Could my location pages be hurting my site's rankings?

Those pages could look like doorway pages if their main purpose is to capture city searches and send everyone to essentially the same service. That can fall under search engine spam policies, though nobody can tell you from the page count alone that you'll get a penalty.

Changing a few sentences on each page isn't necessarily a fix. Ask whether someone searching for that service in that city would get useful information there that they couldn't get from a general service-area page.

I'd audit them before deleting everything. Start with the cities that matter most and check which pages get impressions, clicks, or leads. Keep and improve pages where you can provide genuinely relevant information, and consider noindexing weaker pages while you decide what to do with them.

A useful page might include real local project details, relevant photos, or reviews connected to that area, if you have them. Don't invent local material just to make the text different.

There may be no dramatic ranking drop at all. Some of those pages might simply not get indexed or rank, so building hundreds of them could produce very little return. Check the actual search performance rather than assuming either outcome.

Large numbers of low-value URLs can also take up crawling resources, although 565 pages alone doesn't establish that crawling is a problem for this site.

Fewer pages would be easier to maintain and probably more useful than trying to write hundreds of city variations. A clear service-area page plus strong service pages may be enough for places where you don't have anything specific to say.