- The town has about $1 million in local option sales tax money that it wants to return to property owners, but it has no good way to do that, says Mayor Bill Woolsey.

Usually cities and towns return income they receive from the countywide, 1 percent sales tax to property owners through a credit on their property tax bills. But the town doesn't levy a property tax on residents' bills.

The James Island Public Service District, which provides fire, wastewater and trash services, taxes property owners. But state law prohibits it from receiving local option sales tax money, a benefit reserved for the state's cities and towns.

Woolsey said the town has been collecting its allocation of sales tax money since October 2012, not long after the town's most recent incorporation.

James Island incorporated three previous times, but each of those efforts were squashed, largely due to law suits from the city of Charleston.

"Right now we're saving all the money," Woolsey said. "Our plan is to return the money to our taxpayers. It's a major concern of mine."

If the town found a way to disperse the money to property owners, Woolsey said, their bills would be reduced by about 16 percent. And vehicle taxes would drop by about 5 percent.

The town, during its third incorporation, sent checks to property owners, he said. But that was "an administrative nightmare." The town's only finance clerk was swamped with problems from errors, such as returned checks from property owners who had died, divorced or moved.

David Engelman, chairman of the James Island PSD, said he thinks the town should again send checks. If that's a difficult task, the town should hire a consultant to do it.

Woolsey said he thinks a good solution would be for the town to become the entity that taxed property owners instead of the public service district. But the majority of members of the district's commission are opposed to that, he said.

Engelman said the commission's attorney has said that would be illegal. And he simply doesn't like the idea. "I like to keep things separate," he said.

Woolsey said has sent a letter to the state Department of Revenue, asking if there's any legal way to have the sales tax money go to the public service district, so it can return it to property owners. But he hasn't yet received a response.

Under state law, the town could keep the money and use it for operating expenses, Woolsey said.

In Charleston County, the towns of Hollywood, Ravenel, Meggett, Kiawah Island and Seabrook Island do that.

Eric Budds, deputy executive director of the Municipal Association of South Carolina, said that's acceptable because the sales tax money offsets the need to tax property owners.

He's not aware of any other city or town in the state that returns the money to property owners, as the town of James Island is trying to do.

Woolsey said he's going to keep looking for ways to get the money to property owners. "So we're saving all the funds until we get a resolution."

Reach Diane Knich at 843-937-5491 or on Twitter at @dianeknich.