I think the argument here, when you cut through the noise, is one of whether the government should spend taxpayer money to construct religious places of worship.
I don't see anything prohibiting the government from doing so, however, the government should be careful about setting a precedent that could be used by the much larger Muslim community to argue for government funds to construct more mosques.
In general, outside of historical buildings and other exceptions such as forcible possession/occupation/destruction of places of worship after 1947, that the government was responsible for preventing, I would tend to side with those opposing government funds for constructing ANY religious places of worship.