Pier 36, just north of the Manhattan Bridge on the Lower East Side, was home to a prison barge in the late 1980s that was used to help alleviate overcrowding in the city’s jails. Further back, it was used by banana importers and was the backdrop for a waterfront racketeering scandal in the 1970s.

Now, following up on an agreement struck in the Dinkins administration, the city is clearing out the Office of Emergency Management’s facilities on the pier to make room for Basketball City, a company that now operates private basketball courts near Chelsea Piers.

The city’s development agency is negotiating over the terms of a long-term lease for the site with Basketball City, which seeks to put courts inside an existing 64,000-square-foot warehouse. OEM is seeking Department of Planning approval to move some of its emergency vehicles into an existing warehouse on Flushing Avenue in Brooklyn.

A spokesman for Assembly Speaker Sheldon Silver, whose district encompasses the site, said the speaker supports Basketball City moving to Pier 36 because it fulfills the community’s long-term goal of reclaiming the pier for recreational purposes.

The spokesman, Bryan Franke, said Mr. Silver successfully sued Mayor Dinkins to free the pier of the burden of housing city vehicles and heavy machinery. Mr. Silver brokered a memorandum of understanding with the city that the pier eventually would be used for a community recreational facility. Under the Giuliani administration, an estimated 10 years ago, a request for proposals was issued and the use of the site was awarded to Basketball City.

Now the city’s development agency is honoring that agreement and negotiating exclusively with Basketball City, although officials would not discuss the details of the talks, or say why it has taken so long to finalize the deal. Representatives of Basketball City did not return phone messages from a reporter.

At six Chelsea courts, Basketball City hosts adult basketball leagues and corporate events, runs youth programs, rents its courts to the public, and is affiliated with a nonprofit youth development organization that uses its facilities, according to its Web site.

Community Board 3, which covers the neighborhood that includes Pier 36, gave the green light to Basketball City about two years ago. But some area residents are saying that putting a private recreational facility into a neighborhood filled with public housing makes no sense.

The president of the Two Bridges neighborhood council, Victor Papa, said, “Basketball City is probably a very good entity, but the people who live along South Street have a median income of about $20,000 a year.”

The long neglected East River waterfront is now getting some serious attention in the form of a city plan to reconnect the surrounding communities to the river. In addition, the Drawing Center, which had been slated to move to ground zero, recently announced it would occupy the site that was recently the home of the Fulton Fish Market. That area is sprouting with the same luxury residential development that has seized most of Lower Manhattan.

Surely some will see Basketball City’s expected arrival as advancing this promising improvement. But the director of the Rebuild Chinatown Initiative, Robert Weber, said the Basketball City plan, in addition to being inaccessible to the community, may not meld with the city’s plans to improve the waterfront.

“That project went out 10 years ago, and in the last year the city has sponsored this planning process. Why wouldn’t you integrate this into the existing planning of the waterfront community?” Mr. Weber said.

The director of the Metropolitan Waterfront Alliance, Carter Craft, said that the city’s decision to move ahead with the Basketball City plan is a definite improvement over the existing parking lot, but also is telling of a larger trend.

“The painful reality of today is that it’s so expensive to develop, protect, and maintain the waterfront that the city is seeking more private developers to do it instead of allowing or enabling the Parks Department to do it,” Mr. Craft said.