COLOR LINES: The Troubled Dreams of Racial Harmony in an American Town By Mike Kelly Morrow. 532 pp. $25

"Don't do this! Don't do this!" Lelia Johnson, a middle-aged black resident of the idyllic -- and assiduously integrated -- suburb of Teaneck, N.J., found herself yelling to no one in particular as black youths around her broke Municipal Building windows, vandalized police cars and terrified white liberals with infants in strollers. The occasion was the April 11, 1990, candlelight vigil for Phillip Pannell, a black youth who had been shot dead by white police officer Gary Spath in ambiguous circumstances the day before.

Equally taken aback, according to Mike Kelly's breathtakingly intimate account of the tragedy, was Art Gardner, a black Teaneck High School teacher who'd helped integrate the town decades earlier and who had even coached a younger Gary Spath on an otherwise-black basketball team. "These kids really hate cops," Gardner thought of the black youths rampaging around him now. "Why hadn't he noticed this before?" Kelly has the man asking himself. And why hadn't Gardner and other adults acknowledged that, cops or no cops, some local middle-class black youths had taken to fighting one another and carrying guns without any proportionate provocation from Teaneck's mostly affluent, mostly liberal whites?

Kelly recounts how the town had striven to recruit, assist and accommodate the 25 percent of its population that was black -- so much so that City College Afrocentrist Leonard Jeffries, militant Brooklyn minister Herbert Daughtry and Louis Farrakhan's daughter all had chosen to live there, while the Rev. Al Sharpton and Sister Souljah had settled in similarly accommodating Englewood, next door. Come to think of it, why hadn't anyone noticed or pondered that? No wonder Gardner, the teacher, felt relieved as three black teenage girls, frightened and confused by what the vigil was becoming, asked him to "take us home." "Everybody is going to talk about our town," one girl told him. "Whites are going to say, We knew blacks and whites couldn't live together.' " Silently, sadly, Gardner agreed: "When people think of us and see these pictures, they'll say, I told you so.' "

Ironically, it was a black homeowner who'd called the police to report a youth with a gun as Pannell and friends sauntered across his lawn. The slain boy's defenders and would-be avengers, including local and national demagogues from Sharpton to Farrakhan, would deny the gun report and ignore its source throughout a two-year racial psychodrama that tore Teaneck apart. In court, the question rightly became not whether Pannell had had a gun in his pocket (he had -- a weapon his mother had purchased for protection from his own wayward father), but whether he'd reached for it or only raised his empty hands in surrender when confronted by Spath. When one grand jury declined to indict the officer for reckless manslaughter, a second was convened and did indict him, amid conflicting reports: Some claimed that the first panel hadn't been told the full story of Pannell's surrender; others insisted that New Jersey's attorney general had convened the second only to pander to black anger and liberal guilt.

In a feat of journalistic and personal witness that humbles as it inspires, Kelly, a columnist for the Bergen Record and a Teaneck resident, takes us into those divided grand-jury rooms; into the woodland gatherings and troubled families of Phillip Pannell and his yearning, bumbling, sometimes violent friends; into the strategy sessions and riven hearts of Teaneck's beleaguered liberals; into the back seats of the cars carrying Jesse Jackson and Sharpton to sessions with Gov. Jim Florio or to rallies whose makeups and moods even these masters of public psychodrama often misread. Kelly introduces us, too, to Spath's militant supporters, including police officers who feel that they've played things the liberals' way long enough, deferring to town elders who won't even acknowledge what some black kids are up to.

Some of the liberals in Kelly's account do seem to be in denial about that, perhaps because they can't see how the town's integrationist and multicultural policies could have prompted black anger. Others may simply have judged blacks by a lower standard. If so, Teaneck's "American dilemma" is a variant of the self-fulfilling prophecies of black inadequacy that Gunnar Myrdal found at the heart of whites' perceptions decades ago. This time, it stems from an over-solicitude that won't pay black youths the elementary compliment of holding them to ordinary civic norms -- such as not terrifying their peaceful black neighbors by waving guns around. That leaves it to black parents like Johnson and Gardner to ask, "My God, what has become of our kids?" Except for hand-wringing about the legacies of racism, Teaneck liberalism had no answer.

Kelly offers none, either, but he bears unforgettable witness. He recounts how Spath's acquittal, after a trial surrounded by a two-ring circus that pitted simplistic "black" perceptions against "white" perceptions in the media, widens the fault line of irreconcilable racial judgments in Teaneck. After the verdict, Spath's defenders -- some unquestionably racist, others not -- do feel entitled to say, "I told you so." And Kelly gives them their due, even as he concludes with a wrenchingly tender portrait of Phillip Pannell's disconsolate best friend, Batron Johnson, who ran with him in a group they called the Violators. Batron is now in college, a sober student, possessed of only "one dream he would like to fulfill: If he marries and has a son, he would like to name him Phillip."

Only Kelly's own deepest dreams as an American and a Teaneck parent can have driven him on a quest so relentless that he troubles to locate the site of Pannell's slaying not far from the road where George Washington retreated with his army as a traveling companion named Tom Paine wrote, "These are the times that try men's souls." Only Kelly's skill and unshakable integrity as a reporter and writer can have constrained him, at every flash point and critical juncture, to render an account as scrupulous and nuanced as it is magisterial -- a verbal tapestry, devoid of editorializing, that is worthy of the tragedy it portrays. This is American journalism at its best. And a measure of the depth of Teaneck's and America's racial nightmare may be that often it is witnesses like Kelly, faithful but uncompromising, who remain our best hope. The reviewer is a columnist for the New York Daily News and author of "The Closest of Strangers: Liberalism and the Politics of Race in New York." CAPTION: Mike Kelly, a columnist for the Bergen (N.J.) Record, recounts a town's struggle with racial issues.