The United States' first openly lesbian big-city fire chief was demoted without severance pay Friday amid allegations of discrimination and sexual harassment.

City officials approved the deal that stopped short of firing Bonnie Bleskachek to avoid further costly court action, Mayor R.T. Rybak said. The City Council voted 8-5 to approve the deal.

"She will be completely and permanently stripped of ever holding leadership or management in the city," the mayor said. "She has been severely and significantly demoted, and her pay will be cut by $40,000."

Bleskachek, 43, has denied wrongdoing, but the mayor said she will not contest the demotion.

Hailed as a trailblazer when she was promoted to the top job two years ago, Bleskachek's tenure was troubled. Four firefighters — three women and a man — sued, alleging various acts of discrimination and sexual harassment.

This summer, an investigation by the city's Department of Civil Rights found it likely that the department gave preferential treatment to lesbians or those who socialized with them.

The city has spent more than $410,000 on the investigation, legal settlements and compensation for Bleskachek since she went on paid leave March 22.

Bleskachek's attorney, Jerry Burg, did not immediately return a phone call from The Associated Press.