First of all, remove the old local files source in the app's Settings. If that doesn't work, save the songs you have locally in the location you want, turn off Local Files inside the app's Settings, and then follow the steps listed below to do a clean install of Spotify:
Click Spotify in the menu bar then Quit Spotify.
Open Finder then click Go > Library in the menu bar. (You may need to hold the Alt key if Library isn’t visible).
Open Caches and delete the com.spotify.Client folder.
Click the back arrow.
Open Application Support and delete the Spotify folder.