The playground of a housing project in Manhattan in recent years had slid into a state of disrepair so severe that parents felt uneasy about letting their children play there.

So in 2015, the state approved a plan to steer $770,000 toward a new cushioned play surface, new barbecues and new water sprinklers for children to cool down, plus other improvements. The playground, in the Chelsea neighborhood, is scheduled to reopen early this summer.

Except that the New York City Housing Authority is now planning to raze the playground and build a new residential tower in its place as part of the city’s contentious proposal to replace some public housing buildings with mixed-income private developments to raise money for urgently needed repairs.

The move to scrap a newly-renovated playground underscores the lengths the beleaguered housing agency is willing to go to finance $32 billion in backlogged improvements.

To many residents, however, it was just the latest example of the dysfunction they have come to expect from the housing authority, known as Nycha, which has come under fire for financial mismanagement and scandals over heat, lead paint and mold.

The agency is currently under the supervision of a federal monitor after prosecutors accused it of cover-ups and endangering the safety of its residents.

“I think, in all honesty, it is a waste of taxpayers’ money,” said Miguel Acevedo, the president of the resident association for the housing project, Fulton Houses, about the plan for the playground. “I’m frustrated about it.”

Renovations for Fulton Houses Playground

Read the project description for the renovations of the Fulton Houses playground in Chelsea.

Housing officials for the first time presented the preliminary details of their plan at a meeting on Monday with residents of the Fulton Houses, an 11-building housing complex next to the High Line. The meeting was the first of several the housing agency will hold to answer questions and gather input from skeptical tenants who fear they will be displaced.

Barbara Brancaccio, a spokeswoman for Nycha, said the plan has not been finalized, but that it would eventually generate at least $168 million that would be used for repairs at the Fulton Houses.

“This means that if they want new residential buildings built near or at the location where there is currently a playground, and they want the playground relocated, then we will work with the developer to incorporate this vision into the design,” she said.

She added that the playground renovations were underway before the most recent plan to build at the Fulton Houses was even conceived.

Sean Campion, a senior research associate at the Citizens Budget Commission, a watchdog group, said the about-face spoke to the “state’s historical lack of coordination with Nycha over how the state’s resources should be invested in Nycha’s greatest needs.”

The funding for the playground stems from a $100 million public housing package that Gov. Andrew M. Cuomo approved in 2015, but was wary of handing over directly to Nycha because of its reputation of mismanagement.

“The $100 million is going to be controlled by the state because the state has a better track record at construction,” Mr. Cuomo said at the time.

Mayor Bill de Blasio, a fellow Democrat, tried to convince the governor to entrust the $100 million to the housing agency to fix leaky roofs, one of the main causes of mold. Instead, the governor divided the money among members of the Assembly to fund smaller projects, like upgrades to security cameras, outside lighting and playground repairs.

A spokeswoman for Mr. Cuomo declined to comment.

“If they are in fact in using the playground for some of the new construction, that would certainly be a real shame considering the recent work on it,” said Assemblyman Richard Gottfried, who allocated the state funds for the playground upgrades.

He said the city should find a different site or guarantee that the new building’s developer will pay to replace the playground.

Under the plan, one new residential tower would be built on the playground site. Then residents from 72 units at two of the development’s smaller buildings would be moved to that new tower and continue to pay subsidized rents.

The two small buildings would be demolished, paving the way for two new mixed-income towers that would be operated by a private landlord. All told, almost 700 new units of housing could be built. Housing officials have stressed that residents would not be displaced from the complex.

The money generated from the three new towers would be used to repair the other nine buildings in the Fulton Houses and the neighboring Chelsea-Elliott housing development. The city is also considering handing over the day-to-day management of both developments to a private partner who would invest to renovate the buildings.

The proposal to partner with private developers is a central part of Mr. de Blasio’s revamped plan to generate desperately needed revenue for the housing authority to fix roofs, boilers and elevators.

During the meeting on Monday, residents raised concerns about how they would be relocated to the new apartments and how the city would hold private developers accountable and ensure that residents’ rights and rents would be preserved.

David Pristin, the executive vice president for external affairs at Nycha, told residents that housing officials were there to “work with you to refine this plan.”

Developers could begin construction by 2021 and new apartments could be marketed by as soon as 2023, according to a presentation shared with tenants.

Last year, an audit from the city comptroller’s office found that 70 percent of the playgrounds run by the housing authority at 238 public housing developments were plagued by dangerous conditions, such as broken play equipment or damaged safety surfaces.

Residents said that the playground at the Fulton Houses, whose tar surface was gravely cracked, was dangerous and that renovations, however short-lived, were long overdue.

“It’s just money being cut up and thrown out,” Amelia Martinez, 60, who has lived at the Fulton Houses for four years, said of the plan for the playground. “We need air. We need space. I’m so disgusted.”

Luis Ferré-Sadurní writes about housing in New York City for the Metro Desk. He joined The Times in 2017 and is originally from San Juan, Puerto Rico. @luisferre

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