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Briefly: Grow the city to at least 8 pop, so that you are eligible to build 4 Borough Street. (You get 1 every +2 pop, i.e. at 2, 4, 6, etc.) Plant those Borough Streets (or any other kind of districts) adjacent to your City Center (or vice versa; it's OK for a Borough Street to be in the middle and the City Center to be one of its adjacent satellites). Every district with 4+ districts adjacent to it levels up by +1 level. So if it's adjacent to 4+ level 1+ districts, it becomes level 2, which suffices for that quest. (Cultist's faction trait is that its singleton city can level its districts to level 3, which happens when they're adjacent to 4+ level 2+ districts.)
Generally, you want to build the biggest city you can, in the layout that maximizes the number of district levels. More simply, you want as many level-2 districts as you can fit (and for Cultist, as many level-3s). The short answer is the 2xN stick or the big triangle. Ardent Mages have other reasons to not do a perfect stick, in particular if their radius-2 pillar effects compensate for the approval penalty.
Just to add - Allayi get their equivalent (I forget the name right now) at each population, and this process works for any kind of district, not just Borough Streets. It's just you'll mostly be doing it with Borough Streets.
Edit - and Necrophage, the thread below reminded me...