I am fairly certain it violates both state and local ordinances. File a complaint with your local City Attorney.
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You should contact your City's code enforcement department. It seems unlikely that permanently displaying a private sign in a public right-of-way would be permitted. The code enforcement officer should be able to tell you if the action complies with local regulations, and if it does not will likely pursue an action against the business owner.
It is almost certainly not permitted, either under the city's ordinance or under the city's zoning regulations. It is likely that the city has ignored it because of a lack of complaints - violations are routinely ignored unless and until they are brought to the attention of the zoning authorities. In this case, because the activity is not taking place on private property, the usual cease-and-desist process can likely be avoided and the city could simply confiscate the placard device.