It took me a while, but I found a map of Golotha and a (very little) bit of information on the city at columbiagames.com. (A google search of the site for the city name will bring up the page. It has a link to a nicely sized color map at the bottom of said page.)
I presume you are striping the city of all its former attributes - such as being arguably one of the most evil cities on Harn (due, from what I can tell, to having a temple to one of the major evil deities).
It appears to be a city of five islands, a couple medium to smaller islands, and an offshore outpost island. From the description given, it sounds a bit like a cross between Venice and the London of Sherlock Holmes - a city of islands and canals known for its mists and fogs that occur almost daily - and sometimes all day. However, it also has more streets than canals, and to the east a vast temple to an evil deity. It was apparently the capital of a notable but somewhat disorganized / savage kingdom held under a harsh theocracy.
Being on the delta of a river, it should be considered to be of significant strategic value - both militarily and economically. However, the harsh reputation and ease of crime on its streets (even during the height of day) notably decrease its value - at least economically.
There are fortifications both across the river, south of the city, and on the land just north of the city. The temple is not on an island but instead is protected by the remaining swamp and marsh that extends for some distance beyond the city. However, north of the city and north of the temple appear to be mostly marsh free lands. Those north of the temple appear planted with numerous orchards, for example. (Note that the river narrows to about 200 ft before opening into the bay.)
This is a hard city to explain. In its heyday it received most of its food supplies from other cities - perhaps as tribute in kind rather than in coin. The scarce farmland to the south - across a river is not enough to supply so large a city, and the fields to the north appear unplowed. The orchards no doubt would help to supply food, as would the supply of fish from the river and the bay, but once the supplies stopped coming in, I imagine the city fell rather swiftly into chaos.
So, if we strip the city of all its prior history to re-create it entirely anew, what do we have?
First, let me further examine the (larger) map (found at columbiagames). First, we can see that there is a necropolis on the north side of the river (although quite a bit of woodland blocks sight of it from the river itself), just ESE of the temple. Second, there is a town of notable size just east of the city, and there is a village and keep on the south shore of the river - about 200 ft from the city at its narrowest point. Lastly, while the south shore of the river is quite swampy, the north shore seems to have been mostly drained - excluding a region between the river and the temple that perhaps acts as a buffer zone to discourage the curious.
The town did not arise as a religious center - that came later, after the town became prosperous. Even its status as the capital of a region did not occur early in its history. Recall that the land it was capital of is considered harsh, disorganized, barely contained / constrained by the power of the evil temple - which as I pointed out likely came later. Indeed, the lands of which it is capital are all to the north, while the city itself is one of several along a major riverway.
So here is how I would presume the city arose.
At some point in the past, settlers from the east came down the river - either seeking its source or merely working their way once again several miles down river so as to settle another colony of a more eastern city or kingdom. Having found the delta of the river, they faced a problem. The land was too marshy to settle. There were two locations where settlements might be placed. The first is to the south, as there is a patch of non-marsh at the mouth of the river there. However, the patch was dry merely due to higher ground - making pierage a bit of a problem, and it was surrounded by marsh on all sides - even (a mere 200 ft away) to the north. Another location was found soon after however, but it was some several hundred feet north of the mouth of the river, making control of the entrance of the river difficult (compared to the former location for settlement).
So I believe that the small town south of the river was the first settlement. A keep was built to protect the small military force there (likely only a few soldiers / knights and perhaps crew for two or three ships - a small but useful navy). Both fishers and merchants bringing wares from down stream soon lived around this keep.
In time, however, times grew bleak, and the taxes became harsher. Already there were likely some pirates and smugglers that used the marsh to the north to get around the security point. (As the city seems based a bit off Venice, I would note that the canals are likely straightened versions of prior waterways that were more meandering and less deep). Some of these miscreants - and likely some serfs and peasants from south of the river seeking to escape some real or false accusation or find another life for themselves - settled amongst the higher points on the islands of the wooded marsh to the north. As the situation grew ever more bleak downstream - likely due to the onset of a dark age and the collapse of whichever cities or kingdoms founded the town south of the river mouth, the town to the south became ever more disorganized. Eventually the raids from the north came more frequently, and aid from the east came less and less often - until it finally ceased, and the town realized it was on its own.
At this point the situation likely imploded. The outlaws to the north realized the near impunity with which they could attack the southern town, and the town itself realized the near helplessness of those that taxed them ever more harshly - perhaps seeking to have ships built to return east, away from the hell hole in which they had found themselves several generations after their founding.
Whatever happened next, it was not pretty, and it lead to a change in power. Now the north settlement - as poor in structure and organization as it was - was in charge. Likely for a time they raided with impunity, until they realized that there was nothing more to take, as no new supplies were coming from the east and the damage they had long caused had prevented fishermen from fishing, artisans from crafting, and farmers from planting and harvesting. Realizing the situation, they faced a choice - move south and firmly take command, or enslave the populous and use them to fortify and renovate their home islands.
This is not as unlikely as it might seem (choosing to live on islands in a swamp rather than on dry land). Venice did something similar. When the barbarians from the north came south, they evacuated to a wooded swampy lagoon, eventually using the wood and what stone they could find to build up the larger islands into mounds that could more readily hold the multistory structures that exist there today.
So the southern population is enslaved. Likely some was forced to remain in the south, farming in the few fields that did not require hard labor to make ready (as would be the case north of the swampy region). The others were brought into the swampy north side of the river and used to change mire into land - dredging waterways, piling logs and what stone might be found to make foundations for larger and better buildings, and so forth. Several generations passed before most of the swampy region was converted into the islands known today. Perhaps it was during this time that the cult of the evil deity formed and grew strong. However, some time after they were secure on their islands they discovered a new threat from the north - necessitating first the fortifications on the north side of town and later the fortified island to the west (likely with a small fleet of perhaps half a dozen ships or so to protect the town).
By this time the dark age was nearing its height. Peoples from the north, seeking ever further afar to find new food sources, began to raid the settlement. At first casualties were high, but the city wall - perhaps initially built to hold off any aid that might one year come from the east - allowed the settlement to survive the initial onslaught. Now they faced a dillema: they did not have enough people to fight against this barbarians of the north. They could perhaps train and arm some of their male slaves, but this would put the masters in danger from their slaves. Eventually they managed to find a middle ground. Perhaps they chose the path of Rome and Greek - allowing slaves a chance to buy their freedom through service or coin.
By this time there was another unifying force, however. The cult of the evil deity had gained such a following, such power, that the populace was loath to attempt any rebellion. Indeed, some slaves might have chosen willingly to enter into service, swearing an oath to the evil deity in the hopes of having power over other slaves similar to what their masters had over them.
However it happened, the wall was enforced and the keep to the north built, and the barbarians were held back. When the dark age eventually ended, the city was transformed, for indeed it was a city (if somewhat smaller than its current form). The two peoples were nearly unified, although the nobles and priesthood were both descended almost exclusively from the former pirates, smugglers, and outlaws that had once enslaved those south of the river. The city population was given to a military zeal - and with the barbarians pulling back, they found themselves restless for action. Rather than risk a civil war, the small but eager army was used to take the fight to the barbarians.
Slavery was never fully abolished - just reduced to a more manageable size: giving the poor someone to look down upon, allowing for a humiliating punishment when death might otherwise rob the society of a valued skill, and granting a means of gathering as many laborers as needed whenever a major work or farming projected needed accomplishing. Those slaves that remained during this time were used to build ever more luxurious manors for the nobles, ever larger temples for the deity, a necropolis for the internment of the nobles and the more secretive rites of the priesthood, a new town to the east for the most menial commoners and slaves, and the orchards that now cover the lands north of the mire.
The army marched ever farther, conquering more and more lands. The lands, however, were quite sparse in population, and few villages existed among them - let alone towns or cities, so tribute was slight from these peoples. Mostly, those conquered were used as slaves and sacrifices. And after a generation or two, those thus enslaved were allowed enlistment for a chance to escape slavery through service - sent back to aid in the harsh treatment if not outright slaughter of their own peoples.
With the bounty of their ever larger, ever more impressive city, they eventually renewed contacts to the east - lost many centuries prior. When ships came into the bay and found the river, it was the marbled city that they first saw, and the city became a major trading hub between those lands further east and those ship from further west. But high taxes and harsh penalties lead to many ships seeking to forego the city for those further down river. The navy of the city - small but fierce - made many examples before merchants proved willing to pay their dues for the right to trade - either in city or further along the river (or into the bay, for those ships coming down river towards the bay). The city grew wealthy, and it used its wealth to ever embellish itself, its temple, and its highest ranking families.
But just as dark ages give way to light and golden ages, so to do these ages wane in time, returning to darkness.
Eventually events conspired against the city. As a new dark age approached, crops began to fail more and more often - leading to riots over grain for food and seed. The norther barbarians - long forced into submission by the armies of the city, found themselves pushed south by new barbaric peoples - seeking food and land as swamps and deserts spread and other peoples migrated into their own lands. Caught between the barbaric peoples further north and the armies of the city to the south, it was inevitable that sooner or later some of the tribes would gather their forces in a desperate bid to overcome one foe or the other - and unlike the barbarians, the armies of the city were often contained in singular places, not spread out over vast fields and forests. They attacked.
First they fell upon the outposts - many such fell before the word reached the city and the armies readied and gathered for the first major attack against their walls in generations. Then the barbaric hoard came south and laid siege to the walls of the city. They held - barely, but there were heavy losses on both sides. The city folk that commanded the armies had themselves become complacent, accustomed to the delights of aristocratic sedentary lifestyles. They were also more versed by this time in arranging maneuvers in the field rather than siege warfare. Also, some slaves within the army chose this time to revolt - small and ineffectual uprisings of a dozen here, a score there - but occurring at the worst of times and places during the siege. Several times a wall or two almost fell due to such revolts. The city faced a crisis - if they could not trust their enslaved recruits, how could they find enough troops to survive the siege?
The priests of the dread deity gave answer. Those that were not at least a quarter descendant of the city were slain in a horrific dark rite - openly performed both to cow those that might choose to revolt despite their status and to frighten the populous so that they would not object should it be necessary to tear down their house to better fortify a wall or some other command given them. The streets and canals were red with blood, but after the rite concluded those slain arose as undead. These horrors were then sent against the remainder of the horde. Despite their terror, the horde fought well, and many of those undead creatures were destroyed. But the horde itself was annihilated.
Peace returned to the city, but things were different. The priests were now utterly in charge. Trade had ceased during the siege, and when tales spread of how the siege had ended, trade did not resume. Throughout the day the streets were patrolled by priests followed by two or three undead and perhaps a member of the former city guard - now attached to the temple guard. For a time those within the city and the town to the east and village to the south hoped that the situation would die down, that true peace might return. But then came the horde that had driven the former horde against them. Again the (remains of the) army was marshaled, again the walls were manned, again the undead were gathered - enhanced in number from those slain but not too terribly damaged during the former siege. But the walls had been damaged terribly before, and not all the restoration was complete. The stores of food had been nearly exhausted during the former siege, and little had been gathered to restore the supply. The city fought well, and most of the new horde died, but in the end the city fell.
The new horde was horrified by what they encountered and the terrible losses endured. After pillaging the city they retreated north, taking the lands formerly held by the former north men. The city, although terribly damaged with most of its wealth destroyed or taken and most of its peoples slain or dispersed, survived - in a sense.
Some of those dispersed returned - either to loot and then leave again or to attempt to rebuild upon the ashes. This was particularly true south of the river, where most of the population managed to disperse before the barbarians even crossed the bridge - itself heavily damaged during the siege as the city sought to prevent its use by the barbarians during their final attempt at retreat.
Those few undead that survived were no longer under anyone's control. Many wandered randomly for a time, eventually becoming mired in the swamp or stuck under a collapsed wall of a building. Others wander the former temple and necropolis to this day - ever completing their last orders: to guard these against intruders.
The priests were few amongst the survivors, and often the other survivors killed them on sight, blaming them for the disaster that befell the city. Those that survived were the cunning ones, hiding in the wilderness and amongst the ruins - eventually starting new cults to the evil deity. A few sought to enter the temple or necropolis afterwards - only to be slain by wild undead, no longer taking additional or adjusted orders from anyone. Some survivors that witnessed such believed the evil deity was punishing his priesthood for their failure.
Those that survived initially stayed south of the river. The farm fields were there, the undead and occasional priest were not there, and indeed most of the surviving population was there. Some of the survivors built up a reputation for courage (or foolhardiness) by every now and again crossing the bridge to gather rare supplies from the ruins. A few even sought to rebuild, but for a century and more that proved impossible. The few undead that still walked the ruins were too dangerous and unpredictable. And some that vanished were rumored to have been taken by half-mad priest for horrific dark rites. Sometimes their body - or a part of it - would be found later.
But in time - especially with the bridges over the canals one by one being destroyed - the region of the city just across the bridge became habitable and (more or less) safe once more. Indeed, while the east isle of the city is still considered dangerous - and even more so the lands beyond the east isle of the city, the west isle has recently been determined to be safe - or, at least, enough consider it safe that a new bridge has been built leading to it. The bridge is under constant watch by the guard, however - just in case. The bridges connecting the west isle to the two isles north of it have been torn down, as undead and other horrors occasionally crossed the bridges. The northernmost isle and the western most isle - both fortified but in ruins - have not been fully explored, as undead, strange magics, and odd creatures (perhaps created by said magics or by half-mad priests of the dark cult) seem to still exist in abundance there.
So it now stands as the dark age once again moves towards light. The village on the southern shore of the river is nearly normal, although with rumors of haunted dwellings east across the wetlands. The city north of the river exist in a half-ruined state, although the southernmost isle is habitable and recently a bridge has been made so that the western isle - still mostly in ruins - might be made habitable. Mists cover the city every day, sometimes all day, but despite this gloom some small hope exists. There is much available for an adventurer to accomplish - seeking lost items of value or interest on the west isle - or, for the more daring, on the northern and eastern isles; exploring the lands of the south - through and beyond the swamps, traveling down river to see what other cities or towns may yet survive that might be willing to trade, and even seeking to explore the bay and the lands beyond, from whence many ships once came and might yet come again one day.
Indeed, on rare occasions a ship stops by from afar - perhaps even one upon which an adventurer might arrive.
