“Empty cities (those with no facilities in them) can be recycled. The cost of recycling is one tenth of the city creation cost. To recycle a city, you must be in a recycling vehicle owned by the same recycling faction that owns the city. See the Recycling Rules for more details.”
“The following conditions must be satisfied in order to be able to recycle:
The recycling entity must have recycling abilities (check relevant rules page);
The pilot of the recycling entity must be a member of a recycling faction;
The recycled entity is managed by the recycling faction;
The recycled entity must be unprotected, unless the entity is a HQ.
I've looked through the code and there's nothing to permit a city to be recycled, only decay.
The rules likely reference:
A) An old implementation that was removed in favor of decay
B) An old implementation that was broken and thus removed in favor of attempting to fix it
C) An idea someone had for city recycling that was added to the rules but not coded, like how we've had 3-4 different R&D sets of rules despite no R&D if I recall properly over my time in SWC.