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Could be outdated information, but the manual on p. 166 states:

Keep in mind that the City Level can drop if a Zone’s Population drops below the relevant threshold. So, for example, a Minor City will downgrade to a Big Town if its Population drops below 50 K.

However, a Zone will actually never lose a City Level in any circumstances. Example:

I'll double check this next week!
thanks for reporting!
best wishes,
Vic

confirmed. will be fixed in v121g

Keep in mind that the City Level can drop if a Zone’s Population drops below the relevant threshold. So, for example, a Minor City will downgrade to a Big Town if its Population drops below 50 K.

I think the rules are now more strict than in the manual? The example says that a Minor City* will downgrade to Big Town** if its population drops under 50k, which makes it sound like downgrade would happen on one level laxer terms than upgrade. Is it just a mistake in the example?

* lvl 4 city, population required to upgrade to this level: 100k
** lvl 3 city, population required to upgrade to this level: 50k

Thanks Magirot! Will be fixed in upcoming patch