It's not required, but it is helpful... Let me see if I can break that down somewhat. I can only speak about my experience with Everfree Northwest, and would appreciate it if others can add additional perspectives.
For the general staff members, the only requirements to be there and be helpful are for the days of the con itself; maybe a day or two before and after to help with setting up and cleaning up.
Even many of the higher up staff, the people that do the actual planning, don't live in the Seattle region, but between our use of our internal staff wiki, email, and Skype, they can coordinate with all other staff, and do everything they need to do to make the convention successful.
The only things where you HAVE to live close are those tasks involving the convention storage space, and only a few members of staff are required for those tasks. The big advantage of living close enough is being able to attend and take part in the staff meetings, which happen once a month or so, but attending the meetings isn't required, and we make sure everyone is informed of the important information that comes from such meetings.