Nice attempt here! I am really happy to hear that you enjoyed your playthrough. Congrats on getting out of debt!
As for how the city level works, all you have to do is to fulfill the needs of your citizens. If they are happy (over 90% of happiness) and the particular hut is full it will get upgraded to the next level. If it is the first-ever house to level up, it will unlock II level buildings together with that better looking City Hall. There is no III level yet, but we are working on it at the moment. We are going to add clearer in-game information about upgrading your city I know that currently, it may be confusing.
Thank you for trying LowPolis and leaving a comment.