I agree don't even dignify this behavior with a response. We are talking about what a child is saying to another child. Lol, if I responded to half the stuff kids say to my kids and vice versa
whew, I'd be a major wreck by now, lol. It sounds to me like this child is talking and acting out because she's jealous that ya'll have a puppy.
Don't worry, you're cover story is fine, and truly the city is more worried about people that have double or triple the limit. People that are keeping animals in a inhumane environment.
One dog isn't going to get you into trouble, especially if you just say you're doggie sitting. Sometimes if you act nervous, and react to these things people are more likely to do something just to harrass or victimize. Be mature, be confident, and truly there are much bigger crimes in the world than one dog over a city ordinance. Good luck, sweetie!