I am not sure about how can you setup a local radio station (maybe you need some equipments like FM transmitter etc), but there's some link to give a fair idea, of what goes to acquire a license for the same.
How to Start a Commercial FM Station?
How to Start an FM Radio Station With the FCC | eHow.com
But, you can easily setup an Internet streamable radio station using just your computer. Follow this link to setup that. Download SHOUTcast Radio Tools