Who runs and controls the top level domain?
The applying entity is responsible for paying fees and following ICANN’s policies. As long as it stays within ICANN’s rules, the successful applicant will have free reign to decide policies, fees, and other rules. If a non-city applicant (with the city’s permission) applies, then the city would need to enter into a contract with the applicant specifying any provisions that the city wants the applicant to adhere to.