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This is unscientific and based on the way I personally search, but I'd ask how people in the area refer to that area for some additional input. Here are some examples of the ways I have searched for locations in areas I've lived in (or had family live in). In the SF Bay Area, I used to live in Newark. There were about 30,000 people in the city, and it was surrounded by the SF Bay on one side, and Fremont on three other sides. I would verbally tell people in the region that I lived in Fremont, and I'd search for local businesses using Fremont instead of Newark, as otherwise I'd get results for New Jersey. I have relatives that used to live in Woodstock, VA. Everyone always thinks of Wodstock, NY, and it's hard to find local info, especially when searching from the West Coast. A lot of businesses describe themselves as in the Shenandoah Valley (and it was Shenandoah county), so I'd often search for Shenandoah, or Front Royal, which was the nearest sizable town. Other relatives live in Battle Creek, Iowa, a town of 800 or so people. Even with adding Iowa, I get way too many results for Battle Creek, Michigan. If I need to search for something (usually on ebay, looking for memorabilia) I will search for Ida Grove or Ida County. I know this really isn't an answer to your question, but more of some things to think about. Again, I'd ask (if you're not local to the area yourself) how people usually describe where they live, and look at search volume for that. Maybe also run some AdWords targeted to desired zip codes, and then look in the Search Query Reports in AdWords to see what cities people type in to modify their search?

Another possibility is that there is anchor text or citations pointing to that site that helps Google know it's related to that city, even if that city isn't mentioned on the site.

Thanks Alan, I would be focusing on local searches such as "Buying a Home Rochester MN" etc. I have been working with my clients to get their business pages created on the various business directory sites like Google Places, YellowBook etc.

Cufon is a font sifr used to emulate non-web safe fonts on the web. All of these classes and span wrapped around the H1 are being added on page load. If you actually review the source code you can see that is not what the search engines would see when crawling the page. In regards to stuffing content into the H1, i wouldn't stress over it to much. As long as your targeted keywords show up in the title/meta and a few times on the page you will be all set. Cater your site to the user not the search engines. Good luck!