Local SEO, pricing per keyword question?

The thing with local SEO is you need to build citations, reviews, and links. You have to optimize their website on-page plus a Google+ Local page. After the on-page you will want to build citations, reviews, and links until they rank in the 7 pack and organic results.
A newer SEO could charge $40-$50 per hour, and for an SEO with a few years of experience $85-$100 per hour.

Thanks...any suggestions on per keyword pricing?

I've found that the $100 per keyword is on the lower end of the spectrum, especially if you're buying links.
Regardless, there's a situation with ranking and staying ranked above competitors, and the amount of hours invested to do so. This can get tough charging $100 per keyword. You will need to allow budget for paid links, plus make it worth your time. I would charge based on value, like on client ROI. Build fewer links by using paid links with authority, then you can spend less hours building links and provide a bigger ROI, faster. Which you can charge more for.
Think 10 to 1 for a value based pricing system.
You approach a professional and show him a proposal that involves increasing his business by 20k per month. You make good and take your ten percent or $2,000 per month. If you work smart you could make this 2 grand per month by building just a few links instead of slaving away for over 30 hours to make that based on an hourly fee.

According to me, around 100 to $300 for a keyword each month. It depends on your budget and requirements.

Thanks guys this info is super helpful and much appreciated

I am familiar with ROI based charges. But in this case it won't fly, at least not initially as it's a new business and they specifically asked about per keyword. And mentioned a strategic partnership...which sound like another way of asking for me to work for free...

I have charged my last local client a $297 per month for just 2 main keywords to rank for! and he was very happy!. I suggest that you charge $197 per month for 1 keyword SEO and Maintenance but you also have to choose a niche that has a lot of money in it.