It does not contradict state law. State law says you may not ride more than two abreast, city law says no more than single file. Single file is not more than two abreast, so riding single file satisfies both laws.

The state law does not stipulate that localities may not modify this law.

Of course, in general when there are a lot of cyclists, it's in the motorist's best interests to have them bunch up, so they get past quicker. You can't safely pass a pack of cyclists that are spread out over 300 feet anyway, so you may as well have them bunch up into a pack that's maybe only 100 feet long and they get past quicker so you can get across the road/in the road/etc.