When I was growing up in northern New York, we used to call Plattsburgh P-burgh.
The lovely town of Trumansburg, NY is known as T-burg. It even works on US mail.
You would have to think context will remove any confusion. You don’t often see a big city catch 8 passes for 127 yards and a touchdown, and I am pretty sure Mr. Owens doesn’t have a mayor.
San Francisco is referred to as SF. Makes me do a doubletake every time I see a thread title referencing science fiction.
Well, when a front-page teaser headline on a general-interest publication (just the teaser headline, with instructions to see inside for the story) states, “Great Day for T.O.,” it’s not terribly clear whether Terrell Owens played well, or something good happened in Toronto.
Boston holds its head high above such petty abbreviations.
Okay, Beantowner. 
In writing, many people use MTL for Montreal.
Not what the OP is looking for, but Hamilton, Ontario is often referred to as “the Hammer”.
Or sometimes ‘Sacto’. Goofily, I have been known to say: “‘Sacto’ is Sacramento without the ‘ramen’ in the middle.”
Portland is PDX and Vancouver WA is the Couv.
It’s the title and chorus of a song in “Annie”. The abbreviation is more common in print, though.
Provincetown, MA is P’town and Charlottesville, VA is C’ville (or, based on the shape of the letter, Hookville).
Champagne-Urbana, IL, is oft called CU. This confused me for a short bit, since I attended CU, which is nowhere near Illinois.
I have heard people from Pennsylvania to use the term PA in speech. I had no idea what they were talking about at first which, of course, made me look stupid in their eyes.
Oklahoma City = OKC. Much shorter.
My favorites are the abreviations for Columbia and Charleston, SC.
Columbia --> COLA
Charleston --> CHAS
For airlines, I’ve seen Honolulu rendered HNL and Albuquerque rendered ABQ, but unlike my examples in my previous post, I’ve not seen these used elsewhere.
Tel Aviv is often referred to in writing as TA.
Jerusalem is occasionally shortened - in writing only - to Y-M in Hebrew, or J’lem in English.
It’s fairly common to abbreviate Montreal as MTL and Winnipeg as WPG in writing.
As for spoken language, T-O and T-dot for Toronto have already been covered. In Montreal we say DDO for the suburban town of Dollard-Des Ormeaux, TMR for the suburban Town of Mount Royal (it’s VMR in French), and (scarcely ever anything but) NDG for the neighbourhood of Notre-Dame-de-Grâce.
Oh, and since someone mentioned states, the provinces of British Columbia and Prince Edward Island are universally abbreviated, in print and speech, to BC and PEI.
Yeah, in the thread about SF benevolent Monarchs, I nominated Emperor Norton. 
Not letters, but shortened name:
I know people in San Francisco hate it when you call it “Frisco”, but nobody in Las Vegas minds if you call it Vegas. Most people here say they live in Las Vegas, but if anyone says they are from Vegas, it is not like people are pissed off or anything.
Now, pronouncing the state NeVAHda does grate on nerves…it is pronounced NeVaada (rhymes with The Bad Aah).