented that it is quite unlikely anyone will unseat Bandic, but opined that HNS and SDP city councilmen would be better positioned to control him after the election. Still, Bandic represents the SDP's best chances of retaining the capital and showcasing its ability to successfully manage a major enterprise--key pillar in the SDP's ability to eventually win national level parliamentary elections. At this point, we expect Bandic to be sitting the mayor's seat for another term. END COMMENT BRADTKE