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