A news service for the people of Michigan from the Mackinac Center for Public Policy

In 2006, Google's announcement that it was opening an AdWords office in Ann Arbor was trumpeted as the start of the transformation of a suffering Michigan economy.

The Michigan Economic Development Corp. lured the Internet giant to Ann Arbor with a 20-year tax credit valued at more than $38 million. The city of Ann Arbor also gave it up to 400 free parking spaces for four years in a city where parking spots are much in demand. Based on current costs for a spot in an Ann Arbor parking structure, the parking deal would be worth $633,600 a year to Google if all the spots are used.

For that lucrative deal, Gov. Jennifer Granholm said Google would bring in 1,000 direct and 1,200 spinoff jobs in its first five years.  An MEDC press release stated, "Granholm said the Google decision is just the latest evidence that her economic recovery plan is beginning to deliver dividends of increased investment by high-tech companies that mean well-paying jobs for Michigan."

Yet, four years into the deal, few of the parties involved in the deal will talk about Google's performance in job creation since the announcement.

According to the MEDC, Google brought in 163 jobs in 2007 and then 61 in 2008, far short of the 200-a-year pace needed to meet the 1,000 jobs Granholm said the deal would yield. Using the MEDC's tax credit formula, it is estimated Google received about $800,000 in tax credits for 2007 and 2008 for the 224 jobs.

Many of the companies involved in MEDC tax credit deals fall far short of their job projections, according to a recent Auditor General report. An April 23 audit looked at company projections from 2005 through 2007 and concluded that about 28 percent of projected jobs came to fruition. The Auditor General report stated 184,951 new jobs were projected, but that 52,286 were actually created.

"Google is a microcosm of the entire MEGA program," said Michael LaFaive, the director of the Mackinac Center for Public Policy's Morey Fiscal Policy Initiative. LaFaive was part of a study that pointed out nine months before the Auditor General's report that only 29 percent of jobs trumpeted in state of Michigan press releases actually were created.

"The announcements are made with much ballyhoo by pols and pundits alike. Typically the companies then fail to meet their job creation promises. From 1995 through 2004, only 10 of 127 MEGA companies had created the number of jobs they had promised and within the promised timeframe," LaFaive said. "Several, such as Kmart Corp., stumbled badly afterward, eliminating 100 percent of the jobs for which they had won $6 million in tax credits.

"This isn't a jobs program, it is a job announcement program."

The MEDC doesn't have 2009 numbers for Google, and the Internet giant said it doesn't release specific job counts.  And none of the officials involved in wooing the Internet company will point to one spin-off business created by Google.

Last week, MEDC CEO Greg Main told a House of Representatives tax committee that jobs for 2009 will drop off for a lot of companies vying for tax credits, saying they were "very hard hit."

Businessinsider.com reported in January of 2009 that a Google vice president blogged the company would lay off 100 people in human resources because the company needed fewer people focused on hiring.

Jake Parrillo, a spokesman for Google, said the Ann Arbor office is hiring. But Parrillo didn't respond to questions whether those were new jobs or jobs replacing people who had left.

Mike Miller, who heads the Ann Arbor Google office, didn't return messages.

Ann Arbor Mayor John Hieftje didn't return a message.  

City of Ann Arbor Chief Financial Officer Tom Crawford declined comment.

MEDC spokeswoman Bridget Beckham said the state doesn't track indirect jobs or reveal how much money in tax credits companies received because tax information is confidential.

Mike Finney of Ann Arbor Spark, which helped broker the Google deal, referred questions to Google's Miller.

Ed Shaffran, president of Shaffran Companies, said some Google employees are tenants in his buildings.

He said he has benefitted with tenants from the Google deal. But he wonders about all the conjecture about the impact of a Google landing in Ann Arbor as a magnet for attracting other companies.

"People were feeling at the time, 'If Google is coming, who else is coming? Maybe Microsoft is next. More will follow,' " said Shaffran, who was head of the Main Street Area Association when Google made its announcement. "Apparently, that didn't happen."

Spark's Finney couldn't list a company that has come to Ann Arbor solely because of Google. He said there are companies that hear about Ann Arbor because of the network in which Google operates.

"It's a badge of honor," said Tom Heywood, executive director of Ann Arbor's State Street Area Association. "I always felt the politicians overstate these things."

Rich Sheridan, CEO of Menlo Innovations in Ann Arbor, wrote in an e-mail that the impact goes far beyond the jobs.

"The fact that a Google flag flies over Ann Arbor gives us some bragging rights that few other communities have," Sheridan wrote. "I know when I talk about our area as I visit around the country, people ask me why I chose to keep my business in Ann Arbor. I often say, I've chosen to stay in Ann Arbor for the same reason that Google decided to move their Mountain View CA Adwords operation here: great quality of life, terrific talent, and an entreprenuerial spirit that I don't see everywhere I travel. It helps create a positive momentum that quite frankly give Menlo Innovations more credibility for what we do."

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Star International Academy is the highest ranked high school in Michigan on the Mackinac Center for Public Policy's Contest and Performance report card for both 2014 and 2012. The study and a database of every school in the state can be found at www.Mackinac.org/CAP.

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