The optimal terrain for building cities is a plain on a hill. All terrains give you the same fixed amount of food on the square where the city is built, 2 Food Units (even Icy Hills and Grassy Plains give the same food output, 2 food units). Thus, when deciding on a square to build a city, the food value has no strategic significance whatsoever.
However, if you build a city on a hill composed of plain terrain, you get three Production Units (also known as Hammers) on that square, compared to only 1 Production Unit for most terrain types, and 2 Production Units for all other Hill terrains.
When you build a city on a forest, the forest is immediately removed, and you do not even get the value of the forest in terms of production units as you would have gotten if your workers had chopped it down.
When you build a city on a resource square, whether it is a mineral, luxury, agricultural commodity, or any other type, you get the minimal value for that resource. Thus, if Coal is worth 4 Production Units and you build a city on a square with coal, you get only 4 Production Units per turn, whereas if you built a mine on a coal square near a city, and also built a railroad on that square, you would get 7 Production Units per turn for that square. In sum, when you build a city on a square with a resource, you do not get any of the credit that you could have gotten by building the city adjacent to the resource, then constructing a mine, a pasture, a farm, or a plantation.
