I had read about an app called citycounds.fm, which is no longer active, where they made city-based playlists.  Unfortunately, I can't seem to find any way to search for tracks by city in the soundcloud api documentation.
Any one know if this is possible?
You can't filter tracks by city. The city is actually stored with the user.  So you would have to search for the tracks you want, then perform an additional step to check if the user for each of the tracks is from the city you want.   
I wanted to do something similar, but too many users do not have their city saved in their profile so the results are very limited.
Is there any way to search for tracks by city in the SoundCloud API?