South Portland will hire an outside consultant to review commercial properties to help determine whether a revaluation of business real estate is needed.

At issue is whether the tough economic times have resulted in a severe and sustained decline in commercial property values to warrant the city to undertake a revaluation, which was last done citywide in 2006.

South Portland is highly dependent on its commercial base of real estate, which includes the Maine Mall and dozens of retail and office establishments around it.

The total value of all real estate in South Portland is about $3.5 billion. An independent auditor’s report in 2007 described the city has having a 50-50 split between “residential and commercial (real and personal) property values,” with its largest taxpayer comprising 6.67 percent of the tax base.

A downturn in the economy has led to some mall-area retailers shutting down, including Vinny T’s restaurant, TGI Fridays and Circuit City. Office Depot and Linens n Things will close after the holidays, and Sebago Brewing Co. is leaving a site in the mall parking lot for a new building in Scarborough.

At the same time, Maine Mall owner General Growth Properties has warned that it may be forced into bankruptcy if it cannot meet more than $900 million in debt payments due in 2009. The deadline on the payments was December but has been extended to early next year. At the same time, General Growth has put up for sale malls it owns in Baltimore and Boston. The South Portland mall is not for sale.

City Manager Jim Gailey said Monday that it is standard practice for the city to hire a consultant to help make adjustments on the commercial tax base.

“The commercial assessments are more complicated than the residential, hence the need to hire a consultant,” Gailey said.

Commercial real estate represents all business properties, except for industries, such as Fairchild Semiconductor and other manufacturing facilities. Commercial covers retail and office properties.

The city plans to hire Steve Troubh, who is based in the Boston area. Troubh has assisted previously in reviewing South Portland’s commercial tax base.

“Steve Troubh has done the city’s commercial properties for a number of years, and he is one of the best in New England,” Gailey said.

Troubh will look at the commercial properties and whether they fall in line with the real estate market.

“It’s an overview of where we stand,” said Mayor Tom Blake. “It’s such a big task that we need the consultant’s expert opinion.”

Troubh will work with the city’s veteran tax assessor, Elizabeth Sawyer.

Gailey noted that the review of commercial properties is not at the behest of the Council.

“The assessor’s office will be looking at properties to see whether adjustments need to be made,” he said, which is a yearly process undertaken before April 1, when property values are set across Maine.

Sawyer was on vacation this week and could not be reached for comment.

Sawyer has contacted Troubh and will set up a schedule for him to review the commercial property tax base. She will receive an estimate of his costs, when she talks with him, Gailey said.

Sawyer, meanwhile, is monitoring residential property values in South Portland. She already has made adjustments to some condominium developments.

City Councilor Jim Soule has urged the city to conduct a revaluation of all city property. Most recently, he used his own house as a case in point.

Soule said he could not sell his home for the city’s assessment of the property, which is $394,000. He issued a public call for a buyer to offer him the price for which it is assessed by the city.

At the same time, Soule has complained that South Portland is punished for having a rich and diverse tax base, compared to other cities and towns in Maine.

He argues the high assessments decrease the amount that the city receives in state revenue sharing and school aid.

“It is imperative that we demand a revaluation of our entire residential and commercial properties,” Soule wrote in an open letter to the Council and city manager.

“As we are well aware of the state’s financial shortfall, John Martin has made it clear that they will be cutting educational funding along state-school-funding-formula lines. It behooves us to not be overvalued under this scenario, as we receive our state funding allocation based on our entire city’s valuation.”

But Sawyer has warned that the state uses its own analysis to set the total real estate value for each municipality.

If residential property values continue to fall, the city will have to undertake a revaluation. State law does not permit assessments to be more than 110 percent of market value. Next month in South Portland, assessors from Cumberland County municipalities will meet to discuss the real estate downturn.

Although property values have dropped across South Portland and Maine, real estate broker Joe Flynn said they still seem to be in line with market value.

Flynn said that before the downturn in the real estate market, assessments tended to be on the low end compared to what homes sold for on the market. Now he said that assessments and market values are more in line.

Blake and some other Council members are warning that a drop in the tax rate does not mean residents will pay less for property taxes. He said the city will still need to raise the same amount of money to pay for services.

At the same time, a severe and prolonged downturn in the commercial sector could result in a shifting of the tax burden to homeowners.

“If we revalue and the commercial base goes down, guess who will make up the difference? Residentials.”