Instructions
Visit the city and select "Manage This Town" from the menu. Build structures that improve prosperity, such as the mill or mine.
Enter the city and speak with the guild master. He stands in a different location in every city. Ask him if he has any quests for you. If he does, accept the quest and complete it. Typically, these quests not only reward you directly, but also improve the well-being of the town.
Patrol the city and kill any bandits or armies from enemy factions. Although their presence does not directly affect your town's prosperity, if they waylay and kill caravans and farmers, your town won't grow as quickly.
Click on caravans that depart from your city and offer to escort them. They pay you for your services, and every city they reach increases the prosperity of your town, so long as the caravans make it back safely. Make sure they are not destroyed by enemy factions or highwaymen.