Also, wtf?
Your comment itself is contradictory is it not? If I am to understand "Also, wtf?" to mean something like "euthanising dogs is immoral because it shortens their life", your other argument is that sterilisation is superior because it essentially starves the other dogs. How is starvation morally superior to euthanasia?
Caveat: I actually also have the same emotional knee-jerk response. I own and love a dog very dearly, and the idea of just "getting rid of all the dogs" doesn't sit well with me.
My "also, wtf" stands.
If I may make an attempt at the moral underpinning, it is something like "survival as intrinsic worth". There are flaws to this position, as with any.
It's hard for a small municipality with a stray problem to justify a facility that is entirely dedicated to the bureaucracy of scheduled death. This is a tale as old as time and the end result is not a happy one.
The term "kill shelter" is much more common than "shelter" because by nature a shelter is temporary housing before euthanization resources are available/confirmed.
Directly euthanizing them would definitely be more effective. Reality is just too grim for some people to admit.
Unless the problem really got out of hand, it's not just "some people" who oppose a total cull. Even if people silently approve of the cull, one will find much less volunteers for such an effort than for a large-scale sterilization and vaccination program.