Since you just want a grid solution maybe something like this would work?
;with StateData as
(
select t1.*, ROW_NUMBER() over(partition by t1.STATE order by t1.city) as RowNum
from #tempCityState t1
join #tempCityState t2 on t1.STATE = t2.STATE and t1.City <> t2.City
group by t1.STATE, t1.CITY
)
select case RowNum when 1 then STATE else '' end as STATE, City
from StateData
order by StateData.State, City
I still say it would be better in the front end but this does what I think you are after.
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