ATLANTIC CITY - The state Casino Control Commission declined yesterday to renew an operating license for the Tropicana Casino and Resort.

It was only the second time in the 29-year history of legalized gambling in New Jersey that the commission has denied a license.

The casino will remain open under supervision of a retired state Supreme Court justice, Gary S. Stein.

However, Columbia Sussex Corp., which owns the Tropicana, will have to seek a buyer, said commission spokesman Dan Heneghan.

The commission also fined Columbia Sussex $750,000 for not having an independent auditing committee for nearly six months - a crucial requirement under state law.

Since taking over the Tropicana on Jan. 3, Columbia Sussex has eliminated nearly 900 jobs - about a quarter of its workforce. That led to criticism from its largest employee union, as well as many customers, that the cuts left the Tropicana dirty and understaffed.

Paul O'Gara, a lawyer for Columbia Sussex, said the company was disappointed at the ruling and would appeal it to a state appellate court.

Robert McDevitt, president of UNITE-HERE Local 54, which has been locked in a bitter battle with the Tropicana over staffing levels, said union members were pleased with the ruling.

"They're happy that this company has now been shown in the light of truth," he said. "They've been suffering under this company since January, and now the whole world knows it."

The last time the commission denied a license was in 1989, when the owners of the former Atlantis Casino Hotel were deemed to be too financially shaky. *