What makes you think Sane leaving on a free is the worst case scenario for city?
Sane leaving this year for less than the club's valuation is worse.
If leaves for free, he has played his contract out, we get a player of his quality one more season, at low wages he is on. Without having to break the bank to replace him.
That is as bad if not worse for Bayern. Who knows what happens in that year, other clubs get intersted, Sane's head turns, either to them, or even to staying. Heck he maybe ends up at Newcastle, Bayern maybe sign someone else and dont bother, who knows!
The best for all parties is if bayern stop fucking about and being twats, put their money where their big dirty mouths are, show a bit of professionalism and respect, and pay the asking price, like any big club would do. And everyone moves on.