Why is madinah sacred?

Madinah was the first city in which the proper Islamic state was developed. It was the city where Prophet Muhammad was able to demonstrate the laws of Islam in full. Moreover, Madinah today contains the tomb of Prophet Muhammad and also the third most sacred mosque in Islam. Correction - the SECOND most sacred. First is the Kaaba in Mecca, second the prophet's mosque in Madinah, and third the Aqsa mosque in Jerusalem.