Pete Williams thinks the city is likely to lose this one and I think he's got a great track record. But, if the pole is a public forum, and that's just not the general perception but true, then it's okay. Other flags will also get flown and people will lose the connection of flag to official govt endorsement. People will see the flags as just another ad.

The linked article, as such articles ALWAYS do, omits info that SCOTUS requires. Here, from Cornell University’s Legal Information Institute, is a miniscule bit of the missing info (bracketted explanatory info added).

…whether the First Circuit’s [the trial court] finding that the requirement for perfunctory city approval of a proposed brief [one hour long] display of a private religious organization’s flag on a city flagpole [which normally carries the city’s official flag] pursuant to a city policy expressly designating the flagpole a public forum open to all applicants with hundreds of approvals and no denials, transforms the religious organization’s private speech into government speech, conflicts with the Supreme Court’s precedent[s]….

As much as I would dislike it, the Xians could-well prevail (precedence) :

[supremecourt.gov]