Should the city's taxpayers be penalized for the misbehavior of those cops?
Yes. Be ready for a huge jump in liability insurance.
IIRC the city (taxpayers) are responsible for compensatory damages. If punitive damages are awarded in court that can come out of the cops pocket.
Yes. Particularly if the behavior is condoned by bureaucrats, made known to them but no action is taken. Cities pay out millions all the time for not correcting criminal behavior by their employees. This incident happened quite a while ago, and the cop is still on the force. Now that a federal lawsuit is happening, they will finally be forced to take action against the cop and change training procedures.