Eugene Volokh with his usual insightful commentary:
But denying a private business permits because of such speech by its owner is a blatant First Amendment violation. Even when it comes to government contracting — where the government is choosing how to spend government money — the government generally may not discriminate based on the contractor’s speech, see Board of County Commissioners v. Umbehr (1996). It is even clearer that the government may not make decisions about how people will be allowed to use their own property based on the speaker’s past speech.
And this is so even if there is no statutory right to a particular kind of building permit (and I don’t know what the rule is under Illinois law). Even if the government may deny permits to people based on various reasons, it may not deny permits to people based on their exercise of his First Amendment rights. It doesn’t matter if the applicant expresses speech that doesn’t share the government officials’ values, or even the values of the majority of local citizens. It doesn’t matter if the applicant’s speech is seen as “disrespect[ful]” of certain groups. The First Amendment generally protects people’s rights to express such views without worrying that the government will deny them business permits as a result. That’s basic First Amendment law — but Alderman Moreno, Mayor Menino, and, apparently, Mayor Emanuel (if his statement is quoted in context), seem to either not know or not care about the law.