Very confusing - the officer agreed with this neighbor? Who is it, Boss Hogg and Roscoe P. Coltraine?!?!? If your town ordinances allow those animals, and they are being well taken care of, there are no public health issues...that seems odd. There is a legal aid program in KY that might be worth calling - I do not know:
Kentucky Bar Association > Resources > Legal Aid in Kentucky
Also - can you fence - livestock type fence - around your property so he cannot access it?
Finally, I am sure he will either sue the pants off of you or do something awful to your dog if she were to go after him. Regardless, I don't know of any place where a dog biting someone is okay. This is now a situation where you will need to protect your dog from your neighbor by safely containing and monitoring her, making sure she has no access to the yard unless you've checked it for anything he may have left out for her, etc.
Awful!