Atlantic City beat the New Jersey in court Tuesday and filed a counterclaim against the state seeking $33.5 million.

Atlantic City is in compliance with payments owed to its school district, a judge has ruled.

The city is now fighting back with a counter lawsuit against New Jersey.

Atlantic County Superior Court Judge Julio Mendez on Tuesday denied the state’s request that Atlantic City be forced to freeze spending until outstanding property tax payments owed to its school district through June 30 are paid. The city made an $8.4 million payment to the public schools on Tuesday and needs to pay an additional $25 million in the next two months.

Following Judge Mendez’s ruling, Atlantic City announced a counterclaim against New Jersey demanding it provide $33.5 million in aid that was approved by a state monitor for the 2015 budget. The funds were to derive from a bill in the state legislature vetoed by Gov. Chris Christie that would have enabled the city’s eight casinos to make payments-in-lieu-of-taxes for 10 years. Christie has said he will not sign the PILOT without an approval of legislation enabling a state takeover that would empower New Jersey's Local Finance Board to renegotiate outstanding debt and municipal contracts for up to five years.

Atlantic City Mayor Donald Guardian called on Christie and the legislature to form a compromise following Tuesday’s ruling. The first-term Republican mayor has been outspoken in his opposition to state intervention plan.

“I have spoken with many legislators who want to find a compromise, and they are willing to find a way to save Atlantic City,” said Guardian. “I am confident that once we get past the politics, we will find a winning solution that everyone can agree upon.”

State Senate President Steve Sweeney, D-Gloucester, and Assembly Speaker Vincent Prieto have floated separate alternative bills that would involve state intervention if Atlantic City doesn’t meet certain benchmarks, but Christie has not indicated if he would support this route. Atlantic City implemented a 28-day pay period on April 8 to avert a government shutdown since it needed May tax revenue to pay workers with cash flow running out. Moody’s Investors Service slashed the city’s junk-level bond rating two notches to Caa3 on April 4, citing default concerns.

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