Dynamic site would always work better - both in terms of SEO and repeat visits. Keep adding valuable content and also work on getting good backlinks. If you are service providing business, also get yourself listed in local Google.

Participate in local directories,classifieds and also submit latest happenings.

Participating in local business listing, classified website and local directories .

If you choose a static site for your main folder, you can always include a blog on a subfolder. This will give you the option to update your website with fresh pages/posts as needed to cover local festivals and events as they occur. This will add a fresh and exciting element to your website that a static website could not.

Local SEO only really applies if you're a business that has a physical address where people show up (coffee shop, insurance agency etc) OR if you are a service area business that goes out to customers in a certain area (Plumber, Arborist, Electrician etc). So you wouldn't need Local SEO for your site, it's more traditional SEO. Your business type wouldn't qualify for a Google Places listing. If you're looking to blog about a specific city, I would say your best bet would be to connect with the businesses there. I personally recommend G+ for this since most local businesses are listed on G+ if they care about their local ranking on Google. You could create a brand page on G+ that doesn't need to be associated with a physical address.

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Local SEO, while related to around the world focused SEO, provides similar benefits. The change is that it can also help with your organization's digital conversions from possibilities and real customers

1. classifieds Posting
2. Blog Creation
3. Yellow Pages

I think if we want to target several Local places, then we need to create different landing pages for that & even we need to put some demographic data, service details, service discounts etc etc - which can be useful for the users. I, prefer, to create a Mother City Page apart from individual CITY URL for different landing pages. For an example: If I will have Sydney is the mother CITY Page so the URL structure will be like:

abc.com/sydney/carpet-cleaning
abc.com/sydney/house-cleaning

would you please tell me what is yellow pages..