Why are Notes files not stored locally?

I've been working on this laptop for over a year, and I take all of my work notes using the Notes app. Today, I realized that my work Apple ID was not active—meaning I couldn't sign in or out, or reset my password. So I contacted Apple Support, and they were able to help me sign in to my Apple Id / iCloud account. When I did that, however, it asked me if I wanted to merge my contacts and Notes. I wasn't sure at the time, so I didn't check the boxes... Only to find that all of my Notes are gone and according to a senior Apple Support rep, are not recoverable because Notes files are not stored locally (even though I have the setting selected in my Notes app preferences).

Setting aside the ridiculous issue with Apple wiping data from a computer when an Apple Id is "not active", why on earth are these files not automatically stored on a computer like any other document-creating application? I lost over a year's worth of work notes because of this issue.