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Right now I am builing the city look.
However, when the streets are decending, I find out the side walk can not be smoothly side by side.
I have two options as attached image, or,
I should cut all the sidewalks of structures ?
Version C (3?). Usually you'd align the doorway (although slightly raised to keep water from running in on a rainy day). I'd say align the center of the building, thus causing the door to be one step up. Just hack off that whole level sidewalk!
I agree with Josh. Get rid of anything projecting beyond the front doors and then add the sidewalk to the front of the buildings. If the structures are really going down hill, the building lots will usually be terraced so each building is at the same level relative to the descent of the street. The sidewalk, unless this is a really steep hill, will just curve down in a smooth arc. You may need to fabricate a step or two up to some doors but that will look most like a real street on a hill.
I've seen those Bar Mills N scale sidewalks and they would be perfect for your needs. Since it's made of compressed paper, it will hold it's shape on a grade with less problems than using styrene.
I don’t know if this will help but in this model of RR ave. Pawling, NY. The street is descending as in your case but Chertocks department store and other building windows are kept level just as it is in the real town. The structures all had to be scratch built but the streets and sidewalks were created with Walthers street systems.