Update: 4:55 p.m. State rejects Atlantic City's plan.

ATLANTIC CITY _ The state of New Jersey has rejected Atlantic City's recovery plan, saying it is not likely to achieve financial stability for Atlantic City," triggering what could be an imminent state takeover.

The state called the plan "ambitious" but "deficient" and "speculative."

State officials said the decision was based "not only on what is in the plan submitted by City is deficient, but also on what the City does not have in its plan," including a proposed balanced budget for 2017 that complies with all conditions of the Local Budget Law."

Tammori Petty, spokeswoman for the Department of Community Affairs, said the next step will be for the Local Finance Board to consider "whether to assume powers of the governing body that may be substantially related to the City's fiscal condition or financial rehabilitation and recovery," as outlined in the Municipal Stabilization and Recovery Act. In other words, the state takeover.

Asked if the state would move for an immediate takeover, Brian Murray, a spokesman for Gov. Christie, said in an e-mail, "We're looking at this detailed report, just as you are, and will not be commenting at this time."

Atlantic City Mayor Don Guardian, attending a huge gala of the city's business community at a Caesars ballroom about an hour after the state's decision was revealed, said it was "riddled with inaccuracies."

Guardian, who a day earlier dressed as George Washington for Halloween and said he was fighting for his city's independence, said the battle with Trenton would continue.

Guardian said DCA chairman Charles Richman had told him the state would present their findings to the Local Finance Board to "determine what part of the city government we will be taking over."

Guardian said his staff would be working through the night to address the state's decision, and that more information would be presented Wednesday afternoon. An official statement said the state had "truly missed a golden opportunity" and asked the state to reconsider.

The decision was deeply disappointing to city officials, who noted that the state never discussed any of its findings with its advisers over the last five days.  The city has the right to appeal the decision to the Appellate decision of Superior Court, and City Council President Marty Small said the city would appeal

A takeover would essentially sideline the Mayor and council.

Charles Richman, commissioner of the state DCA, said in the 75-page decision that the city's plan underestimates debt service, overstates property tax revenues, and that key components of the plan, including a proposed sale of Bader Field to the Municipal Utility Authority are "speculative."

The state criticized the 123-page plan for lacking specifics, and said the idea of having the MUA issue bonds to finance the Bader purchase could make the city vulnerable to that debt.

Councilman Jesse Kurtz said: "Plan or no plan, the debt needs to be taken care of. If they're not going to accept this plan we need to put bankruptcy on the table to handle the debt and actually handle the finances."

Assembly Speaker Vincent Prieto, who championed the city's cause in Trenton, called the state's decision "disappointing."

"Taxpayers better now beware," Prieto said. "State takeover of school districts have been disastrous. The administration needs to immediately detail whether a takeover would cost taxpayer money and how much."

He called on all future decisions to be "completely transparent."

The decision caused some immediate confusion inside City Hall.

Jitney driver Frank Becktel, a close watcher of city government, said, "I don't know what the state's decision is. Are they telling us what they're going to do? Or are they telling us they don't like what Atlantic City wanted to to do."

Here's a link to the full decision.

City Councilman Frank Gilliam, who voted against the city's plan and has complained of a lack of transparency, said in a text message: "Now that all the drama is over it's time to get to work in a real spirit of a partnership. ."

But the drama seemed likely only to continue.

In a release, DCA spokeswoman Tammori Petty said the state rejected the plan because "The City has taken virtually no concrete actions during the course of the past 150 days to begin to turn its budgetary problems around and indicate that it has the capability to make the hard decisions that will be necessary to stabilize the City's finances and attract investment that will propel the redevelopment of the City."

While some reductions have been made, the state said, "what has been done and what is being proposed over the next five years will not be enough."

"I would have much preferred to leave management of the City's recovery in the hands of its municipal officials," Richman wrote in the plan. "However I am constrained by the Plan the City has placed before me.
"The enormous problems confronting the City did not occur overnight. City leadership has had ample time to improve the City's financial condition yet has avoided doing so in any meaningful way."

In addition, the statement said, " The City has not shown evidence that it has secured  an agreement with the casino properties for the allocation and collection of their  Payment In Lieu of Taxes as required by the "Casino Property Tax Stabilization Act."

That is a reference to Borgata Hotel and Casino, which has been withholding its quarterly tax payments pending resolution of a$150 million tax appeal refund due the casino. A tentative deal had been reached, but Borgata would not put it in writing, and it was unknown whether the casino would continue to withhold payments under the PILOT program that begins in 2017.

At the gala, Gary Hill, executive director of the Metropolitan Business and Citizens Association, which was installing its 26th slate of officers, said the business community had supported the city's plan. "It's very sad when the state is trying to micromanage our issues and our economy."

Miss America, Savvy Shields, also attending the gala, had no comment.

This story is developing.

Earlier in the day Chris Filiciello said the city made the $9.3 million debt payment due Tuesday without issue.


Say what you want about Mayor Don Guardian and Atlantic City's scrappy fight against a takeover, the man has never lost his sense of humor. Or the ironic sensibility of a history major.

On the eve of the New Jersey's decision on whether to accept or reject the city's 123-page fiscal recovery plan, Guardian showed up for Halloween dressed, naturally, as George Washington and declaring himself doing battle for his city's independence.

At one of the city's "Trunk or Treat" events, he told D.J. Ken Schaffer, below, I'm dressed as George Washington, fighting for Atlantic City's independence!"

If the state rejects the plan and moves for a takeover, it can seize city assets, take over government functions, hire and fire, and rip up union contracts. Expect a lot of "taxation without representation" protests to ensue. And a court battle.

The decision on the plan is due by the end of the day Tuesday from the Department of Community Affairs in Trenton. It caps a nearly year long tug of war with the state over the future of Atlantic City, during which the city teetered on the edge of bankruptcy but managed to pull back from the brink and pay its bills. City workers agreed to defer paychecks in April and then to a monthly, instead of bimonthly, pay schedule. Many of the city's taxpayers even showed up early to pay taxes.

Underscoring that Tuesday was a $9.3 million debt payment due Tuesday that was paid without fanfare by the city, said Chris Filiciello, the mayor's chief of staff.

At various times, both Gov. Christie and State Sen. President Stephen Sweeney called for an outright takeover, but Sweeney was unable to get the assembly to embrace his Senate takeover legislation. The battle also included a January press appearance by all three men - Christie, Sweeney and Guardian - which promised a kumbaya moment but ended up being interpreted as a betrayal by Atlantic City.

Although Sweeney had assured them that the governor was agreeing to a compromise plan, Christie at the press conference read language from the stronger bill calling for a vast takeover and did not waver from that.

Eventually, after forging alliances with North Jersey legislators, including, crucially, Assembly Speaker Vincent Prieto, D-Hudson, Guardian was able to get the 150 day reprieve written into the takeover bill. At the time, most thought it would lead to an inevitable takeover, including Christie, who mocked the deadline and A.C.'s ability to meet the terms by saying, "Tick tock, tick tock."

Read the Inquirer's editorial here.

Read my weekend take on the odds of a state takeover, and how the political landscape has shifted in the last 150 days here.