Former construction magnate Lino Zambito testifies at the Charbonneau inquiry on Sept. 27, 2012. (JEAN-LOUIS FORTIN/QMI Agency)

MONTREAL - Montreal's mayor rejected calls to resign Monday after an inquiry heard that a 3% cut on city contracts went directly to his political party.

Opposition leaders demanded Gerald Tremblay step down after 11 years in office following allegations from former construction entrepreneur Lino Zambito.

He told the Charbonneau inquiry that he paid 3% to middleman Nicola Milioto, a fellow contractor who collected the cash beginning in 2005.

"Mr. Milioto, to whom I gave the money, had told me that it went to Mayor Tremblay's political party," Zambito testified.

The kickback was in addition to a 2.5% payment that Zambito revealed last week - an amount he and other Montreal contractors gave to the Rizzuto crime family.

The 43-year-old said the firms had no choice but to pay if they wanted to get contracts.

"As an entrepreneur, you always have the choice to follow (the scheme) or to work elsewhere," he said.

Zambito's bombshell testimony revealed a wide-ranging system of kickbacks involving city inspectors, engineers and construction firms.

He named bureaucrats including retired city engineer Gilles Surprenant, nicknamed "GST," because he took an additional 1% cut off of all contracts.

The businessman said he paid Surprenant between $100,000 and $200,000 in cash for his part in inflating bids, skimming the difference off the top and divvying up the ill-gotten gains.

The witness said higher-ups at City Hall knew about the rot but engaged in "wilful blindness."

Opposition leader Louise Harel said the buck stops with the mayor.

"I very rarely get angry but I tell you, Montrealers are angry," she said Monday. "We are angry and we want this to end. We believe the Gerald Tremblay's resignation is the only respectable thing that he can do."

Tremblay met reporters on Monday morning and offered the same response that he has given through four years of near-continuous corruption allegations - that he's innocent of any wrongdoing.

"Every year, the chief returning officer verified our financial records and never made any complaints," Tremblay said.

"We will wait for the commission's conclusions and ... recommendations, so you will understand that I won't make other comments."

As for opposition calls that he quit, the mayor replied, "I have no intention of resigning."

Tremblay's Union Montreal party has been rocked by years of corruption allegations and his former right-hand man, Frank Zampino, was among nine people arrested in an alleged real-estate scheme in May.

The governing party's former fundraising director was also rounded up in the sweep and the mayor was interviewed by police but not charged.