New Jersey officials rejected Tuesday a financial recovery plan put forth by Atlantic City, setting the stage for sweeping state intervention in the struggling seaside resort.

The decision to reject Atlantic City's proposal gives the state unprecedented powers over the city's government, finances, union contracts and assets.

Under the terms of a legislative deal worked out this spring, state officials now have the authority to dissolve local government departments and boards, veto the city council's meeting minutes, enter into development contracts and sell or lease the city's water utility.

"It would be the single-most involved takeover that the state has ever made of a municipality," said Marc Pfeiffer, senior policy fellow and assistantdirector for Rutgers University's Bloustein Local Government Research Center. "You will likely see litigation that will attempt to block it."

Atlantic City officials have described such state intervention as unconstitutional and vowed to fight it in court if necessary.

Write to Kate King at Kate.King@wsj.com

(END) Dow Jones Newswires

November 01, 2016 17:25 ET (21:25 GMT)

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