INDIANAPOLIS | A tug of war between the city of East Chicago and an embattled nonprofit group could thrust millions in community development dollars into prolonged legal limbo.

Ameristar Casinos, the new owner of Resorts Each Chicago, is asking a judge to freeze the $6 million annual subsidy that is at the heart of a lingering court battle between the city and the Foundations of East Chicago.

Last week, Marion County Superior Court Judge S.K. Reid upheld a new state law stripping the Foundations of the casino money, which the nonprofit has received for more than a decade. The law, enacted last spring, granted the city control of the subsidy when Ameristar's acquisition of the East Chicago riverboat closed in September.

Ameristar, in a motion filed earlier this month, seeks to remain neutral in the community development dispute. The company wants Judge Reid to place the money into an interest-bearing bank account, beginning with the upcoming Dec. 15 payment.

"We'd prefer that the money go straight to the city," said Carmen Fernandez, corporation counsel for East Chicago.

The city contends the Foundations, which became a single entity following a consolidation earlier this year, have squandered huge chunks of the community development cash on salaries and overhead.

If Ameristar's escrow plan is approved, it's likely no one will touch the money for several years.

"We think there are very serious issues here, and we think it's in everyone's best interest to get them resolved as quickly as possible," said Peter Rusthoven, an attorney for the Foundations.

The nonprofit has filed notice to appeal Judge Reid's ruling. And most observers predict the case eventually will land before the Indiana Supreme Court.

Another $2 million annual casino subsidy has sat untouched since June 2006, when state gaming regulators cut off East Chicago Second Century, a for-profit developer accused of failing its community development mission.

Both the Foundations and Second Century are run by allies of former Mayor Robert Pastrick, who brokered the 1994 deal to distribute the casino cash.