What is the best format to organize new listings?

I am creating a services site similar to United Way. I need separate categories for Location (different neighborhoods) and Service (food pantry, etc.). For advanced search, I would like the search form to have a field for location by zip code or address and a secondary option for type of service.

Should I create categories for 1 and tags for the other or should I have a category for each location and create service subcategories for each location? What’s the best way to organize this?