New Jersey Gov. Chris Christie's administration has rejected a financial turnaround plan by Atlantic City.
The decision sets the stage for a threatened takeover of the struggling city's assets and decision-making power.
The state Department of Community Affairs on Tuesday rejected a five-year turnaround plan in which the city would lay off 100 additional workers, cut spending and sell its largest tract of vacant land to its water utility, with the money helping pay down the city's $500 million debt.
The state had threatened to take over the seaside gambling resort if it didn't come up with a suitable plan to mend its finances.
Atlantic City's financial situation has worsened as its casino industry continues to contract.
Five of the city's 12 casinos have gone out of business since 2014.
