Cut off all services and refuse resources being provided to them from the outside under penalty of jail for those caught attempting to provide. Taking over a part of the city through force is a terrorist action and they should be treated as such. I'd just rather the National Guard/Police (assuming local politicians had any spine) take a siege route and starve them out. Make those idiots become disillusioned in their own fantasy as they realize they have no water and food. Then, arrest all of them.