I think if she was gonna report you she wouldn't have asked you about it. maybe the reporting neighbor griped to her about your prop and said they were gonna do it, & that's why she asked.
I would not start a neighbor war. that can become years of hell.
I've problems with my neighbors dog digging under the fence to come over and chase my horses. I talked to them about it civilly. they really tried hard. even built a new fence. that dog clenched the brand new bottom boards with his teeth & snapped them off to get back under! owner laid heavy blocks & logs along bottom & dog moved them. he tied him up, but any chance off that line, he was back here.
once while being chased around my prop, I told my horse WHOA and she stopped. I said "it's OK baby, KICK HIM" she cocked her head enough to see him outta one eye, and kicked him right in his head, BAM!. (I didn't even really know she understood me!) LOL. he ran away shaking his head.
but he has returned, staying just out of kicking distance. like a devil
Our other neighbor told owner she wouldn't be as nice as me & will shoot the dog first time, legally protecting livestock. that dog won't even go there, much to my dismay.
I keep a BB gun by doors & windows to scare that mangy thing away. my neighbor knows it, because (ahem) all his kids heard me cracking off pops one day.
I have called the guy at work!!
we are still on good terms because he has tried. he got that >bleep< dog from the pound as an adult, and I KNOW WHY it was taken there! it's a conniving dense outlaw.
incidents have decreased. he is only alive because the horse who would get scared enough to run from him was put to sleep. the one I have left won't hurt herself if chased.