Local entities may be more likely to face blowback, but that has not prevented them from engaging in their own fair share of deceptive advertising.  Low-rent hucksterism is alive and thriving at the local level.

Instead of trying to draw lines between who should be allowed to use it, and who shouldn't (a nightmare situation given the ease of creating shell corporations, shady front groups, PAC's, etc), how about hard rules on a media by media basis?

No push advertising of any sort, ever - that is, advertising which is pushed toward the consumer without their consent or desire.

Shopper wants to pick up an advertising flyer or local circular?  Fine.  Junk mail?  Gray area.  TV, Radio, and Magazine ads?  Never.

The Internet is already in the process of finding ways to gather and deliver locally relevant content to interested users.  A layer on top of Google Maps combined with something like GroupOn may well be enough.