I think you are right. Though the murderer could be "semi-local" as in from the larger urban area, or from a deeper rural area, my bet is that statistically, he once lived in the immediate area. At the end of the day, I dont think the area attracts many people who are not local.
"Local",however, can mean living in the area, or having once lived in the area. If the killer is local and still living in the area, I think he would have been identified by now.
If the killer had once lived in the area, I think the police need to do the extensive criminal records search you described for even minor offenses, and also tap local institutional memories regarding "bad news people" whose criminal records may not truly reflect who they are.
For example, a student at my high school could be identified by his formal criminal record as a low level shoplifter / stolen property "fence". A retired teacher or probation officer familiar with him, however, could add that his criminality at the age of 17 went deeper than that and included accusations of arson, deliberate cruelty to siblings, and sexual abuse of a relative.
Active or retired police, teachers, clergy and youth sports coaches would be good sources for institutional memory as they may know more about past residents than the official records state.
