What's wrong with letting the people use their own property (city hall, which the people own) for placing a menorah?
The people OWN the city hall, and as long as their use of it
does not conflict with other people using it at the same time,
THERE IS NO CONFLICT!
As long as it is privately paid for, NOBODY is going to think the city is endorsing a state religon and requiring everybody to follow suit.
I have no problem with displays at city hall. Our city hall has all kinds of displays and the children love them. Adults too. City hall belongs to the people, all the people.