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Crime is one of the worse aspects that come with increasing population. It has the worst effect on commercial offices, but it can make any kind of population leave if it is bad enough. The effects of crime can be seen in the city when you zoom it, for example, graffiti will appear on vandalized buildings.

Crime appears more often in an uneducated population, so building schools can help reduce crime if there were none before. Certain rewards, like the state fair, also act as crime generators.

One aspect related to crime is riots. These occur when your city is in a really bad state and the population is quite upset. They'll run rampant and destroy everything until they're stopped.

To stop both of these threats, you'll need to build police stations. Since crime is mostly a problem of larger cities, you can hold off them until late into the game.

Criminals that are caught by the police will be put in jail. Every police station includes a small jail, however if crime is really bad, it's possible for this jail to be overcrowded, which will result in a prison break. In this case, you'll need to build a City Jail to store the inmates. (The Federal Prison business deal also works as a jail if you were wondering.)

Note that due to an in-game bug, it is never possible to eliminate the crime from large buildings, like the airport or the country club, no matter how many police stations you build around it.

Small Police Station
Construction Cost §250 Capacity 25 inmates
Maintenance Cost §125 Capacity Cost N/A
Large Police Station
Construction Cost §800 Capacity 50 inmates
Maintenance Cost §250 Capacity Cost N/A
City Jail
Construction Cost §2,500 Capacity 1,000 inmates
Maintenance Cost §450 Capacity Cost N/A

The Small Police Station has two police cars, the large one has four as well as a larger range. While police stations can be underfunded, it's not recommended to do so.