Hours are measured by the level of the lake, which rises and falls in an extremely consistent manner.
So, why is there a need for a clock?
OK, my idea is that the clock is not a \"clock\" as we know it. It doesnt tell the time with hands and numbers.
The \"clock\" in the middle of the city, would be an ornamental pond that is either magically or physically connected to the lake outside. This way, time could be told by the rise and fall of the water. And you could have all your fancy decorations, fountains and statues.
If the \"clock\" was connected to the lake by magic, then you could have these clocks all over Yliakum, on all different levels. They would work like those big, time telling stones in Zelda: Ocarina of time, they would be spread all over the world, and you could go up to them to find out the time.
... I never did find out if those stones had any greater purpose, other than whacking them with your sword, and placing bombs at their feet.