The shipping amount in the coupon setup page is not currently programmed. You have the following options for giving local customers discounted shipping:

1. Setup shipping by zip code will give you more granular control to discount local customers

2. UPS shipping calculator and program the order integration pipeline to discount local customers. Note, customizing the order integration pipeline requires programming

Here is a kb article w/sample vs project that shows how to program the order integration pipeline.

http://helpdesk.smith-consulting.com/...e-pipeline.aspx