Its not strange at all.
In various law enforcement agencies, including some in this county, when someone is promoted from within to an appointed position (appointed being the operative word)there is usually a protection allowing that person to revert back to their last civil service position i.e. patrol, sgt, Lt, etc. I have found this is mostly to protect the appointee in the event of shifting politics such as the election of a new mayor or some other issue.
Obviously this is not the case here but as stated in TDW it appears he was not demoted for reasons of policy/law violation but of job performance (I have no personal knowledge just going off the article). As the article stated the policy/law issue is yet to be resolved and he is still under administrative leave pending the outcome of that issue.
Now if he had been hired from the outside directly to chief, such as the chiefs in Aberdeen or Hoquiam, the firing would have been final.