Google Doesn't Hit Ann Arbor Job Projections, But Still a Media Favorite

In 2007, newspapers around the state trumpeted Google’s announcement that it was opening its AdWords office in Ann Arbor. Then-Gov. Jennifer Granholm came down to Ann Arbor for the press conference and former University of Michigan President Mary Sue Coleman and several high-ranking state officials all commented on Google’s arrival.

This week, MLive reported that the owner of the buildings Google currently inhabits will be leasing out that space in 2016, raising questions about Google’s future in Ann Arbor. Google was projected to bring in 1,000 jobs within five years of moving into its Ann Arbor offices. A company spokesperson told MLive they currently have 400 employees in Ann Arbor. As part of its tax-subsidized agreement, the company's last filing in 2008 showed it had 224 jobs in Ann Arbor.

Google’s impact on the state economy has been minimal, considering that the state has added 5.8 million jobs and lost another 5.8 million jobs since the second quarter of 2007, according to the U.S. Bureau of Labor Statistics.

Yet, the company’s involvement in Ann Arbor has generated dozens of news stories since 2007.

“The media makes way too big of a deal with regard to these announcements,” said Chris Douglas, an associate professor of economics at University of Michigan-Flint. Douglas is also on the Mackinac Center for Public Policy’s Board of Scholars.

Douglas said the media coverage often fails to address the costs of big taxpayer-financed deals with high-interest topics such as film subsidies involving celebrities, tax breaks for sports arenas and popular sports teams and mega companies like Google.

“I think the media being seduced by the cult of celebrity is a real problem,” Douglas said.

Ed Shaffran, who owns Shaffran Companies in downtown Ann Arbor, said 400 employees isn't much in a city of 117,000.

"It's a drop in the bucket," Shaffran said.

Shaffran said there are numerous start-up companies in downtown doing well without help from the government.

“There are companies with eight and 10 or 12 employees; they didn’t get any tax subsidies,” Shaffran said. “They didn’t get any free parking. But they are down there.”

Gary Wolfram, an economics professor at Hillsdale College and an adjunct scholar with the Mackinac Center, said the Google hype was a good example of people not looking at the big economic picture.

“You see Jennifer Granholm standing there saying, ‘Oh my God. This is great. Google is going to come in.’ We don’t observe things like how big this is in terms of total jobs in the state of Michigan," Wolfram said. "All these government attempts to direct where the economy is going, it doesn’t work out. The market will win out in the end.”

Google was offered a $38.25 million refundable tax credit in July 2006 to create 1,000 jobs. The Washtenaw Development Council also paid the company’s $5,000 application fee for the credit. Google also had a deal with the city for free parking for the first few years. The state’s briefing memo mentioned that it would be requesting a local property tax abatement.

Since then, the company only appears to have claimed portions of that credit in 2007 — when the company created 134 jobs at the project — and in 2008, when the company claimed credits on creating 224 jobs at the project.

“The economy is much broader and moves much faster than any government could hope to subsidize,” said James Hohman, assistant director of fiscal policy for the Mackinac Center.

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