INDIANAPOLIS | Millions of dollars in East Chicago development money hung in the balance Thursday as the Indiana Supreme Court heard arguments in a case to decide who will control that money.

A 2007 state law authorizes the city of East Chicago to decide how to distribute local development payments from the casino.

But Foundations of East Chicago, the nonprofit organization that had been receiving casino money, claims that law is unconstitutional because it only applies in East Chicago.

"If this is not special legislation, I don't know what would be," said Peter Rusthoven, attorney for Foundations of East Chicago.

Indiana's constitution requires generally applicable laws. Laws affecting a single community usually are not permitted.

This law seems to run afoul of that standard, suggested Justice Frank Sullivan Jr., a South Bend native.

"This looks special and targeted to me," Sullivan said. "What is the justification for having different rules for East Chicago's local development agreements?"

Solicitor General Thomas Fisher, representing the state and supporting the city in the case, wouldn't deny the General Assembly wrote special legislation. The unique circumstances of the East Chicago deal warrant it, he said.

"Here you've got a board, that is unlike any other board around the state. There's no local representation on it any longer. There's nobody accountable for the actions of the board. There's nothing similar that anybody's been appointed to with respect to any other development agreements around the state," Fisher said.

"It's special. And it deserves special legislation."

The city's attorney, William Bock III, argued Foundations of East Chicago isn't entitled to the money because it's not specifically named as a recipient in the agreement between the city and the casino operator.

Foundations of East Chicago is the merged entity of two nonprofit groups created by former Mayor Robert Pastrick to improve housing and infrastructure using a share of East Chicago's casino revenue.

Investigations by The Times and the Indiana attorney general revealed Foundations of East Chicago was actually spending a large chunk of its money on lavish salaries for board members and staff.

Current Mayor George Pabey wants the local development funds, worth about $6 million a year, to be placed under city control.

The Indiana Court of Appeals ruled in April the city has that power under the 2007 law but could also have reallocated that money at any time since the agreement was signed in 1995.

Rusthoven rejected that claim. He said if there are no standards in the law directing how the money is to be spent, a "Pastrick redux" administration would be free to re-redirect the funds how it wants.

Pabey defeated Pastrick in a 2004 special election ordered by the state Supreme Court following a fraudulent 2003 mayoral election in East Chicago.

A decision by the Supreme Court in this case is expected early next year.