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A file photo of Atlantic City's casino-lined skyline.

(The Associated Press)

TRENTON -- Gov. Chris Christie's administration announced Tuesday it rejected Atlantic City's five-year financial recovery plan, putting the troubled seaside gambling resort one step from a state takeover -- a fate local officials vow to resist.

Charles Richman, commissioner of the state Department of Community Affairs, which was in charge of reviewing the proposal, said in a report that the plan "is not likely to achieve financial stability" in the city.

"I would have much preferred to leave management of the city's recovery in the hands of its municipal officials," Richman wrote in his decision. "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."

READ: The state's full decision

But the plan didn't immediately trigger the takeover that Christie has long called for and that many city leaders and state lawmakers have fought for months to avoid.

Tammori Petty, a spokeswoman for the department, said the next step is for New Jersey's 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."

Brian Murray, a spokesman for Christie's office, said: "We are reviewing the extensive report, along with everyone else, and will not be making any statements at this time."

City Council President Marty Small, a Democrat, told the Associated Press the state's decision is "misinformed, misguided, and biased."

"The fix was in, and it will be dealt with," Small said. "This is far from over."

Small and Mayor Don Guardian, a Republican, said in a joint statement that the city is "truly disappointed that the state did not recognize the value of this thoughtful and comprehensive plan."

Guardian had previously said the city would appeal a takeover in court. He and Small said Tuesday the city is "reviewing all of our options."

"We will fight this until we cannot fight any longer," they concluded.

State Assembly Speaker Vincent Prieto, the lawmaker who led the fight in Trenton to stave off a takeover, said the plan "should have been approved."

"I doubt the state can do better," Prieto (D-Hudson) said in a statement. "Taxpayers better now beware. State takeovers of school districts have been disastrous."

Atlantic City has been stung by the closing of five casinos in recent years, which caused its tax base to shrink by more than 70 percent and blew a $100 million hole in the city budget.

City and state officials bickered for months about how to keep the city from falling into bankruptcy -- which experts said would cause towns across the state to see their credit ratings drop.

In the end, Christie signed a rescue package in May known as Municipal Stabilization and Recovery Act. It gave the city 150 days to come up with a five-year plan the state could approve or face a takeover -- which would allow the state to renegotiate union contracts, restructure debt, sell off city assets, and more.

The result was a 120-page proposal that calls for 100 job cuts, early-retirement for some employees, a tax settlement with casinos, and a plan to sell the former Bader Field airport site to the city's municipal utilities authority for $110 million, among other cost-saving measures.

But Richman said the plan does not include a proposed balanced 2017 budget that complies with law, underestimates debt service, failed to accurately estimate revenues, overestimates property tax revenues, and more. He added that key parts -- such as the Bader Field plan -- are "speculative in terms of their viability."

In recent days, local leaders seemed optimistic the Christie administration would accept their plan. Wall Street Credit rating agency Moody's Investors Services called it "robust and detailed."

Some experts also noted that Christie might want to avoid taking over a famous city at a time when his approval rating is at record lows and he is facing heat from the ongoing Bridgegate trial.

But Patrick Murray, director of the Monmouth University Polling Institute, said "there's a lot of money to be had in the development of Atlantic City."

"A lot of allies of the governor are involved in this," Murray said. "And we are talking about Chris Christie here. I'm not surprised by anything with him."

The Associated Press contributed to this report.

Brent Johnson may be reached at bjohnson@njadvancemedia.com. Follow him on Twitter @johnsb01. Find NJ.com Politics on Facebook.