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When I played the game for the first time, there was an option to select your difficulty? Does it affect anything other than starting cash?

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I did a better search and found the answer.

Easy
Initial Funds: 500,000
Staged Growth Boost: 83%
Demand Boost: 6%
Tax Boost: 20%

Medium
Initial Funds: 200,000
Staged Growth Boost: 91%
Demand Boost: 3%
Tax Boost: 10%
You can get the Space Port reward in this difficulty level.

Hard Initial Funds: 100,000
Staged Growth Boost: 100%
Demand Boost: 0%
Tax Boost: 0%
You are also able to get the Space Port and Area5.1 rewards in this difficulty level.

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Staged growth is the mechanism that prevents skyscrapers from being built in a small town. The percentages change the stage limits. For example, if you have a population 37,000 of medium wealth residents then you have a high enough population for Stage 7 buildings. However if you were to play on easy then you'd be able to get some Stage 8 buildings. This is because 43,859 (number of residents needed for a R$$ Stage 8 buildings) is multiplied by 0.83 (83%) which equals 36,403. That is enough for some stage 8 buildings.

Source is: http://www.simcitycentral.net/forums/archive/index.php/thread-223.html

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