These options would be nice:
Install New Governor
like it is now
Liberate the City
return the city free of charge to the civ who has the largest culture in the city or the previous owner (you can choose which one, if they are 2 different civs), can only choose this option if this civ is friendly with the player (it is absurd to return a city to someone who hates you), player would get some diplomatic bonus for this
Raze the City
destroy the city, you get a large sum of money, kill all citizens of the city
Enslave the City
the city is destroyed, you get some amount of money, (less money than complete raze, some of the population becomes worker
Subdue the City
destroy a random amount of buildings, and kill a random amount of citizens, you get a city with less enemy culture and with shorter resisitence time, but the city will suffer some unhappiness
Every option excep the first 2 should have a rep hit, especially in later ages, the player should suffer rep hit with every civ, not just the previous owner of the cty.