The city -- thus far unnamed -- is a mercantile hub; its economy is almost entirely based on its shipyards, its banks, its markets, and its middle-men. It's also, due to the large number of cultures that pass through it, a place where knowledge from all over the galaxy is gathered.
I picture it as set on a flat disc that's orbiting a star. The top of the disc is the where the banks, markets, residences, and other non-"industrial" buildings are located. From the bottom of the disc, dangling like roots, are the shipyards and "ports", as well as some of the seedier hangouts. I know that there are far more plausible layouts, but I really have this picture stuck in my head.
So, the primary problems:
1. Atmosphere. How do these people breathe, and what protects them from the deadly emanations of their star? They're human. I could -- although I really don't want to -- cover the top of the city with a large dome, but that doesn't much explain the bottom half, where ships are coming and going etc. Ideas?
2. Gravity. They don't have magnetic boots.
The magic, as I see it, isn't of the "spells and candles" variety (le blargh); it's used to directly mold material and space by trained mages. It can only be used on inanimate materials, like metal and rock -- it would destroy flesh.
Also, are there any other problems that I'm not thinking of that I need to deal with?