NEW YORK -- When Mario M. Cuomo (D) became governor in 1983, he took one look at Battery Park City and asked an aide: "What the hell is the state doing building market-rate housing?"

The sprawling, state-financed development at the tip of lower Manhattan is a collection of luxury town houses and condominium apartments that sell for as much as $840,000, with gleaming office towers for such corporate giants as American Express, Dow Jones and Merrill Lynch.

Cuomo put the aide, Meyer S. Frucher, in charge of the Battery Park City Authority and told him to "give it a soul," Frucher said. After four years, that soul finally may have been found a few miles uptown, in Harlem and the South Bronx.

Battery Park City has become such a real estate gold mine that its surplus profits are being used to support $400 million in bonds for housing for low- and moderate-income people. New York City officials are using the first installment to renovate 45 abandoned, city-owned buildings in Harlem and 14 in the South Bronx. One-third of these 1,850 apartments will be reserved for the homeless.

When plans for Battery Park's fifth office tower are final, the authority will back another $600 million in bonds, producing a billion-dollar housing program without federal aid. "It will be the largest housing trust fund in the country," Frucher said.

This cash infusion "will enable us to do rehabilitation on a massive scale," said Paul A. Crotty, New York City's housing commissioner. "That will also spur private redevelopment in these devastated neighborhoods."

Crotty said Harlem is particularly suited for renovation because "we own an unbelievable percentage of the property there, just blocks and blocks and blocks." All told, Battery Park profits could finance the renovation of more than 10,000 apartments.

Not bad for a development that was created as an afterthought during the reign of Gov. Nelson A. Rockefeller (R), when millions of tons of dirt dug up for the 110-story World Trade Center were dumped across the street, creating a 92-acre landfill along the Hudson River.

Although it has since become an urban success story, Battery Park City almost went bankrupt in 1979, during the city's fiscal crisis. The authority had spent much of its bond money on site preparation, and no developers were willing to risk building on what was still a pile of dirt.

But after state lawmakers stepped in with a $65 million bailout (repaid with interest last year), the value of Manhattan real estate skyrocketed and developers began flocking to Battery Park. Now planners envision a community that eventually will house 30,000 residents and another 30,000 workers, the kind of thriving neighborhood not seen there since George Washington took the oath of office nearby in 1789.

Already, the development boasts 6 million square feet of office space and 4,000 units of housing, plus public parks, sculpture, a riverfront esplanade and the Wintergarden performance center, complete with 16 towering palm trees. A Holocaust museum will open in 1989.

Also on the drawing boards are a 700-room hotel, a Monte Carlo-style marina for luxury yachts, a wildlife center and restaurants, shops and movie theaters.

Separated from the Wall Street area by a busy highway, Battery Park City is isolated but still part of the city: It has won widespread praise from architecture critics for its stone and brick facades, traditional street grid and other design touches that give it the feel of an old New York neighborhood.

Perhaps the most unorthodox item on Battery Park City's agenda is a plan to build a new home for 84-year-old Stuyvesant High School, one of New York's two premier high schools for gifted science students. The authority plans to complete the school, which will cost $80 million to $100 million, in three years.

By the standards of the city's Board of Education, which is picking up the tab and usually takes eight to 10 years to build a new high school, that would be a major achievement. With many of its schools plagued by construction defects and maintenance problems, a state legislative committee has recommended that some other agency take over school construction.

So when Frucher's agency offered to donate prime land for the school, but only if it could run the show and use its own architect, the board could hardly refuse. The authority is not required to accept the lowest bidder and will be able to ensure that the 10-story building fits in with the surrounding area.

Still, the ambitious design -- two gymnasiums, an Olympic-size swimming pool and 12 state-of-the-art laboratories -- drew flak from some local politicians, who questioned why such elaborate schools are not being built elsewhere in the city.

With the agency advertising its newest one-bedroom condos at $300,000, Battery Park City sometimes appears to be a playground for wealthy stockbrokers. But Frucher, who is expected to seek a job in private industry soon, said the high school, housing bonds and planned tourist attractions are helping to give it a "social purpose."

"We need to make Battery Park City a destination," he said. "We don't want the esplanade, the parks and the other public spaces we're creating to become nothing more than a backyard for those fortunate enough to afford housing here."