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Of course, your conclusion can't actually occur until you see the outcome in Google.  Everything else is just speculation. I'll take a crack at it though, and say that your local result is not necessarily an indication that your organic is soon to return to previous levels. If, for example, your strong organic results were due to a great link on a strong site and your reduction in rank was due to the disappearance of that link, not to a penalty of any sort, you may still show up well in the local results but organically, you just don't have the umph, any more. Only time may tell. In the mean time, make it even more difficult to tell by building new linking relationships and reaching out to your social media audience as much as possible.

Honestly, given that you currently have relatively few cities, consolidating might not have a big impact. I'd be cautious going forward, if you were going to expand into hundreds of markets or started having a ton of results under every market, but for now it probably makes more sense to improve your link profile and try to get some content on the site that isn't entirely search results.