Once you have created or joined a state, you will be able to start working on a State Capital. You will need special materials that can be obtained by completing tasks at the Center of Ocean Transport.
The Capital is subdivided into themed regions, each of which is composed of blocks. Upgrade municipal buildings and buildings that generate electricity and water to unlock new blocks. The block upgrades will become available once you upgrade the municipal buildings. New areas will become available as your state levels up. To increase the level of your state, complete tasks to earn state experience.
Once the block reaches level 4, you will be able to change what it looks like. To do so, either the Governor or a Deputy Governor needs to allow the continued construction of the block. Once this is done, you will see a chain of possible upgrades to the overall look of the block. Each time you complete a stage, the appearance of the block will adjust to the next one in the queue. This step can be repeated again and again until you are happy with how the block looks. Used decorations will return to the end of the chain and you will be able to reuse them again once you loop back around to it.