A federal bankruptcy judge has ordered Suffolk County and Brookhaven Town to review and possibly approve a proposed video lottery casino in Medford that Suffolk Regional Off Track Betting Corp. considers key to emerging from bankruptcy.

The decision by U.S. Bankruptcy Judge Carla E. Craig, in Brooklyn, issued Monday, breaks a legal logjam that had delayed by months the OTB’s plans for up to 1,000 electronic slot machines at a 90,500-square-foot facility off the Long Island Expressway service road east of state Route 112.

OTB officials had turned to federal bankruptcy court when state, county and town officials could not agree on who was responsible for reviewing and approving the project.

Phil Nolan, Suffolk OTB president, welcomed the decision, saying it provided a “plan for the OTB to proceed with the video lottery terminal parlor.” He said OTB has almost completed its environmental review and a separate plan to be submitted to Brookhaven. He would not lay out a timeline for when construction would start or when he expected the project to open.

County spokesman Justin Meyers said the county does not plan to challenge the decision.

The Medford Taxpayers and Civic Association and the town Conservative Party have sued to stop the project. They have said it would spur traffic problems and increased crime and excessive drinking.

advertisement | advertise on newsday

The opponents said Tuesday that the lawsuit will move forward. The lawsuit says that the betting parlor isn’t allowed at the location under Brookhaven’s zoning laws.

Oral arguments are scheduled for Dec. 9 before State Supreme Court Justice Jerry Garguilo, said Peter Creedon, a Northport-based attorney representing casino opponents.

Suffolk Legis. Rob Calarco (D-Patchogue) said the fight against the casino “is far from over.”

In her 21-page decision, Craig said the Medford casino “is critical to Suffolk OTB’s efforts to adjust its debts and emerge from bankruptcy.”

Craig wrote the county “is accountable for administration and enforcement” of the building code. She also found Brookhaven had to “accept and review” Suffolk OTB’s site development plan. She ordered OTB officials to complete an environmental review of the project.

Town Attorney Annette Eaderesto said Tuesday that Brookhaven had not decided whether to challenge Craig’s decision. Town officials had argued that county authorities should be responsible for approving OTB facilities.

“We respect the decision of the court. We are still analyzing it,” Eaderesto said.

Nolan said the casino will create 350 new jobs and protect 250 existing OTB jobs.

Suffolk is only guaranteed $2 million in the first year of the VLT operations and $3 million in the second year, as most of the profits will go to pay off OTB creditors, according to bankruptcy documents. Suffolk OTB hasn’t turned a profit since 2006.