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Because officials balked at spending a few thousand dollars to repair an obscure underground tunnel, a leak turned into a torrent that caused millions of dollars in damage and turned Chicago`s Loop into a soggy ghost town, Mayor Richard Daley conceded Tuesday.

In a dramatic admission, the mayor said the city knew about the potentially disastrous leak as early as February.

He also served up the first political head in retribution.

Daley demanded the resignation of John LaPlante, the acting chief of the Department of Transportation, for not acting quickly enough to patch the trickle that ate away an underground tunnel wall and ultimately swamped downtown Chicago.

”This was not a minor oversight and the costs to the city will be enormous,” Daley said. ”This investigation is by no means complete. We are still sorting out who else was responsible.”

But Tuesday evening, in an interview in his fourth-floor office where he had returned to retrieve some personal items, LaPlante said he had been given ”conflicting advice” on the tunnel project and defended his decision not to make emergency repairs despite a staff memo urging them.

”I was given conflicting advice,” LaPlante said. ”There was the memo, but there was also a lot of verbal advice from the other side.”

As Daley described it, the damage to the tunnel was apparently caused as long ago as last year, when a private construction company installed new wooden pilings to protect the Kinzie Street drawbridge from river traffic and passing barges. Daley said pressure from driving the pilings into the river bed apparently cracked the tunnel wall, located from 15 to 19 feet below the river bottom.

The leak was discovered by a cable television company in January while it was inspecting the tunnel, where fiber-optic cable is installed. At least two city departments were notified by the company, but because of delays and foul- ups in the City Hall bureaucracy, Daley said, repairs originally estimated at $10,000 were never done.

Meanwhile, officials at the construction company, Great Lakes Dredge and Dock Co., which has done similar work for more than a century, said the job was done properly and deemed satisfactory by the city.

Daley and other city officials said they did not know if Great Lakes had been notified by his administration that the tunnel system ran dangerously close to the construction site in the Chicago River. Corporation Counsel Kelly Welsh said he was investigating the matter.

LaPlante`s fate was sealed as early as Monday, when sources close to Daley began leaking damaging information about LaPlante to reporters in order to deflect criticism away from the mayor, who so far has avoided political catastrophe.

However, the administration continued to sidestep certain questions on Tuesday, such as whether other administration officials had knowledge of the leak beforehand.

As the Daley administration picked through the political minefield, business and Commonwealth Edison Co. officials were attempting to bring the Loop back to life. Edison officials predicted that power would be back on to most areas north of Washington Street, except for the Marshall Field`s store, by morning rush hour Wednesday.

And Gov. Jim Edgar declared Chicago a disaster area, setting in motion a rescue plan that could ease the city`s financial burden. If President Bush makes a declaration similar to the governor`s, the city and other public agencies could be reimbursed for up to 75 percent of flood-related costs. That decision could come as early as Wednesday.

The sense that troubling questions remained unanswered was echoed by Edgar, who toured the waterlogged State of Illinois Center across the street from an equally damp City Hall.

A few hours before Daley dropped the ax on LaPlante, Edgar suggested that responsibility for the problem doesn`t stop with an underling.

”I`m sure that there`s going to be a lot of hindsight involved in this process. Somebody made an error, they should be held accountable and I think we all recognize that we`re the chief executive, what happens under us is our responsibility too,” Edgar said.

”I think before we start even thinking about pointing fingers for who`s going to be the scapegoat, I think we first need to get the problem resolved, then take a close look at what caused it.”

Daley`s news conference announcing the forced resignation of LaPlante, who the mayor promoted last year, resembled a political inquisition at times. It was a sharp turnaround for Daley, who on Monday reacted angrily to questions about blame.

But since then, as engineers and divers worked overtime to stop the water flow, his political apparatus struggled to staunch the flow of bad publicity for the Daley administration. According to administration sources, mayoral advisers realized Monday they had to quickly sacrifice a top aide.

On Tuesday, Daley provided reporters with detailed city memos, a chronology of the botched events and a videotape of the damaged tunnel taken in mid-January which showed water leaking, walls crumbling and a gray river of knee-deep silt.

The mayor excoriated LaPlante and offered his public case against the bureaucrat who allegedly did not take prompt action. On April 2-11 days before the flood-Daley said LaPlante learned of the potential danger in a memo from Chief Bridge Engineer Louis Koncza, who suggested work be done immediately.

At that time, LaPlante sought bids for repair work, but they came in above the $10,000 the city`s own officials had estimated for the job. So LaPlante sought new bids. Visits to the tunnel by other contractors were scheduled for Monday.

”LaPlante had to go, that`s how the game is played and everybody knows that,” said one Daley adviser.

But questions remained about why Daley ousted LaPlante while taking no action against General Services Commissioner Benjamin Reyes. Reyes` department staff was notified about the leak in February, but no inspector visited the site until March 16.

Reyes, a steadfast Daley aide whose political star rose under the late Mayor Harold Washington, is a top fundraiser and political operative for the current mayor.

Aides to Reyes said he could not be located.

According to the mayor`s chronology, Chicago Cable TV employees examined the underground tunnel in January and videotaped the damage. They notified Reyes` department in February. An inspector from General Services said he was unable to locate the site in February and did not get to the site until March 16, the mayor said.

A few days later, a Department of Transportation specialist took photographs of the crumbling walls. But the photographs were not developed until March 25, Daley said.

On April 1, staffers from the departments of transportation and general services met to discuss the problem. A day later, engineer Koncza wrote a memo to LaPlante urging immediate repairs.

In the memo, Koncza warned that unless repairs were done quickly, the city faced the ”danger of flooding out the entire freight tunnel system.”

Koncza recommended that emergency four-foot thick bulkheads be inserted into the tunnel wall. That procedure would cost $10,000 and take two weeks, he estimated.

On Tuesday, Daley said that he was angry with LaPlante for not realizing the gravity of the situation and pushing through authorization for payment for the repairs. But LaPlante said there was no indication that a crisis was imminent.

”We didn`t believe it was that serious a threat and I was led to believe by my staff that it wasn`t that serious a threat,” he said.

”People went down there to take a look. If we thought it was something very serious we would have told the mayor, and it turned out it was something serious,” LaPlante said. ”The wall had been breached in September and nothing had happened from that time until April, so we had no reason to believe it wouldn`t hold for some more time.

”I wish I had a better feel for how severe the damage was,” he added.

”I`m not sure anybody could have known that. In hindsight, it`s very easy to know those things. At the time it`s going on, it`s very difficult.”

Other top administration officials said LaPlante could have requested immediate funds from the city by asking Ed Bedore, the city`s chief financial officer.

But LaPlante, a City Hall veteran who has worked in Chicago government since 1962 in the public works field, may just have been following procedure dictated by a mayor who demands cost accountability.

Current and former city officials say that requests for repairs are often portrayed as urgent. But requests then face a number of hurdles, wending their way through several bureaucratic layers.

Sharon Gist Gilliam, who served as budget director under Washington and chief of staff for former Mayor Eugene Sawyer, said that the system is intentionally cumbersome because it is designed to protect the city`s budget. ”The problem is necessarily part of the system of checks and balances to ensure that the city and the taxpayers ought not pay for things it ought not to be paying for,” Gilliam said. ”The downside is that it tends to be a long process.

Daley said the disaster illustrates the scope of work that needs to be done on the aged and deteriorating tunnel system that snakes beneath the city`s downtown.

”It is clear that the city cannot live with a threat like this hanging over our heads,” Daley said. ”Once this immediate problem is addressed, we will review the entire underground tunnel system and consider a systemwide program for ensuring that this can never happen again.”