The city council of Thompson, Manitoba recently approved a municipal-services agreement with the Nisichawayasihk Cree Indian Band in Nelson House. It wasn't too long ago the residents of Thompson rejected the idea of establishing urban reserves in their community.

In fact, in 2001 the majority of Thompson voters rejected the urban reserve in a citywide plebiscite. Yet contrary to the wishes of Thompson voters, city officials went ahead anyway.

Opponents of the urban reserve are demanding a second plebiscite. The city would be wise to comply with their wishes as plebiscites allow citizens to examine a proposal more closely. And the establishment of an urban reserve should not be done lightly as there are a few pitfalls.

An urban reserve is commercial land purchased by a native band in which the land then becomes designated as part of their reserve - regardless of where the land is located. Once urban reserve status has been achieved, the property is subject to all the provisions and protections contained within the Indian Act, such as freedom from taxation.

Urban reserves create two problems.

Unfair competition is the first. True, native bands negotiate an agreement with municipalities to pay fees for services - such as sidewalk and road maintenance - in lieu of the regular property taxes. However, the Indian Act protects reserve land from lien and/or seizure. Therefore, the City of Thompson has no recourse if the Nisichawayasihk Cree Indian Band refuses to uphold the services agreement.

Native Canadians working on urban reserves do not pay income tax, so businesses can pay lower wages without the workers losing any take-home pay. Furthermore, a native-owned business would not have to pay taxes for goods and supplies delivered to their shop located on reserve land.

Native-owned businesses, native workers and businesses operating in partnership with urban reserves have a clear and unreasonable advantage over their competition. This unfair competitive advantage may in fact cause existing Thompson businesses to become bankrupt.

Obviously, the tax breaks would help a native owned business operating on an urban reserve. But most of us realize there is no such thing as a free lunch, someone has to pay the bill.

In fact, the citizens of Thompson and the province will have to pick up the tab for lost property tax revenue currently generated from the land which would compile the urban reserve. And, let's not forget the tax revenues lost due to tax breaks on labour and merchandise.

The second problem of urban reserves is once land is designated as an urban reserve land, it can no longer be disposed of without a majority band vote. Similar to other reserve land, it can only be transferred to the federal government. In the future, this restriction could be tough to swallow for a band investing in the fluid urban land market.

It is very important native Canadians enter the mainstream of Canada's economy. Viable business ventures are one way to achieve this. In a free market system, all players must be on an equal footing. Unfair competitive advantages, such as tax breaks, disrupt the system by off-loading the tax burden to other citizens and businesses.