Battery Park City, for so long a seeming daydream of the planners -- and a genuine nightmare for New York's politicians -- is at last beginning to rise from its flat platform of earth and steel near Manhattan's southern tip.

It is the kind of project that can generate excitement by its size alone. Covering 92 acres of landfill in the Hudson River and designed to encompass more than 6 million square feet of offices, more than a quarter-million square feet of retail-entertainment space, more than 14,000 new residential units and several spectacular new public parks, it is, indeed, a building enterprise of awesome scope.

But even more impressive is the spirit in which it is being built. Rescued from near bankruptcy five years ago, Battery Park City is well on its way to becoming a striking urban success story of the 1980s, a model of true public-private partnership in the development process. The planning principles and design guidelines for each of its elements represent changes in ways of thinking about cities that are as dramatic as they are healthy.

The idea for Battery Park City originated in the 1960s under Gov. Nelson Rockefeller, whose taste for big, clear-the-earth development programs has been forever monumentalized in the wind-swept Albany Mall. Although the landfill was completed in 1974, almost nothing else had been done by the end of the decade. The financial crisis of the mid-1970s had hurt the project, and developers were not attracted by its rigid, all-or-nothing plan. The Battery Park City Authority was facing a disastrous $200 million bond default.

At this point Richard Kahan, then head of the state's powerful Urban Development Corp., was called in to try some of the UDC magic on the failing enterprise. The miracle is, it worked. The UDC had amassed a brilliant record under Edward Logue in the early 1970s, doing quality subsidized housing projects, and under Kahan's leadership it was entering the new era of public-private partnership. "With Battery Park City," Kahan recalled, "we knew we had to go for broke. There was no point in pinching pennies. From day one I knew we had to have another Rockefeller Center, or the bonds would go down the tubes." (Kahan's strong leadership, a key part of the story, has been continued by his successor, Meyer S. Frucher.)

The key statement in the revised master plan for Battery Park City says that the project "takes as its theme an acceptance of all that is desirable about New York's basic pattern of development." This soft-sounding battle cry actually betokens a fundamental shift in values from that not-so-distant time when the reigning dogma was to try to build new worlds by first eradicating the old ones.

In its "organizing principles," the plan spelled out the implications of this change: Battery Park City is to be not a "self-contained new-town-in-town" but, rather, "a part of lower Manhattan." Its layout will emphasize the "ground-level circulation" instead of the vertical separation of vehicles and pedestrians beloved by futuristic planners from the 1920s on. Its streets are to be based upon the "historic grid pattern" of New York rather than monotonous linear connections. Its buildings will take "less idiosyncratic, more recognizable and more understandable" forms than the heroic modernist megastructure previously proposed for the site. Its residential sections will attempt to "reproduce and improve upon what is best about New York's neighborhoods" rather than try to reinvent the wheel of housing for the presumed needs of a new mankind. And perhaps most important, in view of the fact that the previous Brobdingnagian schemes proved unbuildable, the plan was designed from the outset to be flexible and responsive to market demands.

How well the completed Battery Park City fulfils this farsighted program remains to be seen -- it will take more than a decade to build. But so far almost everything has been so good.

The strategy of relocating the commercial-entertainment center from the southern edge of the site to its very heart, adjacent to the giant twin towers of the World Trade Center, already has proven out. That this connection has distinct economic advantages is demonstrated by the speed with which the office space has been leased or sold. (American Express, for instance, has already purchased an entire building.) Featuring a steel-and-glass "winter garden" and a public open space with terrific river views, the commercial center clearly will serve future residents of the new neighborhoods to its north and south as well as office tenants from all parts of the financial district.

Another proven success is the crisp set of design guidelines established for the commercial center by consulting architect Alexander Cooper (who also coauthored the very different and more problematic guidelines for the Times Square renewal project). Two of the four office towers, designed by Cesar Pelli for Olympia and York Equity Corp., are nearing completion. Though it is still too early to judge the final effect, there is no reason to doubt Pelli's claim that the finished ensemble will "continue and celebrate the historic skyline of Manhattan." That, after all, was one of the many criteria established in Cooper's guidelines.

From bottom to top, Pelli's buildings -- with their clean-lined skins (progressing in stages from dark polished granite at ground level through zigzag granite-and-glass midsections to reflective curtain wall towers), and their varying crowns (domed, pyramidal and stepped-back) -- would appear to be exemplary demonstrations of the ways in which an architect can work creatively within a well-defined set of rules. The same can be said for the center's public spaces, which Pelli designed in collaboration with landscape architect M. Paul Friedberg and artists Siah Armajani and Scott Burton.

"That was the first set" of specific guidelines, Kahan said, "and there were a lot of arguments. I felt in my gut that with all of those requirements they had overstepped the bounds, but I was wrong." Cooper is even more to the point. "Most of the criticism about the guidelines being too specific comes from architects," he says, "but in serious urbanism a little stifling of architectural flashing is not a bad thing."

The design guidelines for the first phase of residential construction -- four large blocks immediately south of the commercial center -- were an even sterner test of this thesis because, first, even top-of-the-market housing is a more difficult financial deal than offices and, second, these blocks were divided into a dozen separate parcels. Again, it is hard to escape the conclusion that the experiment has been an outstanding success, even though only one of the residential buildings is under construction.

And again, the basic reason is that the guidelines themselves were so thoughtfully conceived. In the end, seven different architectural firms were selected to work on the sites, and on the basis of their models and preliminary drawings one can be quite confident that this new development, unlike all previous proposals for housing at Battery Park City, will have the kind of variety-within-unity that characterizes the best of older New York neighborhoods: buildings of varying shapes and sizes sharing a common street wall, common materials (with an emphasis on stone and brick), and common ground-floor treatments.

It should be said that, in addition to sensible rules, the architects and developers of the first 12 residential buildings (which range in height from nine stories to more than 40) had a beautiful context with which to work. If the riverside site in itself is spectacular, the architects of the public spaces (none other than Alexander Cooper and his partner Stanton Eckstut) have improved it in truly sensitive ways. This is an exemplary case of practicing what one preaches -- as models for the sequence of spaces and for details such as plantings, railings, street furniture and paving surfaces, these designers relied quite directly on what they admire in older sections of the city. With only a portion of the 1.2-mile riverside esplanade and a small part of a single new park completed, a visitor can sense the extraordinary kind of place -- graciously fitted, and at once easy-going and active -- that Battery Park City can become.

All of this is not to say that either the plan or the place is perfect. An important social goal -- to provide housing for some of the city's poor and moderate-income population -- was scuttled with the adjustment to the new economic realities. Design of the next phase of residential construction will be a tougher nut to crack, because the blocks are bigger and the density requirements greater. As a result, avoiding a monotonous streetscape will be far more difficult. And the existence of a 250-foot-wide street (possibly to become part of the Westway auto route) between the landfill site and the rest of lower Manhattan is a visual and psychological barrier that even the creative design engineers of Battery Park City could not overcome.

But cities everywhere can learn something from both the process and the spirit in which Battery Park City is being developed. The planning of downtown Washington, for instance, could be immensely improved by careful study of the leadership and design sensitivity of this unprojectlike project. The basic lesson is clear: Whether designing a single building, a whole block or an entire new neighborhood, it is imperative to build upon the best examples a city already has to offer.