Harvard has expressed strong interest in purchasing a 30-acre business complex in Watertown, but town officials fear that the tax-exempt University could cost them millions of dollars in vital tax revenue.

If Harvard does purchase the massive office space named Arsenal on the Charles, at $185 million, it will be one of the most expensive land purchases in Harvard's recent real estate campaign.

An official statement from Harvard is expected today, but Paul S. Grogan, Harvard's vice president for government, community and public affairs, said yesterday that Harvard is "extremely interested in the property."

Harvard currently leases 112,000 square feet in the complex to house Harvard Business School Publishing. A clause in the lease gives Harvard a chance to purchase the property once it goes on the market, before other parties can make a bid.

The details of a possible deal between Harvard and O'Neill Properties, the Philadelphia-based owner of the site, have not been revealed by either side.

Banker and Tradesman, an industry publication, reported two weeks ago that Harvard was a late entrant into intense corporate bidding for the tree-lined property. The Arsenal's posh office space is currently rented by internet firms and consulting groups.

Because Harvard's non-profit status makes the University tax-exempt, Watertown could potentially lose $2 to $3 million in annual property taxes if Harvard purchaes the site, officials from the Watertown Town Council said yesterday.

Watertown bought the property in the mid 1980's, transforming it from a 200 year-old military base into a office park for stores and businesses with the hopes of generating new tax revenue.