You know what I miss? Nationalities
If a city can retain its nationality after conquered, it opens up a new mechanic of controlling warmonger sprawl and works well with the proposed local happiness mechanic.
One tweak I would change is that, nationalities should not assimilate as quickly, and assimilation speed can be a Civ UA trait / cultural superiority mechanic.
The concept can be further parsed out between nationality & faction:
Faction is the identifier each Civ has for their Civ owner. So natively grown cities will have factions identifying as say, Japanese or Babylonian.
Factions determine the populations for each civ, and even in conquered cities, their size will continue to grow and they may migrate. However, these factions can change to your nationality given enough culture bonuses/assimilation traits.
This opens up possibilities for multi-ethnic hybrid Civs of the player's making. It's not something I expect in the base game, but imagine a hybrid Indian-British Civ that developed organically in the early game. That Civ could maybe get a specific combination bonus that is unique to them.
I know this is going into the counterfactual historical route and it's not everyone's cup of tea, but the concepts of factions/race and nationality would be really nice things to explore. Cities should not be faceless production centers