Organization of blog with multiple users

I’m starting a blog which will be a running commentary on a number of different cities. There will be one or more authors for each city. In terms of content organization, would I use the Categories function to organize the posts -ie assign a category to each city? If so, is there a way to further subcategorize using a hirarchy of categories and subcategories? By this I mean can users go to a California category, and within it find subcategories San Diego, Los Angeles etc, and inside these subcategories find relevent posts? If I can’t, what is the appropriate way to organize?

A second question: No limit on number of users/authors, right?