The final tally was Hamill 142, Watson 140, and Dillow 60.
Watson, who had asked for a recount, said he felt it was handled properly.
"I felt the five ballots needed to be counted," Watson said. "I don't feel bad at all."
Watson and Hamill shook hands with each other after the votes were tallied and Hamill was once again declared the mayor.
Hamill said he would also have asked for a recount if he had been in Watson's position.
The mayor and newly re-elected council members will be sworn in at next month's meeting.
After the election, the council voted unanimously not to count the sealed ballots and they were kept in closed envelopes.
The ballots had been challenged by poll workers on election day when the voters' names could not be found on registration books even though they were registered to vote. They were allowed to vote, but the ballots were sealed in envelopes until Tuesday night.
Town Recorder Charles Slusher said that the voters' names had been left off the books due to a clerical error.
Councilman Howard Shade said that the poll workers and the council had followed the law as they understood it by not counting the votes earlier.
Slusher said he had checked further with the West Virginia secretary of state's office and learned that the ballots should have been counted.
Hamill won reelection to a fifth term. The position pays $2,700 a year.