I think this is all part of my bigger problem with Elemental, it seems like most of the effort is going into the magic, RPG elements, and the tactical combat...and much less into the empire building (which is--no surprise--my favorite). This is compounded by the fact that terrain doesn't effect the production of a city in any way. So you end up with a huge map full of nothing, and no reason to place a city in any particular area.
City resourcing in general just underwent a massive rebuild between 1.0 and 1.1. Massive. The issue right now is that you don't have to worry about the AI, so why build? They'll pretty much leave you alone. That's the reason to build new cities, to eventually have so many resources you can fight several aggressive AIs. Of course there's enough to get one city going, that's the point. Were the AI challenging you, you'd need at least 1 city you can build up from nothing to be competitive. I'm guessing the fact you can put everything in just about one city kills it for you? That I can understsand.
The more I think on it, the more I believe the AI not being all there is what undercuts many other parts of the game. Playing since release when the AI was super aggressive, and getting used to going after as much land as I can, makes me think the game is going to be way better when the AI is better. I spread myself out when I play and that usually keeps me spending resources and wanting more. I can't imagine just sitting in a single city the whole game. How boring. It's possible to do that and play the game right now. But half of the interesting parts revolve around trying to do more. If the AI were competitive, it would eventually steam roll you if you played like that.
One thing to note about the city building in Elemental.....none of the special constructions have punch. They all involve "increase x by y%." That's such a passive way of looking at things. That's why city building and building new cities seems pretty hollow too....you want to be wowed by the Abbey of Ibzil, but it's just more research points. It doesn't let you do anything special, create a special unit, nada. So the players attention goes back to their empire, and the meandering AI, and they don't feel challenged or excited to go after new resources, because it's just going to give them more or what they already have.