Fearless,
City Portals have made millionaires... City Portals area HUGE niche market. People make money.
Now I am guessing you are referring to the people who think they can hand reg a junky domain, buy $150 script and then sit back and watch the money come in, THOSE are the people who don't make any money.
Put Time, Energy, Legwork, and Money behind a local website and it will succeed. Before you begin do your homework, if you cant offer a superior/cheaper product than what the area currently has then move on to another area. Also I have seen people too many times go out and buy ChicagoLocalWebsiteOnline.com (example). You need a domain that shows you are legit, spend a few bucks and make an investment in a good geo name, even if you portal falls you still have the domain investment.
I have used PHPCityPortal and for the dollar I have never seen anything else close. I able still customizing it to my needs which is important, NO ONE SINGLE SCRIPT is going to serve your community perfectly, you need to cater your site to the needs/wants of the local economy, businesses, and citizens. Anways in less than a year I am averaging over 30,000 pageviews a month and I am still not even closed to finished. My site is generating income and above all is growing rapidly at a local level.
In Summary most people won't make a living off of a geo site, but that is BECAUSE most people arent willing to put the time/energy/commitment that it takes to make a local portal or any website for the matter successful.
JamesDavid