You're not wrong. Having said that, with a little work, you can have a local staff that just happens to live somewhere else. Granted, it takes more effort than what someone voicetracking multiple stations across multiple markets is typically willing to put forth, but, if the staff takes the time to familiarize itself with the area it's serving, it can cover local news, events and issues. Where the jock actually is doesn't matter if the pronunciations of area streets, events and towns are correct and the content is delivered in manners that connect with the audience. Breaking news and severe weather can also be covered in a much quicker turnaround time than what the local TV stations can offer with a little work. Again, I'll grant you that national and regional voicetrackers don't often provide that, but it is doable.
As radiorobert mentions, local in small markets is never going to be what it once was. Those hyperlocal small market stations in the 80's and earlier struggled to make profits back then, and those small markets have a lot more stations (and the same or fewer advertisers) than they had 45 years ago. I realize it's not a 1:1 comparison, but the RadioLand app shows 25 FM stations alone as available in Mason City. In 1980, Broadcasting and Cable Yearbook listed four total stations licensed to Mason City while Austin had three.