Is distilled water a necessity? I live in Louisville and we have some of the best water in the world.(hence our amazing whiskey)
There is very little confusion about water. Either it tastes good, as Phillipe said, or it does not. If your municipal water source is clean and tastes good all you are needing is to make sure it is sterile. If you have concerns about the chemical components in your water the you can get a detailed report from your water company for free. Most problems people associate with water quality actually are more often a result of brewer error.
Short answer: No.
In general, if your water is good to drink, it's good to make beer as well. I also have access to good water and I don't find it makes any difference on my finished product when I use distilled water instead. If your water has too much minerals or wrong pH, you can still use it after you treat and/or filter it.
I am firmly in the camp of water adjusters, as I am convinced that any water can make beer but only great water makes great beer. First hand experience with a good local brewery which had to switch their water source following a dry summer has only solidified my experience so far. Definitely follow Rory's advice of getting a water analysis sheet from your local water company in order to know what you are working with. I have found the book Water: A Comprehensive Guide for Brewers by J. Palmer and C. Kaminski a very helpful guide. Another de-facto standard with advanced homebrewers (and some professionals) is Martin Brungard's Bru'n Water sheet, there is a free and a donation version with very little difference. His website also offers some insight into water chemistry: https://sites.google.com/site/brunwater/