CRA Chief’s Severance Pay Blocked : Politics: A legal quirk gives the City Council a chance to reopen the $1.7-million deal that John Tuite negotiated before his ouster.

Still smarting over December’s $1.7-million deal to gain the retirement of former Community Redevelopment Agency Administrator John Tuite, the Los Angeles City Council on Wednesday refused to approve a final $400,000 payment and voted to renegotiate terms of the controversial manager’s ouster.

Meeting first in a closed session and later in public, council members reopened the issue by using a quirk in the law that gives them oversight of some CRA budget matters. Having exhausted its spending authority in certain accounts, the agency needed council approval to release the funds necessary to complete the buyout of Tuite’s contract--the richest such arrangement in city history.

“I don’t think the people of this city want us to collaborate in this,” Councilman Zev Yaroslavsky said. “I can’t be required to vote for something I abhor and that my constituents abhor. . . . This is a sleazy deal.”

Bob Morrish, Tuite’s attorney, warned council members that his client would consider the withholding of funds to be a breach of contract and that he would sue for damages.

“Whatever you think of him, there is an arrangement,” Moorish said.

After the council voted 8 to 2 to ask Tuite to appear Aug. 7 to discuss the renegotiation, Morrish said, “We’re obviously very disappointed. . . . We don’t think it’s a rational move in light of the additional (legal) exposure the council may face.”

Morrish said Tuite is on vacation, so he did not know if he would be willing to reopen negotiations.

The severance deal was approved by the CRA board a day before the New Year’s holiday weekend, when few City Council members were around to challenge it. Once the deal was signed, the council had no authority to intervene.

Tuite received more than $750,000 the day the agreement was signed, and it stipulated that his pension benefits would be paid in a lump sum by June 30. But when that deadline rolled around, the CRA found it had exceeded its budget--and thus was forced to come to the council for permission to retrieve the funds from another account.

Though virtually all council members said Wednesday that they were alarmed by the terms of the retirement package for Tuite, several said it may be best to pay the money and put it behind them.

“All of us were outraged at the size of the buyout of Mr. Tuite, but hopefully reason will prevail,” Councilman Richard Alatorre said. “We are exposing ourselves and the taxpayers of Los Angeles (to a lawsuit). Irrespective of how we feel, we have to look at . . . what’s in the best interest of the city.”

Tuite, 57, had held the $147,000-a-year post for four years when he was forced into retirement. Critics complained that the giant agency, with a $250-million annual budget, had neglected the interests of homeowners and small businesses in favor of large land developers in the downtown area.