The first step is to create the object LOD (optional grass LOD) and tree LOD without the Open Cities Skyrim plugin loaded. The second step is to generate everything else like the dynamic LOD and the optional occlusion data or terrain underside and the plugins with the Open Cities Skyrim plugin loaded.
For the first step, start DynDOLOD with all plugins and mods but without Open Cities Skyrim and any patch that depends on it. Click to the advanced options and uncheck the Dynamic LOD checkbox. Check Object LOD and Tree LOD (or Ultra). Once DynDOLOD completed, do not save the DynDOLOD plugins or delete them afterwards. The DynDOLOD output folder now contains only the meshes and texture folder with the object LOD and tree LOD.
For the second step, first edit the ..\DynDOLOD\Edit Scripts\DynDOLOD\DynDOLOD_[GAME MODE].ini. Rename the first occurrence of 'Open Cities Skyrim' to 'xOpen Cities Skyrim' for the line that starts with:
WarnModFileName=Open Cities Skyrim;...
Now start DynDOLOD with all plugins and mods enabled, including Open Cities Skyrim and any patch that depends on it.
Check the same worldspaces as in the first step. Click one of the presets buttons Low, Medium or High to update the rules. Check other options as desired.
Check Dynamic LOD and start the process. Once it is done, save the DynDOLOD plugins.
Now the DynDOLOD output folder contains the meshes and textures folders from step one and the DynDOLOD plugins and the SKSE folder with the *.JSON and *.TXT files from step two.
Install the entire contents of the DynDOLOD output folder as usual. The meshes and textures folders can also be installed before doing step two.
Open Cities Skyrim does not change any textures, so it is irrelevant if it is active or not when running TexGen.