In Mountainview, California three years ago, University President Mary Sue Coleman saw that Larry Page had a gleam in his eye.

Page's long-running interest in bringing Google to Ann Arbor was realized last week. Gov. Jennifer Granholm and the Michigan Economic Development Corporation announced Tuesday that Google's global advertising program, AdWords, will base its headquarters in Ann Arbor.

AdWords is the division of Google behind the box of text links on many web pages that presents ads most relevant to what is browsed and therefore what the browser might be interested in purchasing.

Page, who graduated from the University with a degree in computer engineering in 1995, is Google's co-founder and president of products.

Coleman said during her visit to Mountainview - the home of Google headquarters - three years ago, Page first expressed his interest in Ann Arbor.

In addition to Page's contact with the University over the years, Google has been working in Ann Arbor to digitize all University libraries, Coleman said. The project is to be completed in 2010.

When Page spoke at last year's graduation ceremony for the School of Engineering, Coleman said he acknowledged once again his desire to come to Ann Arbor. But after the ceremony, Google ducked from the radar - leaving Ann Arbor in the dark about its future plans here.

Michigan Economic Development Corporation spokesman Michael Shore said last year MEDC tried to deliver proposals to the top executives at Google, but did not hear back from Google until recently.

MEDC is the state's resource for businesses seeking to expand or relocate in Michigan. Some of the services MEDC provides are site location assistance, job training, help with permits and tax abatements.

Shore said a Google consultant called last month and after negotiations, the Michigan Economic Growth Authority voted to approve a $38 million Single Business Tax abatement over the next 20 years - reducing the tax payments to $127 million. This ensured Google's decision to make the move.

MEGA offers tax credit against the Single Business Tax, a tax on large companies that applies to 40 percent of businesses in Michigan, as an incentive to bring high-tech jobs to Michigan.

Coleman said Page loves the University and Ann Arbor.

"He had a great time here, but Google wouldn't come if it wasn't a good business decision," Coleman said.

Ann Arbor Mayor John Hieftje said a large part of Google's decision was based on the high quality of life the city offers.

Public Policy Prof. Paul Courant expressed similar thoughts. He said Google must be pleased with what Ann Arbor can offer, especially fresh graduates from the University.

Courant, a former University provost, said Google's decision was much more about the University than the state.

"If they can get an extra 38 million, so much the better," Courant said.

Hieftje said in addition to the state, the local community has to make a contribution to lure business to the area.

The City Council has not met yet to discuss any tax incentive it may offer Google. Tax abatements offered by the City Council are usually against property taxes, said City Council member Wendy Woods (D-Ward 5). If such an incentive were offered, it would be used to bring Google to a certain part of town.

Woods said she hopes Google will locate in the heart of the city to bring more residents downtown.

"We want Ann Arbor to be more than just restaurant row," Woods said.

Courant said it is "almost standard" that businesses get tax breaks when making a location decision.

Shore said the loss of 5,000 General Motors employees in the early 1990s is a lesson in the usefulness of tax abatements. In 1992, GM was debating whether to close down its Willow Run plant - located just outside Ypsilanti - and relocate in Texas. Gov. John Engler was opposed to industry incentives.

The GM plant in Arlington, Texas was not as hesitant. Texas offered $30 million in incentives and as a result 5,000 employees moved to Arlington. Shore said as far as he knows, these jobs have never been replaced.

"Everyday someone is trying to take what you have or protect what they have," Shore said.

Public Policy Prof. John Chamberlin said the break offered to Google is relatively small. In general, he said, tax abatements are not a good idea as a national social policy.

Competitive bidding between states can result in a race to the bottom, Chamberlin said. For instance, if Indiana had offered Google a $40 million break, he said, Michigan would have felt pressure to hike its offerings.

The SBT is an unpopular tax for both republicans and democrats. Chamberlin said republicans want to dump the tax without replacing it. Gov.