Prompted by Fairfax City Fire Chief Harold E. "Gene" Dailey's surprise decision to leave his $46,696-a-year post on June 1, the City Council has proposed significant changes in the way authority is allocated between the city's paid and volunteer firefighters.

The new changes to the fire and rescue services ordinance would limit the role of the Fire Service Advisory Committee and give the paid fire chief total control over all operational functions and personnel matters of the 97-member squad. Previously the advisory committee, a six-member support group for the volunteer firefighters, handled disputes between the volunteer and paid fire services.

Dailey said his resignation stemmed from confusion over the separation of powers between the paid fire chief and the volunteer fire chief.

"The old ordinance was ambiguous -- you just couldn't tell where authority started and stopped," Dailey, 55, said. "We're just trying to discourage the volunteers from going over the head of the paid fire chief."

Dailey said he was bothered by volunteer firefighters confronting council members or the advisory committee about problems on the force.

"It was confusing as to what power I had and I could no longer operate as things were," said Dailey.

Mayor George T. Snyder said the council had no idea there was a power struggle within the fire department, and that Dailey's resignation led them to call for the amendments in the city's current fire ordinance.

But whether the changes will encourage Dailey to stay on as fire chief is unclear.

Last week City Manager Edward A. Wyatt said he did not officially accept Dailey's resignation although he said he had no plans to ask him to stay. "He can do whatever he wants," Wyatt said. He would not comment further.

Asked whether he would reconsider his decision to leave after the council's attempt to redefine his role as the fire department's top ranking officer, Dailey said, "I haven't been asked."

"I'm not going to talk to him Dailey ," Snyder said. "That's the job of the city manager. If a council member asked Dailey to stay , you wouldn't need a city manager."

Council member Robert Lederer said it was more important for the council to clarify who was in control of the fire department than whether Dailey changed his mind about quitting.

"Whether Gene Dailey stays or not is not the main issue here," Lederer said. "Our immediate concern is the correct status of his position."

Final action on the proposed ordinance amendments is scheduled for the council's Feb. 12 meeting. Lederer said the council could probably expect opposition to the planned amendments from volunteer firefighters.

John Case, a volunteer firefighter and vice president of the volunteer firefighter corporation, would not comment on the proposed changes in the ordinance. He said it was "a city matter between the city administrator and the fire chief."

This is the second time in two years the city restructured authority within the fire department.

In July 1983, when Dailey was appointed fire chief, city volunteers agreed to relinquish control of the city fire and rescue services after years of feuding between the volunteer and paid firefighters.

Dailey, a 20-year veteran of the Fairfax City fire department, headed the volunteer force from 1966 until 1975, when he left Fairfax to serve as chief of the Winchester Fire Department. He returned to Northern Virginia in 1980 to become Fairfax City's fire department administrator, which then was the top paid position on the force but second in command to the volunteer chief.

In other matters, the council:

* Proposed a $16 million, five-year Capital Improvement Program for fiscal years 1985-86 through 1989-90.

* Proposed plans for fiscal year 1985-86, which starts July 1, include $450,000 for school building repairs, $178,000 for curb, gutter and sidewalk repairs around the city and $50,000 to synchronize and computerize traffic signals on Rte. 29/50.