MERCEDES — This city is already a retail destination for out-of-towners.

Now it needs to keep its residents shopping here, too.

There may be no better example of what expanded retail options can mean for a city's sales tax revenues than Mercedes.

Before the Rio Grande Valley Premium Outlets opened here in November 2006, its annual sales tax revenue hovered around $1 million.

In the year after the outlets opened, sales tax revenue jumped to $5 million.

Since then, that revenue has grown at a rate that has "exceeded expectations," said Albert Gonzalez, the executive director of the Mercedes Economic Development Corp. The city's sales tax income is up 11 percent this year even in the midst of an ongoing recession that is keeping some consumers away.

Gonzalez said the driving force for his own city's retail sales growth is different than what has fueled Edinburg's growth.

"Ours isn't preventing leakage" of residents to buy necessities, he said. "We're overcompensating for a lack of shopping for everyday items with the destination retailers."

With major big-box retailer Wal-Mart located next door in Weslaco, Mercedes loses revenue as its own residents spend their money three miles down the road, Gonzalez said. But with its secure hold on luxury shopping at the outlets, the city's next step will be to lure businesses that complement those high-end offerings.

The extra revenue from the outlets allows the city to pay for services that don't have their own revenue stream.

Gonzalez said some of Hidalgo County's smaller cities are more aggressive when it comes to retail.

"You want to keep our own shoppers here," he said. "You start with that, and it's a big boost, as evidenced by Edinburg."

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Jared Janes covers Hidalgo County government, Edinburg and general assignments for The Monitor. He can be reached at (956) 683-4424.