That pothole would not even be considered a pothole in my hometown. Trashed the wheels and cracked a steel frame? And that tire held air with that damage to a wheel? Pretty questionable in my opinion. Suing the city/government? I hope you have numerous witnesses,and video, and can prove the wheels/bike were damaged by riding over that pothole. Even with that, I would be very surprised if a law suit got you anywhere or anything.