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show that it is restricted to not put a sign there. if they have permission and it has been grandfathered in over 50 years then yes they have permission.
which evidently they do since the city has not taken it down in that time frame.
they have a 1st amendment right to welcome people into the city and with permission can put the sign on public property just like any other business or organization.
the fact you or anyone else might be offended is inconsequential.
Any other business does not have the right to freely use public property to advertise their product. That's the point.
I'm not offended. I personally don't care.
If they have permission then they have permission. Eminent domain, which you call grandfathered (which is different) probably does not apply. In most cases government is immune.
But even so, IF the town sanctions a religious sign, and a sign stating The Churches Welcome You is a religious sign, than all religious signs must be allowed, or none. The easy way out is none.