Quoting willie sanderson,
Did you have a high resource yield on that river square? I really don't see the problem really as in Civilization and even MOM one could and should setting on a river square as it produced the most of everything in those games. Why is Stardock trying to muster it out as a settling spot?
According to the city screen the yield was a sweet 3/3/3.
I think one problem is that there aren't any graphics for indicating that the city's town centre is built over a river. Secondly, whenever I've looked at the map it hasn't shown tile yields in rivers, meaning that as far as the player is concerned, they still can't build on rivers, only capture AI cities built on them, unless the map - being a convenience for the player - is lying and I can build on rivers if I can find a spot like that one.