You have to renew it to prove residency. Libraries are funded by property taxes. If you move, which happens all the time, you are no longer that library's first priority and probably have different restrictions for check outs etc. Libraries have to try to keep circulation statistics for nonresidents below 15% in order to properly serve their actual service area.
Really? That's crazy. Mine never expires as far as I can tell, but it's a fairly small city.
Now in Chicago, I felt like I was at the DMV. I needed proof of residence, forms of ID, etc., before they would give me a card. And they were NOT friendly about it when I didn't have just the right thing on me. I think there was even a waiting period - I could only check out one book the first time, then basically had to prove I would bring that one book back before they would let me check out more.