Oak Harbor staff outlines plan for handling end of U.S. penny production and cash rounding

A city staff member outlined how Oak Harbor plans to handle the U.S. Treasury's decision to discontinue penny production and recent state legislation permitting cash rounding, saying most customers will see no change and pennies will continue to be accepted.

The presentation, given at the start of the meeting, explained that the city's bank recently told Oak Harbor it is limiting the amount of pennies it will provide to commercial customers and that some local businesses have already begun rounding cash totals to the nearest nickel. "Most of our customers will see zero changes as this only affects in-person cash transactions," the city staff member said, noting those transactions represent "less than 1/3 of 1%" of all payments.

Why it matters: the change affects only in-person cash transactions and can change the final amount a customer pays at the register, though electronic payments remain unaffected. The city emphasized it will continue not to charge fees for electronic payments.

How rounding will work: staff said pennies will be rounded to the nearest nickel after taxes; 1, 2, 6 and 7 cents are rounded down while 3, 4, 8 and 9 cents are rounded up. The staff member added, "If the customer has pennies, we will accept them even after this goes into effect." The presentation cited Department of Revenue guidance that taxes must be calculated on the pre-rounded amount; staff illustrated that with an example in which a $10.00 sale with $0.92 tax totals $10.92 and would be rounded to $10.90, while the state still receives the full $0.92 in tax.

Utility accounts: for customers who pay utilities through ongoing accounts, staff said any rounding adjustments will be applied to the next bill before any new rounding occurs so the system remains mathematically balanced.

Timing and coordination: staff noted the state law takes effect on June 11, 2026, but Oak Harbor does not expect to implement rounding immediately because pennies remain in circulation. The city will coordinate with the state and the Association of Washington Cities and will provide advance notice to customers when it sets an implementation date.

The city framed the discussion as proactive customer communication rather than an immediate policy change; staff said further information on when and how rounding will be implemented will be communicated to customers prior to any change.