Is the city entitled to retract its waiver of part of the debt after it had agreed to do so, especially given that the creditor views its action as inappropriate?

You are not permitted to retract what you have waived from your debt, even if the debtor does not acknowledge your kindness. This is because the portion of the debt that was absolved has become as if it never existed and is nullified. If the creditor absolves the debtor of a debt, the debt is nullified and does not return. The debtor is not obliged to pay you except for what remained after the absolution. The jurisprudential rule states: "What is nullified does not return."