A clash between county government and higher education escalates to a state court next week when Centre County formally appeals a 1987 lower court decision exempting Penn State from paying real-estate taxes on a private on-campus bank.

The brief, to be filed with Commonwealth Court Jan. 16, comes after 10 months of talks between county commissioners and University officials who are at odds over the Mid-State Bank & Trust branch office in the Penn State Bookstore on Campus -- a branch office the county views as a taxable, non-educational commercial activity.

Penn State has contended throughout the dispute that its status as a state land grant institution precludes the payment of any local or regional taxes. The University declines comment on the issue because of the pending litigation, said Bill Mahon, director of public information.

Centre County hopes the appellate court will force Penn State to pay the tax, and the county commissioners' office did not rule out the scrutiny of other University business endeavors should this month's suit prove successful.

The appeal was originally scheduled to be filed Nov. 16 after negotiations broke off in October. But county officials agreed to a 60-day extension when the University attempted to re-establish talks, said Lawrence Bickford, Centre County's director of administration.

Bickford said the decision to enter next week's appeal resulted from what he called a failure by the University to take concrete steps to repair the negotiations.

"It was the University that asked for another 60-day extension. We said, 'Okay, we're interested. Please make an offer so we (will) have something to discuss.' No offer was presented," said Bickford, who stressed that the county remains open to proposals.

Phone and written contacts by the University during the past two months resulted in no scheduled meetings, he said.

The county, in an attempt to gain allies for its litigation, late last year asked several municipalities in the Centre Region to adopt a resolution supporting its taxing efforts. The end result was a statement of support -- an amicus brief -- to be filed tangential to the main brief on Jan. 16.

"When it became apparent that negotiations were not going to bear fruit, the county determined its position in Commonwealth Court would be strengthened if the Centre Region municipalities were in support of our position," Bickford said. "It will send a strong message to the court that it is not just the county . . . that has a vested interest in the case."

The amicus brief contains signatures from officials of Patton, Ferguson, Harris and College townships and the State College Borough, as well as support from the State College Area School District.

"The (State College Area school) district felt that it was worth filing the supportive brief to lay to rest once and for all what was taxable," said Patricia Best, the district's communications director. "There was an issue there that needed to be decided."

In a telephone interview, Best quashed possibilities that the district's move would be detrimental to the "cooperative working relationship" between it and the University.

State College area schools provide a training ground for student teachers and researchers in Penn State's School of Education, while the University in turn often enrolls high school students who wish to gain college credits while still in secondary schools.

The issue, which stemmed from an attempt by the county in 1984 to get $228 from the University, is one tax experts say hinges on state interpretation of local laws.

"One thing that's unique to this area of the country is the proliferation of nuisance taxes," said Charles Enis, a University associate professor of accounting and management information systems. "Services are privately owned at most universities. If the University owns the building and the University is tax-exempt, then it shouldn't have to pay the taxes."

The many aspects involved in leasing would further complicate the issue, he said.

While the bookstore building itself is University-owned, Mid-State -- a financial institution with 31 branches in Blair, Bedford, Centre, Clearfield and Huntingdon counties -- rents the space, said Kevin Davis, the bank's vice president and director of marketing.

"You have a situation where the bank is not a player in this issue," said Davis, who hopes the bank will remain a minor issue in the appellate court clash.

He said Penn State's branch of Mid-State, which opened in 1982, was created after the University awarded the institution a bid "to serve students on campus."