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You'll immediately continue into this decision after ruling on the decoration for Bowerstone Castle (which you'll see the results of here as well). You'll have two choices in dealing with Aurora:

1. Fulfill your promise to Kalin to protect Aurora, while granting it autonomy as its own free state. This option will restore Aurora as a full-fledged city with the oversight of Albion's soldiers, and will significantly improve its dark and dreary atmosphere. It is one of the most costly decisions, however, at 700,000 gold. You'll gain morality and favour with the people for taking this choice.
2. Go back on your promise to Kalin by rendering Aurora a colony of Albion, re-opening the mine within the city and forcing the people there to work, effectively as slaves, to pay for their protection and status (or lack thereof). This option will net you 500,000 gold for the Treasury, and will open up a new dungeon area within Aurora (a mine), which contains a puzzle leading to a random Legendary Weapon. However, this will also significantly decrease your reputation with Kalin and the people of Aurora, and grant you a dose of evil points.

This is another one of the more lasting and permanent decisions you can make as King or Queen. Aurora is a major city, roughly the equivalent in size of Brightwall, and its landscape will be permanently changed if you choose to re-open the mine. Having its favour may not be important to you, but the people there will look upon you with disgust if you force them into servitude.

Once you've completed this decision, you'll return to your personal chambers, and Hobson will introduce the quest The Desert Star to you.