By Hilary Russ

NEW YORK (Reuters) - The bill is growing for New Jersey's attempt to revive Atlantic City, its financially distressed gambling hub.

The state will pay Ernst & Young more than $250,000 for its work analyzing Atlantic City's financial problems, according to a copy of the retention agreement reviewed by Reuters on Friday.

The information sheds further light on how much New Jersey taxpayers will shell out for Governor Chris Christie's decision to appoint an emergency manager for the resort city, a move that was opposed by many including Atlantic City's mayor.

Ernst & Young's work will be on behalf of emergency manager Kevin Lavin, who was appointed in January. That firm's fee is only part of the total bill, some of which is still unknown.

Christie's move to exert control over Atlantic City's affairs in January came amid his ongoing efforts to deal with broader state-wide problems, including huge public pension liabilities and a weak economic recovery.

Christie, a potential Republican 2016 presidential candidate, has overseen the state as it suffered multiple credit downgrades. It is now the second worst rated U.S. state.

Atlantic City Mayor Don Guardian had opposed bringing in oversight. Days after the appointment of the emergency manager, the city's credit rating was slashed several notches deeper into junk territory on concerns that the move opened the door to a possible municipal bankruptcy filing.

Last week, Moody's Investors Service warned it could also downgrade seven other struggling New Jersey cities, including Newark, Paterson and state capital Trenton, in part because Christie's appointment of an emergency manager could demonstrate a limit to the state's willingness to support other municipalities if they fall into distress.

New Jersey's Law Department selected Ernst & Young on behalf of its client, the Department of Community Affairs, for which Lavin works. It cited the firm's experience working closely with Detroit's bankruptcy team.

DCA spokeswoman Tammori Petty said in an email that Ernst & Young's Detroit experience included "all aspects of that city's financial and operational restructuring and financial forecasting, and expert support and guidance, functions similar to the services they are providing" in Atlantic City.

"Given the short time frames established in the Governor's executive order, (the firm) was able to hit the ground running and get to work immediately," she said.

The fee covers the first phase of Ernst & Young's work, which includes Lavin's initial report, to be released this month.

Ernst & Young will also bill $455 per hour for longer-term services. Those include liquidity forecasting, developing options to deal with cash flow problems, analyses of debt and revenues, and helping develop a restructuring plan, according to the agreement.

The contract was signed by Robert Lougy, the Attorney General's chief of staff, on Wednesday.

The state is paying Lavin an annual salary of $135,000, according to a previous report by the Associated Press. Costs could climb further if Lavin needs to retain other professionals or pursues a bankruptcy or other restructuring plans.

A spokesman for the governor's office did not respond to an email seeking comment on the emergency manager costs. Ernst & Young also did not reply to a request for comment.

Renegotiating a city's debts and costs can be expensive. Detroit's emergency manager Kevyn Orr, who is now advising Lavin in Atlantic City, made $275,000 for his work on the Motor City's municipal bankruptcy, the biggest in U.S. history. Atlantic City is much smaller, with a population of just 40,000.

New Jersey said it would provide Orr's agreement for his Atlantic City work when an executed contract is available.

Ernst & Young's contract runs from Feb. 5 through the end of 2015.

The contract was provided as a result of a state record request.

(Reporting by Hilary Russ; editing by Megan Davies and David Gregorio)